This article was originally published on Emerce: 5 redenen waarom startup falen.
Success stories of corporate-startups are inspiring, but it is easier to avoid mistakes than to repeat your successes and there is a lot to be learned from failure.
So why do so many corporate-startups flame out?
Leonard Bukenya — partner at Aimforthemoon — helps big organisations to accelerate innovation. This happens in the form of corporate-startups: New businesses within an existing company, with the focus on entrepreneurship. Such corporate-startups are not always successful. Bukenya shares five reasons why they fail and what you can do to prevent this.
- There is no strategy
- Not enough focus
- You’re measuring success the wrong way
- No connection with the existing organisation
- Giving up when it gets hard
“Bigger organisations are almost always preoccupied with operational excellence”, says Bukenya from Aimforthemoon. “It’s only about optimizing and improving the current business model.’’ If such an organisation goes to work on an exotic idea that is on the edge of the existing business operations another more exploratory approach is needed. An entrepreneurial process like that of the Lean Startup method is very suitable but requires a lot of adaptability.
This doesn’t always happen without a struggle, which is why some corporate-startups fail. According to Bukenya, these are the five most important reasons why this happens.
1. There is no strategy
“If an organisation doesn’t have a clear strategy, it’s very hard to give a specific innovative project or product a place in the business.”
And this also makes it very hard to pick the right approach. Companies who then decide to pick the startup method are in for an unpleasant surprise. An element to that method is the fact that it can fail, but that’s exactly where you need room for. A clear strategy here helps making substantiated decisions. Is succeeding as fast as possible the most important thing? Then a corporate startup is not the best solution and you can best look for a solution closer to the existing business.
Make sure you have a good strategy because without it you will never know when you are doing it right or wrong. Know in what direction you want to move en choose an approach that fits your strategy. Do you choose a startup method? Then be prepared to make mistakes.
2. Not enough focus
“This is an extension of reason 1. a corporate-startup is unpredictable and complicated, so you need people with dedication.
It’s not a ‘’Friday afternoon project’’, it needs full attention and focus.
That’s not only about people but also about resources.
Do you want your corporate-startup to be a success? Treat it like a full organisation, with all the focus and resources that accompany that.
3. You’re measuring success the wrong way
“Enterprises are used to measure success through Quarterly plans, Yearly plans and similar metrics: Stuff where its mostly about revenue and other aspects that you can predict beforehand. With a corporate-startup, this won’t work, because the profitability will only become clear later on. ’
In the beginning, if you’re focussing on the short term profitability and revenue, a potentially successful startup can be shut down way too early.
Use innovation metrics instead, where you measure if you are being innovative or not. First, discover if you are really solving a customer problem, if the business model works, if you have a competitive advantage and if the market is big enough. Making profit comes later.
Reason 4: no connection with the existing organisation
“You have a strategy, a good team and your startup seems a success. But alas the corporate from which you originated is insufficiently involved.
As a corporate-startup, there is always a danger that you become a ‘toy’.
But the eventual goal must not be forgotten, and that is still to make the corporate more successful. Maybe you want to work separately from the existing culture and approach, but you cannot go without the right decision culture to get the existing organisation on board.’’
Therefore it is important that next to the core team, different business mentors and stakeholders from the organisation are involved. People from within the organisation who know what is happening in the company and create support to anchor the startup in the existing organisation. The corporate-startup team must take these people with them on their journey. This way you prevent the situation where the board is given a well-performing startup with which they have no idea what to do.
Reason 5: Giving up when it gets hard
“With a corporate-startup comes a culture of learning. And with learning comes making mistakes, and that you keep going when it gets hard.
A lot of organisations shut their startup down when it gets too hard. Lessons that were learned don’t get reused.
While the most successful startups originate from failed startups! If it doesn’t work out, make sure that you learned from the experience and keep going.’’
According to Bukenya, this requires a certain type of person. People who are open for the new way of working which comes with a startup, that commit to solving problems and don’t stop until they succeed.
Want 5 more reasons? Check out my keynote.
I am curious to hear your thoughts on corporate-startups.
What worked for you? What didn’t?
Comment here or drop me a message at leonard [at] aimforthemoon.com