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The Journal

What Does it Really Mean to “Act Like a Startup”?

5 minute read

As tech valuations rise, and more and more unicorns are born, legacy businesses everywhere hear the message that they need to act more like startups. If you want to innovate, stay relevant, and grow, the advice goes, then you have to take risks, be nimble, and throw money at potential solutions.

But the painful reality is that most corporations don’t enjoy the conditions necessary to enable true startup behaviors. The DNA of a large, established business looks far different than that of a fledgling company. And just like with actual startups, creating new ventures is hard, risky, and doesn’t always pan out.

So how, exactly, can you design the conditions for success?

If you have a big company’s DNA, you need to catalyze strategic changes—small mutations that make it possible for a startup model and mindset to thrive inside a much different species. Sometimes, it happens naturally. If a legacy company hits an acute adapt-or-die moment, there’s no choice but to change (à la Netflix or Microsoft). But for companies where transformation is inevitable but not immediate, it’s entirely possible to engineer the conditions that generate pressure for a controlled shift. Here are three ways senior management can provoke the conditions for success.

1. Question your business model

Many legacy companies have been successful because they’ve focused on their core business, while many startups have flourished by routinely abandoning theirs. The key is to do both: Keep the core business running while a new venture pursues something entirely different.

Recently, American Family Insurance was looking to innovate outside of its traditional business model while staying true to its mission to help working families. One of its customers' biggest pain points was an inability to save enough money for an emergency. A $400 surplus—a cushion to get through a medical crisis, for example—was beyond many people’s reach.

Initially, American Family thought budgeting tools might provide a solution, but from the very first research interview, it was clear that budgeting wasn’t the barrier—cash-strapped people budget masterfully. The problem was having enough income to put away a little extra.

So, the insurance company embraced a radically new opportunity, creating a service to help families living on the edge bridge the gap between their paychecks and their security threshold. The company built a new business venture called Moonrise—a platform that would allow businesses to tap into an on-demand workforce, and allow people to access short-term work when they found themselves on shaky financial ground.

The solution was outside the scope of the legacy company’s core offering, but by moving outside of its business model, American Family Insurance was able to create an entirely new venture that helped its core customers solve a chronic, unaddressed problem.

2. Be an early adapter

It’s nearly impossible for an entire corporate organism to pivot rapidly in response to what’s happening around it, but startups have the innate superpower to move fast and get in early. When an emerging need or trend appears on the horizon, they can leap to create new products—or even new markets—far more quickly than large corporations. To achieve speed and adaptability, the new venture must be carved off and treated as its own autonomous, responsive entity.

Take the case of the 150-year old financial company that decided to widen the scope of its business to meet the growing desire for socially-responsible investment options. The company recognized early signals that the consumer desire for Environmental, Social and Governance (ESG) investing and impact investing was increasing rapidly, especially among younger generations, with whom they didn’t have many relationships. Chasing a high-growth opportunity for a new market segment, they set out to create a digital-first product that focused on socially-responsible investing.

To get started, the company didn’t simply announce a new division, or task an existing team with creating something new. Instead, they hired a founder and an outside startup team of 10. They built a company and a culture that was totally separate from their parent company’s offering, allowing the venture to take risks, prototype early and often, and above all, move fast. Throughout the venture’s development, the team continuously evolved the experience and business model by pushing prototypes to potential customers, adapting and pivoting until they reached product-market fit. By creating a team with the impetus and the culture to hit the ground running, the venture launched in just 18 months—and put its product in the hands of its consumers before its competitors.

Image by Elin Svensson

3. Select for resilience and relentlessness

No matter the industry, startup leaders tend to have a few shared qualities that are more common among the entrepreneurial set than among seasoned CEOs. For a new venture to really work, the people behind it need to be driven by curiosity and insight, and have the skills necessary to prototype and iterate their way toward a tangible outcome. They can’t carry the static burden of “the way we do things around here.”

Intercorp, a massive Peruvian economic group of more than 30 companies, including banks, malls, cinemas, and schools, sought to build and design an innovation studio. Instead of solely relying on the business units to drive their own innovation processes, the company opted to create a central entity that could solve problems across its offerings, focusing on the needs of Peru’s rising middle class.

Intercorp purposely built La Victoria Lab in a middle-class Peruvian neighborhood—outside the walls of the corporate HQ—to immerse the team in the human-centered problems it’s trying to solve. The company also put together an interdisciplinary team of resilient and relentless talent, and set it up to embrace design thinking, identify new opportunities, and constantly prototype new value propositions. This talent stays close to the customer in order to shape new ventures in development, works through rapid digital-first prototyping, and operates within constrained timelines to get results. To drive disruptive new growth opportunities, small, cross-functional teams work quickly to design and launch digital businesses that compete with Intercorp’s core companies. Through La Victoria Lab, Intercorp’s leadership is intentionally creating urgency and applying positive pressure to disrupt its own businesses and remain competitive.

As a leader of an established company, you can’t ignore its history or DNA—nor would you want to; it’s what made the company successful in the first place. But you can constructively provoke necessary changes that allow new ventures to flourish. By openly embracing new business models, pursuing (and possibly creating) new markets, attracting and empowering entrepreneurially-minded talent, and even imposing a few artificial constraints like tight timeframes or lean budgets, companies can begin to fundamentally evolve not only what they do, but also how they do it. It’s the only way to ensure long-term market leadership—and sometimes even survival.

The tricky part of all of this, is that true venture-building, much like innovation itself, cannot be a corporate hobby. It cannot be wedged into spare time and pursued only when employees have white space on their calendars. It has to be modeled from the top, by senior leadership. One of the things that makes startup entrepreneurs effective, and ultimately successful, is their grit, determination and dedication to creating lasting change in the face of all obstacles. It's why others join them on their mission. Make it one of the reasons that others join you.

Visuals by Elin Svensson.

  • Katherine Londergan

    Senior Design Director, IDEO Cambridge
    Katherine loves designing new ventures with rich brands, products and service experiences—whether for large corporations that need to find new growth, or start-ups getting ready for launch. She's fascinated by different models of how corporations innovate and design new businesses.
  • David Schonthal

    Senior Portfolio Director, IDEO Chicago
    With a background in startups and venture capital, David helps new products and services successfully get to market. He’s also the co-founder of MATTER, Chicago’s health-tech incubator, and a professor of innovation and entrepreneurship at Kellogg School of Management.
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