Start-up hybrid: How misfits out-innovate established companies


How misfits out-innovate established companies. PHOTO | SHUTTERSTOCK

“The wise person doesn't give the right answers, they pose the right questions,” to paraphrase Claude Levi-Strauss.

When a company wants to innovate what should they focus on?

For the budding entrepreneur, full of energy and drive, wanting to create a successful start-up business, what is the fundamental question they should ask?

Is there a way to create a new business model? An approach that combines the resources of a large corporate, with the entrepreneurial imagination of a tiny start-up?

A good number of business plans don’t survive their first contact with the customer. This is because they create a bright idea product or service, that they think the customer wants.

Only to discover no one wants their service offering, after investing a lot of money and time.

Harvest problems

So what is the place to start? When thinking about introducing a new product ask – What is the problem that it solves? Look at it from the perspective of the problem that your customer faces. What is it that they want?

What is it that they are trying to do? Begin by understanding all the difficulties, pain points that your target customer faces.

Innovation guru, Clayton Christensen puts it slightly differently – Ask what is the job being done by the product.

Go out into the market, delve into the customers’ muddy home ground, and begin by harvesting their problems. Entrepreneurial discovery begins but uncovering a true customer need, based on a problem.

The truth is that entrepreneurs do not usually do this by conducting surveys and focus groups, relying on ‘second-hand’ market research.

A better approach is to become like an anthropologist doing research. Spend a lot of time speaking with customers, just simply observing them, almost ‘getting under their skin’, understanding their experience.

Once the critical problem is identified, design the product as a solution, that is just plain simpler and faster. Overall, more effective than anything now on the market.

Hybrid start-up

Very often it is the misfits with a laptop that can out-innovate established companies. While the corporates have the resources and capabilities that ought to give them a substantial lead, they lack enterprise zeal.

They lack entrepreneurial drive and creativity because they are trapped within the corporate box, with the mindset of 'this is the way we do things around here' that stifles blue-sky innovation.

In Christensen’s management classic, The Innovators Dilemma, he suggested that the only way that a larger corporate could be truly innovative was to create a separate innovation unit, apart, outside of, largely divorced from the corporate, not encumbered with its more restrictive systems.

While this is a possibility, blue chips like Airbus, UPS, Volkswagen and Mercedes-Benz have started hybrid start-ups.

This new business model combines the best of both worlds, the resources and capabilities of the corporate, and the ‘batteries included’ imagination, creativity and entrepreneurial drive of a startup.

Not the same old, same old

The approach of the hybrid start-up will be very different from traditional large organisation business practices.

For the hybrid start-up, the stress is on running fast experiments, and thinking how to gradually scale them.

Here the focus is on practices that are the foundation of Silicon Valley, the lean start-up approach, design thinking, and a whole portfolio of agile methods, including rapid prototyping and testing.

The question is how closely does one tether – link the hybrid start-up with the mother corporate? How closely hybrid start-ups work is a matter of choice, with pros and cons, of several approaches.

No, the hybrid start-up may not be for everyone, but it does provide an imaginative, cost-effective ‘do more with less’ way to be on the leading edge of the innovation curve.

It can, for instance, move the second and third-tier banks and insurance companies out of a rut.

The focus is on coming up with the ‘by design product or service that solves the customer’s problem, building the prototype in a low-cost, low-risk way, testing it in the market, getting the feedback, and rapidly adapting, going through the build – test - learn cycle several times.

The aim of the hybrid start-up is not to have a ‘one off’ hoping to get the lucky goal of innovation, but more to create a system, a system that creates a stream of in-demand innovations.

Insightful questions, not glib answers hold the key.

David is the director at aCatalyst Consulting.

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