Grow Xponentially



Is This The Winning Innovation Setup?

Innovation in the 21st century for the successful 20th century companies is not easy. The past success is a key obstacle and although established companies have more resources for innovation/new businesses than the start-ups, they fail to eliminate other obstacles like: mindset, organizational set-up and culture. Common statements within established companies about new business creation are:

  • Margin is too low for such a business

  • We do not have resources

  • We have always done it this way

  • Our customers won’t like that!

  • We don’t have time for this

  • We are not in this business

  • We did not agree in the last strategy review that your business unit will work on this subject. This happened twice to me.

  • We do not have the right culture and people for new businesses

  • Our organizational set-up is not suitable for new businesses

  • Although they innovate or can innovate with new products and/or services they do not have the right commercialization capabilities or access to the right go to market channels

With all above obstacles how can an established company align mindsets and innovate? Changing mindsets is a very difficult task. A better way is shifting mindsets by leveraging the fast growing start-up ecosystem: 

1.  Acquire: bring in external competences through acquisitions.

Viable if the organisation is set up as independent and autonomous unit reporting to a supportive CEO with sufficient autonomy and focus to create new products or markets. Apple and Google acquire almost a start-up per month and lately also Amazon entered the race.

2. Partner with external start-up(s). 

This is a good way to create external focus and learn. E.g GE has partnered with Kaggle (Data Science and machine Learning Platform) as well as other professional expertize platforms or accelerators.

3. Invest in ‘start-ups’ that are doing what you want to do.

Good option to learn and decide later for a potential acquisition.

4. Bring in start-up veterans and project team members into the organization to shift the culture from the inside.

5. Grow start-ups organically

The choice depends on scale, urgency and availability of solutions/resources.

But what else is needed for an established and successful 20th century company to succeed in the 21st century? The most important attributes for success are the organizational set-up and culture:

Organizational set-up. The best way to organize for new business/start-ups within an established company is to set up separately (within an incubation structure or start-ups are acquired to become part of the incubator) working like start-ups to discover a viable business model before they run out of cash. This approach is essential as working within a big company the start-up culture needs to be preserved. Their focus is to innovate by creating new businesses based on new business models or develop new technologies or a combination of both. The start-up leadership reports directly to the CEO or other member of the senior management team and they have their own processes and metrics suitable for their business model and different than the current incumbent businesses. At the same time the strengths of the established company if relevant to support the start-ups e.g access to distribution channels or introduction to the right partners is many times very valuable for success and needs to be deployed in a way that the unique business model and start-up culture is preserved. This is is many times difficult and that is why Top management needs to be actively engaged.

Culture. The start-ups need a different culture than established companies in order to succeed. Start-ups within or working with established companies need to maintain their own culture. The ingredients of such culture include:

  • They have a Transformative Company Purpose.

  • Open minded culture

  • They challenge themselves being connected with communities & crowd. 

  • Embrace exponentially growing technologies + multiplication/convergence effects

  • Embrace Autonomy and Speed. 

  • Learn faster through experimentation and fast failure is encouraged as it is learning. 

Concluding the best way for an established company to enable successful innovation collaborating with start-ups is by leveraging both the resources of the established company and the entrepreneurial spirit of start-ups in order to achieve 1+1=3. This is not easy to be done and needs the commitment and continuous attention from the Top.

What do you think?

Thank you very much.

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If you want to Innovate and grow faster please check How To Grow Faster

Mike Mastroyiannis is Business, Management & Executive Coach and Management Consultant for among others Business Transformations and Xponential Growth. He has served as CEO of business units in Multinationals, founded or lead start-ups and serves in advisory boards. He can be reached through LinkedIn or email mike@TenX2.com


Mike Mastroyiannis