5 Things that established firms can learn from startups

A fresh breeze for companies: Inspiration through startups

Whether it’s Uber, Airbnb or Zalando, a wide variety of startups have penetrated classic markets and revolutionized entire sectors of the economy at a breathtaking pace. Many of the new players were laughed at when they were founded – and are now rated higher than their classic peers. As digital pioneers, they set the pace in their respective market segments. This presents established enterprises with the question of how to respond to the new startup culture in the effort to keep pace.

In fact, the current development also offers these former top dogs a great opportunity: to analyze what makes many startups so successful, and to find inspiration in the innovative models and approaches they apply. “To stay relevant in the digital world, companies have to scrutinize their previous business processes and old patterns of thinking and acting,” according to the Otto Group, for example, in explaining the “Cultural Transformation 4.0” it initiated back in 2015.

In concrete terms, this transformation involves a logical rethinking of previous approaches to work and behavior. Its goals highlight the various aspects in which startups can serve as role models for traditional companies.

1. Resolute focus on customer benefits

Startups have precise answers to the questions: “Why should we exist?” and “What problem can we solve?” Their thinking is based on the customer’s needs, resolutely making the customer the focus of what they do. In contrast to start-ups, larger companies often lose this strong focus on the customer due to an increasing distance of many employees with no direct customer contact.

The new players place their primary focus on the actual added value for their target group. Consequently, customers are actively involved in developing products and services at an early stage. Particularly the initially limited resources make special proximity to the customer and creative solution approaches indispensable in the effort to reach the goals that have been set. They are the drivers of innovation, and their key lies in an accurate grasp of the problems and needs of the target group.

2. Autonomous teamwork within the framework of agile methods

Agile methods facilitate this strong focus on customer benefit. Agile working in autonomous teams turns traditional approaches to working in companies upside down. By taking responsibility for their independent actions in flat hierarchies, management is also migrating into a new leadership role. Instead of guidance and control, the promotion of agile work lives from the effort to support and encourage employees.

Many of the firms in the Old Economy are still dominated by clear hierarchies and small-scale planning, silo thinking and a circle-the-wagons mentality. Startups, on the other hand, systematically deploy modern management methods. An increasingly popular example of this is Google’s successful system of “Objectives & Key Results,” in which clear guidelines and targets are jointly and regularly coordinated for all areas of the business. Breaking down rigid hierarchies opens the door to a high degree of entrepreneurial flexibility and helps agile companies react quickly to changes and unexpected events.

3. Speed as the core of startup culture

While safety and predictability are paramount in large companies, for startups, speed is an essential part of their DNA. This is how agile work permits efficient coordination in a team and creates space for individual initiative. Fixed, hierarchical and small-scale structures, on the other hand, lead to significantly longer decision-making paths and create hurdles to the rapid implementation of ideas.

A characteristic feature of startups versus established companies is that they enter and test the market with new products and services in a significantly shorter time, continuously analyzing the response of customers and continuously improving on their offer. An essential element of this is a positive error culture that allows people to try out new things, offers opportunities for learning and reveals new potentials.

4. High flexibility through trial and error

Closely linked to the trial-and-error approach is the high degree of flexibility in startup firms. Whether individual products, services or an entire orientation, new and agile players are often extremely versatile and can quickly reinvent themselves if need be.

Many of today’s successful startups began with a completely different approach and radically modified their business model within short periods of time. Thanks to their efficient structures, many startups also have the ability to quickly tap into additional business areas and position themselves profitably.

5. Corporate culture with an entrepreneurial spirit

The foundation for speed, flexibility and innovation is the effort to foster an environment that encourages employees to develop new skills and ensures long-term commitment to the company. Many start-ups now increasingly compete with other new players and established companies in the job market.

That is why they rely on an innovation culture that spotlights the open exchange of ideas and permanent learning opportunities. Employees are encouraged to think entrepreneurially, to grow in their careers and to work toward a shared goal in a networked way. High transparency within the company also ensures that everyone always keeps an eye trained on the big picture.

Learning from the startup culture – The courage of openness to new things

The things startups do are characterized by openness to new things. This courage to change the perspective and to take new paths is increasingly demanded of established companies if they also want to set the standards in the markets of tomorrow. Of course, this involves more than a mere transfer of individual startup methods. It means creating an innovation culture that breaks down existing barriers, prevents the silo mentality and permits an entrepreneurial transformation.