Differences between corporations and startups
Large corporations can be compared to big cruise ships. They have an enormous force of pushing forward at a steady speed for a long time but are hard to steer. When it comes to innovation nowadays, the market can dictate sudden changes of business trajectory that can mean a complete redesign or rethinking of a certain product or services. What gives startups a huge advantage in the market economy is the fact that they come in aid of the segments demanding these changes.
A startup usually appears because of the need of a different product that creates innovation. Big corporations have huge assets, production lines, personnel etc. that are suppling an already existing need or demand, turning out a profit from the current status quo. What startups do is challenge the status quo and offer a new experience to the initial few who believe in the challenge they launch.
Are startups seen as a threat or an opportunity?
It is hard for a big corporation to implement or offer the change a startup could. First of all, that is because trying something new costs a lot for a corporation, because their client base and distribution channels are much bigger. Moreover, they usually do not benefit from investments, so everything is done at their own expense. A big corporation has many shareholders and there a lot of people and departments that have to agree in order to offer something new. Therefore, the implementation process is slow and suffers a lot of changes on the way.
What many corporations usually do is one of the following two things:
- They wait for startups to become successful and then buy their solutions.
- They create a special department for R&D that creates innovation.
The problem with the first practice is that it is not very cost efficient. Besides the huge cost of buying a successful former startup that is now worth millions, implementation must be taken into consideration. That means preparing all the departments for working with a completely new solution. Moreover, people might not like the changes a big corporation would bring to a working startup solution, so more money, training and optimization should be invested to keep it the same as before.
The problem with the second practice is that it creates corporate-ready solutions that lack the high personalization degree a startup can offer. A startup can interact better with its small customer base, launch test MVPs, and most importantly, get feedback from investors who know from experience how a new solution has to be implemented and sold to a growing audience.
Successful startups’ pattern
If we look at successful startups we can see a pattern. All of them fit a very specific group’s demands and then, without changing the concept or business model too much, that group becomes larger. This happens because people see how, by adapting their demands, they can benefit from a very efficient solution.
Let’s take Airbnb for example. At first, people did not trust this platform for finding reliable accommodation, nor did they think they can get the same level of comfort and luxury a hotel could offer. However, after seeing that the cost of accommodation is drastically cut and the array of possibilities for accommodation types and conditions is larger, they began crossing the barrier of trusting a private individual rather than a big hotel for offering them a solution to a need any traveler has.
Another business that managed to raise from startup to a huge revenue company is Uber. People thought that in order to get from A to B, they need to call a cab and travel with a car that is bought and used only for the mean of taxi services. However, after seeing that they can get exactly the same service, but at a lower cost, the fact that private individuals offer the same service for extra cash did not matter anymore. What matters most is the final result, which is getting somewhere in decent conditions, which Uber does very well without owning a single car.
Conclusion
People will always see a new, innovative solution with a pinch of reticence. They also tend to trust something that has been tested and used for a long time more than something that is new and few other individuals are used to. This is the reason why corporations which offer the same product or service to everyone are successful, but there will always be a few visionaries who will see the advantages something new has to offer, despite the inconvenience of not being sure about the level of satisfaction they will get. And these people are the reason why startups can thrive in a corporate world.
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