Friday, May 22, 2015

How To Be A Successful Corporate Startup

By Brian Moelich
Business Designer
Innovation Enablement, CX


Organizations have the ability to generate innovative ideas, but are failing to integrate them back into the enterprise.


Innovation practices like design-thinking and lean startup are being adopted by organizations as the path to new growth. The challenge though is that as great as these practices are for generating and prototyping creative customer-centric ideas, rigorously testing them to gather evidence and make decisions based on that evidence, they fall short on how to incorporate those ideas into an enterprise.

From my experience incubating new ideas within an enterprise, I’ve found a few methods, when paired with innovation practices, increase the likelihood of those new ideas being pursued and accepted into the fold of the organization.

Understand who your stakeholders are and get their buy-in throughout the innovation process

Just as you use design-thinking to interview and understand who your customer is and what their underlying needs are, do the same with your executive and business unit stakeholders. Put yourself in their shoes. What is top of mind for them? What keeps them up at night? What are their needs?
As you generate new ideas, tailor your ideas to your stakeholders and create gains or solve their pains for them. Do this throughout the process and not just at the beginning. Take prototypes to your stakeholders and co-create with them like you would your customer.

Have all your strategy ducks in a row

Strategy in its purest form is about making choices and tradeoffs. You can’t be everything to everybody or you will be mediocre at best. Design-thinking and lean startup may not make strategy explicit, but successful corporate startups do.

As you learn who your customer is through interviews, prototyping & testing ideas and gathering evidence on what resonates, clearly articulate who that customer is. Go beyond just a persona and use language from the Business Model Canvas, because this is what corporations understand and want to hear.

Is your idea B2B or B2C? Is it a two-sided market? Where will you play geographically? How will your idea get into the hands of your customer? How will customers become aware of your idea and what will you do so that the idea is sticky with them? At what part of the production line will you play and do you need to partner with someone? What is the customer willing to pay for?

One last thing on strategy, explain why your customer will choose you every time over the competition. Your idea will be truly compelling to your organization if you can articulate, and preferably, visualize why you standout from the competition.

For example, Steve Jobs showing the iPhone back in 2007

Image credit: Earnest Kim

Model the financial metrics that matter

For a startup seeking funding, it’s a no-brainer to come prepared with a market size and capital expense estimate, revenue forecast, customer acquisition cost (CAC), average revenue per user (ARPU), lifetime value, churn, etc. Just as an investor loves to see these numbers, so to do organizational stakeholders. 

You will learn about possible revenue models and how much people are willing to pay for your idea through your innovation process and modeling these out will give you more information on the way forward. For each option, do quick back-of-the-napkin estimates for market size and expenses necessary to get to market. Think about customer awareness and activation, what will that cost and how much of your target market could you feasibly reach?

Understand what capabilities you will need and how they fit into your organization's existing capabilities

Organizations are great at understanding what their core capabilities are and what the necessary activities are that produce those capabilities. Your goal then becomes, knowing what the core capabilities and supporting activities are that your idea will need. I like to think in terms of an activity system, pictured below.

Example of Nespresso below, Credit: Heather Fraser

Use this then to compare to your organizations core capabilities and supporting activities. What can you leverage? What needs to be built out? What should be done in-house or should certain activities be outsourced to a partner?

Tell it all with a great story

When you’re ready to pitch the idea, sum all of this up, alongside everything you learnt along the innovation process, and help your corporate stakeholders understand the relevance of all of it with a heartfelt story.

Take the story of someone you interviewed. Explain who they are and emphasize their pains to allow the listener to empathize with your customer. Then get into what the future holds for your customer with your new idea in hand and how it delivers on their needs and solves their problems.

Now with your stakeholders primed, explain your idea with a clear value proposition, why it is better than the competition, how your organization is uniquely positioned to develop it and why they should care, i.e. the value it will create.

The success of corporate startups depends on more than innovation practices alone

Innovation practices like design-thinking and lean startup are great for generating new ideas, and I hope you’ve learnt a few ways to increase the likelihood of those new ideas being pursued by your organization.

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