Disruption is the over-riding trend in business today. The mantra 'disrupt or be disrupted' echoes in boardrooms around the globe. We're seeing entire industries turned upside down by new entrants: the insurance sector and Metromile, the payment sector and Stripe, the media industry and NowThis, and the telecoms sector and WhatsApp. But just how are these startup companies becoming so influential, so quickly, and what can established organisations do to compete against these agile, tech-savvy startups.
This trend for disruption is not limited to the insurance, payments, media and telecoms industries, it's affecting all sectors and organisations. One simply needs to look at the list of Fortune 500 companies. When we compare the 1955 listing to that of 2017 we see that only 60 firms (12%) from 1955 still feature in 2017. Those remaining 60 are firms like General Electric (GE), a 125-year old organisation that describes itself as a startup.
What GE has done, arguably better than any other established company, is understand how necessary it was to adopt a leaner, more flexible approach to innovation and change. In 2012 it created FastWorks, an internal process that implemented lean startup techniques across the organisation.
Gartner predicts that by 2021, over 50% of established organisations will be applying lean startup techniques internally as they seek to accelerate business transformation.
So what are these lean startup techniques?
In Eric Ries' bestselling book The Lean Startup he outlines the methodology of a startup: creating a minimum viable product (MVP), innovation accounting, pivot and build-measure-learn.
Like a pilot project, creating an MVP allows a company to develop a version of a product/service and gain the maximum amount of user insight from the least amount of effort. Companies are in effect testing the product or service out on a small, but complete, scale, so that they can ascertain whether there is adequate demand for such a product or service, measure and learn from the test and put those learnings into practice as quickly as possible, and all with minimum investment. In the startup vernacular, this is called Validated Learning (the unit of progress for lean startups).
Innovation accounting focuses on the innovation process itself, measuring progress, setting up milestones and prioritising work. This step ensures that innovators within an organisation have accountability for what they're doing; they need to formalise their process, write it down.
A key characteristic of lean startups is the build-measure-learn loop; turning ideas into products, measuring how users respond, and learning whether tweaks need to be made (often called pivot) or whether the product is good to go into full production. The success of this learning cycle is based around its manageable size – through building an MVP, real learnings can be made quickly, efficiently and inexpensively. Through measurement and testing, organisations can then move quickly into the next phase with confidence.
Move fast and build things
Once upon a time Facebook's motto was "move fast and break things", and while this fit with the business at the time, Mark Zuckerberg has since distanced the company from this slogan. Today's startups, and organisations striving to innovate, are more likely to talk about moving fast and building things.
It's a fast-paced, digital world, which is showing no signs of slowing down. The successful companies are those who are poised to pivot, who are ready to grasp hold of the innovation imperative. Speaking at the recent Dublin Tech Summit, Laurence Buchanan of EY predicted that 75% of the Standard & Poor's 500 companies will be new entrants by 2027. This sobering statistic highlights the reality for established organisations; the startups are coming.
To succeed in this new world, enthusiasm for change, flexibility to pivot, courage to take risks, and commitment to innovation are an absolute must. And while these traits are typically associated with the startups of this world, it's important to note that they aren't exclusive to the startup community. Large, established organisations can and must learn from these eager, young companies and foster a digital mind-set, or risk getting left behind.