We hear a lot in the news these days about how big companies are both challenged by and responding to the threat from start-ups. In many cases, start-ups are lauded as more consumer-focused and agile. As a result, big companies have set up small units designed to mimic the start-up model, but is this truly a recipe for success?
Here is the essential point, trying to create a start-up within a big company risks throwing the baby out with the bathwater. Scale, resources and deep knowledge of consumer behaviour are advantages that should allow big companies to innovate better than a start-up. There are barriers, such as an addiction to process and a focus on efficiency instead of opportunity, that need to be overcome for a big business to innovate with the agility of a start-up. However, these barriers often stem from ingrained ways of working rather than organisational structure, and aren’t insurmountable. In short, big companies should be able to adopt a new approach to innovation throughout their business that plays to their advantages and allows them to innovate better than a start-up.
One of the biggest challenges for a big company is to step outside the traditional, stage gate approaches to innovation that have led to years of close in, line extension launches that have failed to add incremental value to these businesses. The result of processes like these is that markets have got so crowded that in categories such as yoghurt in the UK it would take you 65 years to buy all of the yoghurts available if you bought a different SKU each time you shop!
To cut through in a world saturated with choice, innovation needs to offer consumers options that are meaningfully different to the ones they have already. Many of the best examples of innovation that have delivered this meaningful difference in recent years have come from start-ups that have tapped into changing consumer needs with a proposition that disrupts the norms of the category incumbents. These examples abound from craft beer to fintech to pet food, but big companies may be even better positioned to create meaningfully different products if they play to their strengths.
A meaningfully different innovation will only emerge if a clearly defined growth opportunity is identified as the start point. Once this is done then lean, start-up principles which rapidly iterate from opportunity to idea to Minimum Viable Product (MVP) to scaled launch can nurture and improve the innovation. And it is our belief that, larger, more established businesses with their greater resources can implement lean innovation better than a start-up because they can LEARN better than a start-up. Learning better comes from the smart use of modern, agile, insight approaches focusing on critical assumptions and behavioural understanding.
The smashing together of intelligent futures strategy, expert knowledge and big data from consumer conversations provides the learning that identifies opportunity areas for innovation. The smart innovator will then generate ideas, use approaches such as VR or dummy e-commerce platforms to test them in context, build a MVP and get learnings from agile research approaches and small scale launches. All the time iterating and testing the critical assumptions behind the idea. It is the learning that results from this testing that enables the proposition to be optimized and maximise its chances of success with a scaled launch.
The difference between a big organisation and a start-up is that the latter cut corners out of necessity. For example, why should a start-up approach of getting the reaction of a few people in a café in North London be the ONLY basis of your optimisation guidance for a MVP? Feedback from hundreds of your target consumers is available in days. Why rely ONLY on the observations of a brand manager to translate consumers’ thoughts into insight? Expert qualitative researchers, trained to understand the 90 percent of consumer feedback that is un-stated (through facial expression, body language etc) and to decode the semiotics of speech are on hand.
So, when thinking about how you approach innovation, do you learn better than a start-up?
Written by Phil Sutcliffe, UK Board Director at Kantar
