Why startups are disrupting big businesses
In 2014 and fresh out of University, I landed myself in a graduate program at a small New Zealand underdog startup that changed the pricing and nature of city to city transportation.
To be honest, I’ve never heard of the brand before I applied. But somehow, they managed to steal a good chunk of market share from an established monopoly in just a few years.
It started with a dream to make city to city transportation more affordable and a dash of madness from it’s founder — a man I have utmost respect for but still convinced that he’s madder than a hatter.
But you need a good dose of madness to make a startup work. It’s what made the company successful.
What is madness?
“You are trying to understand madness with logic. This is not unlike searching for darkness with a torch.” — Mad Hatter
Big businesses, especially those entrenched in age old methodologies are getting smashed to pieces as new startups pop up and dominate markets out of nowhere.
Not only are they not prepared for it, they don’t quite know how to respond. In fact, by the time they get around to thinking about a response, the startup has already moved on.
How quickly a startup adapts to its environment and market requirements is the key to its survival. While big businesses may have financial cushions to fall back on when the books are in the red, startups do not have this luxury and need to stay in the green by whatever means possible.
This means they keep things simple, test often and modify their product to fit their customers to maximize conversion and therefore sales.
This mentality and need for speed is a core nature and trait of success for startups and disrupts big business’ mental models of hierarchical approvals and waterfall planning methodologies.
Uncertainty is a startup’s dream and the stuff of nightmares for big businesses
When my startup boss was looking for people to join his team, he was deliberate in choosing people who had very little business experience. The lack of entrenched expectations and actual business knowledge allowed the startup to be more creative than what a corporate environment would allow.
This enabled the startup to experiment with new ideas, projects and possibilities. While some failed, others thrived simply because of the different perspective the young team had on ‘reality’. Unrestricted by the burns and fear of failure, the startup created uncertainty for established businesses by creating products and producing campaigns that were untraditional and highly divergent from what already existed.
Speed is achieved through simplicity
When a new idea is presented, the startup did everything it could to strip it down to its bare basics. With a time restriction of only around 2 weeks to build, launch and test — you simply didn’t have the time to make it complicated.
Anything that wasn’t necessary to the core product was taken out. This allowed the business to test the viability of the idea before more resources are spent on it. If the product didn’t work, then the sunk cost of learning from the experience was not as great.
The quicker the startup recognizes that an idea has failed, the quicker it can change its course and do something else that is profitable.
It’s to do with business baggage
Big business became big because of a process they followed to get to where they currently are. It worked then and seems to still be working now, so why change?
It seems like the logical question to ask.
However, as startups growth rate exceeds and begins to cut monolithic established growth rates, big businesses are starting to ask — what are they doing that’s working for them?
While some big businesses are trying to adapt to the new landscape of suddenly and always changing business landscape, they struggle simply because of the way they organize themselves as a business.
When a big business tries to compare themselves to a startup and copy their methodologies, they fail. This is because the big business is trying to compare and turn themselves into something that is very different in nature and operation.
Hierarchies, filtered down decision making, departmental segmentation and pay grades are the things that determine who does what in an established organisation. However, this is very different in a startup where almost every member plays every role that is required by the fledgling business.
You would never see the big boss on the phone doing customer service work in an established monolith company. Nor will you see someone in IT sitting down with the marketing team helping them make banners for a campaign. Employees in startups cross pollinate their skills, expertise and ideas across the business. In contrast, big business employees tend to remain within their job descriptions.
Most big corporations were established decades ago and used a very different set of methodologies for a very different commercial landscape. Startups in contrast do not have these experiences, are starting fresh without any previous expectations and organisational restrictions.
The small size of startups also allows them to move quickly and make decisions instantly — things that big established businesses resist because of their entrenched modes of operations.
For some, the way startups operate can be seen as chaos and madness. But for the startup that’s slaying it and carving out their market shares from an established business, it’s business as usual.