Start building Crossups(X-ups) not Startups.
A new category of temporary ventures emerging on top of our technology infrastructure
Lately I am getting more and more involved in a new type of venture/endeavour that can not be considered a start-up yet are scaleable and innovative. What I am starting to experience that this is new type of venture also needs to be managed in a different way than a typical start-up: It has a different starting point, a different DNA and a different objective.
To be honest I think this might become a huge category of ventures in the near future and offers, when executed well, quicker ROI’s with a lower risk profile than the typical start-up. Possible upside of these type of ventures on the other hand tend to be lower. In this article I want to recognize this new category of ventures, offer clear attributes on how to recognize them and also offer some initial thought on how to manage and excecute them succesfully. I call them Crossups(X-ups). The reason being that these venture tend to be temporary(by design) collaborations between existing entities that seize a short to mid term market opportunity. Maybe one of the best known Crossups is Pokemon Go. To independent entities with existing assets combine forces to capture a short to mid-term market opportunity. This is not a typical founder story going into pitch arena’s to find funding for example. Another example is Beats by Dre. A headset company that leveraged existing positions to grab a short term market opportunity.
The collaboration challenge
In general collaborations are a common thing in mature(saturated) marketplaces. For example lifestyle brands tend to collaborate with niche players to revitalize their brands. In these markets the focus is not to create something new but much more on combining, re-ordering and reframing. Collaborations in Tech are not that common. Main reason is that it does not fit in the current beliefsystem created in the start-up ecosystem. In general the common belief in Tech is to build something awesome and have it stick somewhere to a customer segment through a well defined usecase. While doing that you build your own IP that you protect through patents. As the market is getting more and more crowded this approach will be harder and harder to execute, as startups just don’t have the stamina to penetrate existing marketplaces and capture a “new” position. What is also stopping start-ups to collaborate is their shareholder/investor set-up. In general messy ventures with shared IP and assets are harder to exit. Investors like clear fenced IP that can be sold off without the approval from non-shareholders. With Teamily we have probed to see if we could collaborate with other parties. Yet we were unsuccesful on executing on it.
Starting the X-up
So starting an X-up requires a different mindset than with a start-up. With a startup you focus on the potential and the future. With an X-up you focus on the existing available value. For example when starting an X-up you focus on your already existing follower base, your reputation, your existing skills. Thing you can excute on immediately. Also when finding partners for your X-up you focus on the combination of assets that fill-up your business model canvas. With a startup, founders need to have the same dream and vision. That is not necessarily so with an X-up. In general the starting point of the startup is focus on that what is not there(yin), where the x-up focuses more on that what is already there(yang). Starting a X-up requires partners that already have a sustainable place on earth. Meaning that they can operate not from a mode of scarcity or survival stress but from a clear sense of place and position.
Founding the X-up
An X-up never has the ambition to get the return in an exit. The X-up makes the money during the operation. In that sense it follows more of what is called the Hollywood model. The entity dissolves after the operation. By design it is a temporary organization. So in the set-up of contracts the focus is not that much on IP and stake of the shares, as it is not relevant, but much more on the commercial conditions( like rev shares, kick-backs and bonusses) and on responsibilities(who does what and when).
Productizing an X-up
When talking about products an X-up builds somewhere that is fairly familiar to the audience. From the start it has a simple narrative that is focused on desirability, the product is easily scaleable and falls into a known product category. The routes to market are established. A startup typically creates products that tend to be new. Startups spend loads of time on framing their story to make their new products recognizable for a large audience. The startup product is disruptive in nature. Startups have an inclined nature to prove they are right about the future which prevents them to develop products that are right for this moment. An X-up always leverages something that is already attractive and generates pull. This can be an existing brand, an existing franchise like Pokemon or maybe a celebrity. The startup often takes the approach of using “brand or product ambassadors” to generate pull for their product, yet the “pull factor” is not as high as with an X-up that made the attractive component and integrated part of the product.
