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As an advisor to many startups, I often see adopted business principles that may make sense for a large, established company that is trying to drive innovation, but will not work for a new startup. I am a strong supporter of new entrepreneurs starting with a big vision, and believing that anything is possible – but I am also a pragmatist who believes in taking realism into account in any plan.
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The fact that entrepreneurs tend to think outside the box with passion and persistence is a big advantage, and this is clearly why many large companies are now funding or buying successful startups for new innovations rather than relying on internal projects. On the other hand, large companies with existing resources and qualified people have different rules for innovation efforts.
1. Good ideas will have no trouble getting funded.
Large companies finance internal ideas with the money and people they already have. Startups typically don’t find any funding from investors until they have proven they can run, have a proven model, and be ready to scale. LikendisLikes waiting for funding at the idea stage are generally disappointed.
2. Marketing is a key competitive advantage.
Too many startups are proud to be the first to enter a new market – to be invaded by big gorillas with more resources that see the pull of startups. The first placing on the market is only a lasting advantage for a large company, like Apple or Google, with the resources necessary to support its first movement.
3. Always start with a bold, hairy goal (BHAG).
This approach works for large companies that are struggling to think outside the box and who need a long-term goal to grow their business. Startups are best served by attacking an existing painful problem or an unmet need with short and long term potential, placing smaller bets faster.
4. Don’t start until you know the risks are minimized.
Large companies have lawyers and executives who are paid to reduce the risk to almost zero. LikendisLikes have learned that there is no risk-free reward. If they want growth and sustainability, they often increase smart risk, which means more risk for growth or a competitive advantage.
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5. Successful projects are well staffed and methodically executed.
It is a commercial axiom that works well when the scope of a project is well known. For a startup, nothing is known and the endowment is non-existent. LikendisLikes must assume that the initial iterations will require multiple pivots, and that money and people will always be a struggle.
6. Hire or train a specialist for each of the key elements.
Large companies depend on specialists and experts, while startups need more generalists. Startups can only afford a few people, so each should play several or almost any role. A founding entrepreneur can be a technology expert, but those who succeed are also good businessmen.
7. If we build a great product, customers will find it and we will.
Large companies, such as Apple or IBM, have a large customer base and quality products, so new technologies along the same lines will be found. A startup doesn’t have a brand, so new products, no matter how small, need real marketing, social media advocates, and education efforts to attract customers.
8. Keep innovations in stealth mode until they are ready to ship.
Hiding new solutions makes sense for large companies that can be prosecuted for “announcing” a new product in advance to block the market or kill a competitor. Smart startups make their intentions visible at the idea stage to test customer interest and make corrections before spending real money.
As an entrepreneur, if you are a recent graduate from the business world or have just acquired a prestigious master’s degree in business administration, be careful when applying the principles of business textbooks to your first startup . Business principles are essential for both, but startups are more of an adventure into the unknown. It’s a fun trip – but don’t blindly follow all the principles of big business.
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