Startup Inside A Non-Startup, Part 1

12 Differences Between Entrepreneurial v. Corporate Thinking

A year ago, Next Story Group acquired the company I co-founded, Brand Karma, and I joined the team to start a new venture, Kafnu. Since Kafnu’s second opening in Taipei, I’ve had time to think about why it’s difficult to merge the best of startup and corporate worlds to foster innovation. In this 2-part series, I’ll begin with the cultural differences between startup and corporate, and then conclude with suggestions on how one can increase the success rate of doing a startup inside a non-startup.

Even though both entrepreneurs and corporations run businesses, the mindset of ‘being entrepreneurial’ is often at odds with ‘being corporate.’ This makes it difficult following a merger or acquisition, or even when a company simply asks its employees to be more entrepreneurial or establishes an innovation group to be entrepreneurial. Based on my experience, I’ve identified the areas where the startup and corporate differences can be great. I call these the Zodiac of Clashpoints.

Here are the signs:

Risk Taking — entrepreneurs think about risks differently. While the corporate mindset is often about mitigating risks and avoiding fires altogether, entrepreneurs often play with fire intentionally because they see opportunities in threats. It’s not about coloring outside the lines, it’s not even seeing that there are any lines.

Matrix Organizations — both mindsets work in a matrix organization, but the differences here are about proximity. It’s not easy to explain, but think about it like this, corporate employees need to check up/down/left/right of the org chart, whereas an entrepreneurs check up/down/left/right of where s/he is sitting.

Politics — the more people in a company, the more opportunities for divisions. Hence sometimes to succeed in a corporation an employee has to pick which team to be on. In a startup, there’s only one team or you’re out. Still, lack of politics won’t eliminate arguments or passive-aggressive behaviors when disagreements arise.

Standard Operating Procedures (SOPs) — SOPs exist because they can bring predictability. As a company evolves, more SOPs get created to make best practices repeatable — and often that translates into predictable financial performance. In the marketplace, entrepreneurs constantly think of new ways to disrupt conventional thinking and SOPs to create opportunities for themselves.

Compensation — during my startup years, it was all about the ownership (and accepting the reality that sometimes there’s late or no paycheck). Hence being an entrepreneur became a 24x7 lifestyle because I didn’t want to waste time while I was building value into what I owned, and I didn’t know what that value could be so I just kept working to maximize the unknown value. Corporate employees tend to have a steady paycheck with clearly-defined expectations and commensurate raises and bonus ranges; there isn’t really a jackpot, but the net is safe, reliable, and leads to less urgent mentalities.

Accountability — who is ultimate responsible for something? This can be grey in a large company, and you often see this in emails and reports. In my previous corporate lives, I was cc’d on many emails and reports. Sometimes these documents contained important things, and when one of those important things came up in a meeting later on, the phrase ‘…but you were copied on it…’ always seemed to get spoken. Many people call this ‘cover your ass (CYA)’ documentation. In a startup, internal conversations about how to move things forward are frequent, short, and decisive — and reports are limited or DIY, setting the foundation for a different type of accountability where there is immediacy and action.

Greenlight — often to get stuff done in a corporate environment an employee has to ask for permissions (from up/down/left/right in a matrix organization), whereas startups are more likely to just do it and hope for forgiveness if something goes awry, and as a last resort ask for forgiveness. Otherwise they just keep going; greenlight is the default signal until a startup runs out of money, whereas in a corporation redlight is the default signal until approval.

Management — as a general manager in a large corporation, you often have to manage subject matter experts to ideate, plan, or execute outside your area of expertise. However, in a startup, everyone develops subject matter expertise over multiple new disciplines, and as a result management is more about herding these on-demand self-made subject matter experts towards an intended direction, rather than structured management of experts towards the achievement of a set of goals.

Upward Mobility— corporate employees have steps on a ladder that at least indicates what’s next, whereas the entrepreneur has a seat on a roller coaster — sometimes flying high, sometimes crashing low, depending on the overall health of the startup. This can be a volatile ride for serial entrepreneurs, but how upwardly mobile an entrepreneur often comes down to 1) how many rides, 2) how high and how low did you go, and 3) did the ride end safely for you, your team, and your investors.

Governance — as organizations become larger, there must be governance in finance, legal, and HR. However, most entrepreneurs won’t spend as much bandwidth on these functions because they’re focused on creating their new product or service, so there’s a bit of a ‘cross that bridge if we get to it’ attitude. Without governance, startups can indeed go much faster, but they can also run into issues later on (e.g. Airbnb, Uber, Theranos, Facebook...).

Status — as a corporate employee, the name recognition of your company and the seniority of your title creates status and personal branding. In a startup, people won’t have heard of the name of your company, so the term ‘startup’ itself and the category it’s in, if you can give talk about it, give employees status. An added bonus is ‘Founder.’

Freedom — corporations typically look for solutions to a problem. This is the way many of the internal innovation projects get funded — they have the freedom to look for solutions. Startups sometimes do the same thing, but other times, they have a solution in search of a problem — as the problem is based on changes in the customer’s world that haven’t yet been articulated. Indeed, startups have the freedom to look for problems.

These are some of the major differences between corporate vs. entrepreneurial thinking. In the next part of this series I’ll discuss what I learned in starting something new inside a non-startup.