Executing an X-up
We prefer to either manage things like a corporation(we tend to manage the order) or like a startup(we tend to manage the chaos). Within a corporation you manage the results that have been generated. The startup is a whole different story. With the startup there is clear lack of market related results. Yet the startup environment is filled with input. Input like ideas, visions, hypothesis, sketches, assumptions. The startup is constantly managing this inflow of input that is created because of the fuzzy or foggy future. The X-up is about execution and output generation. Many VC’s impose this management style way to early on startups as a means to control the chaos. An X-up has not many unclear variables in their system. There is a consideable level of knowledge about the market they are in are able to “guarantee” output. They know typical metrics of the market. Metrics like conversion, cost per unit, acquisition costs. This makes the de facto object that steers the X-up “The Agreement”. An X-up succeeds or falls with the ability to make (unique)agreements and follow-up on them: “If you do this, I will do that”. It is not a hypothesis(startup) nor a defined process(corporation). It is right in between those worlds.
X-up Mindset and State
Where a founder team consists preferably of a “hustler”, “hacker” and “hipster”, the X-up has a team with a narrower profile that match more on behaviour than on vision. Some characteristics are:
- Pragmatic in nature(today matters);
- Result and data oriented(proof not promise);
- Clear specialized knowledge(experienced);
- Producer/Conductor mindset(the composition of parts matter)
One critical part of having the right mindset to operate an X-up is a sense that you are already part of a market; You are the market, you have a place. Startup typically place the market outside of them making it something that needs to be entered. It is very small distinction but absolutely crucial to become successful with an X-up.
X-up for Corporations
The X-up model is much more interesting for corporations than the startup model. More and more corporations that have invested in the startup model through incubators or accelerators have ended up with many small niche companies that don’t scale. Small companies with motivated founder teams that don’t really contribute to the corporation’s bottom line but are not worth “killing” as they do deliver a small return.
Corporations have many already existing assets that are great starting points for X-up based models. Many corporations are often already seeking collaborations with other companies yet these collaborations seldom have a temporary and opportunistic nature. They tend to be strategic or of longterm collaborations with a defensive motivation. This defensive attitude highlights the corporation’s weak points and threats instead of their existing valuable assets. X-ups are the most realistic way for existing corporations to develop impactful new business opportunities that leverage existing assets on a huge scale. The crucial thing that will make corporations capitalize on X-up opportunities is their ability to re-purpose existing resources in new ways. It requires a mindset to see parts of their business as autonomous parts that are able to be re-purposed in different way. For example a distribution network can be used to deliver your existing products to customers but that same distribution network can also be used to deliver something completely different. So it requires corporations to have a mindset to see all parts to be connected BUT also see that all parts can be autonomous as well.
5 Tips to get into X-up mode:
- Identify very precise what output you can generate within your own comfortable context: No value = no X-up.
- Don’t dismiss unlikely combinations of companies(assets). Your beliefs might cloud your opportunity.
- A hammer can be used to open a bottle. Stay openminded about how to utilize assets.
- If you can’t make a business case don’t start. You obviously lack knowledge or information to get into execute mode.
- Be distribution focused and not product focused. Where is the channel to the customer needs to be on your mind from the start.
Next up with X-ups
I truely believe that X-ups are the future of entrepreneurship. The model fits with today’s short lifecycles of products and companies. The game is to make huge temporary impact in a short time. The access to all global resources through the click of a button really facilitates this mindset. I also believe it needs to be recognized on it’s own because it’s specific characteristics. It can not be seen as a type of startups or business development because of it’s temporary nature. I believe X-ups are the proof of a next phase in Tech. Where the color of ocean is slowly turning red from blue.
In a sense the corporation becomes a creative expression designed to have a temporary nature. Letting go of the concept that corporations always need to continue will open up a completely new belief system of what a corporation is. This model only works if there is an underlying infrastructure that connects us all.
If you have any examples or stories about X-ups please share them with me. Topics that really interest me now are great examples of commercial contracts between multiple partners. I am also interested in ideas and examples on how startups can better collaborate with other companies.
If you found this an interesting piece and want to discuss further please contact me on firstname.lastname@example.org