Start-ups are masters in innovation and the search of new business models. Where corporate organizations are masters in execution. Scaling a business though is a hard job for many start-ups and innovation is a tough thing for almost all corporates. Why is it so difficult to master both disciplines?
Dying business models
The shelf life of business models is declining due to changing customer needs and new possibilities to deliver value in a more relevant way. Often driven by digital transformation and renewed eco systems. To stay relevant as an organization and ensure financial health you need to be in search of new business models besides executing your current business. Basically, you need to focus on both aspects of business to stay future proof.
However, practice shows that many organizations have difficulty doing both. Understandable when you consider that both disciplines require completely different rules and competences. Where execution requires a tight and error-free execution of operational processes to deliver what has been promised, the search for new ways of creating value requires trial and error, gaining new insights, quick iteration and translate these insights into propositions and business models that have a fit with the market.
So how to become good in both disciplines?
The first step is to realize as an organization that you need to focus on both disciplines in order to be successful in the long term. This requires target setting on both aspects. In addition to introducing targets for both the execution of the current business model and the search for new ways of value creation, you also need to release resources for both execution and innovation. If you don’t reserve resources for the search of new value creation, the organizations’ backlog will always be prioritized for the running business. Because that’s where money is earned today and that is what is for now most urgent. But not for the long term.
The organization needs to invest in inventing new value propositions and business models in order to stay in business in the future. Organizations like Google, Amazon and Bol.com have separated backlogs for running business and the search of new propositions and business models. So those two won’t conflict with one another. Secondly the competences of the people running the business shall differ from the competences of the people in search for new ways of value creation. The first group will consist of people that are good at planning and organizing, are process driven, good in scaling concepts and that are somewhat risk averse. The group of innovators need to consist of people that are extremely curious, have a growth mindset, are visionary, flexible and good at fast iteration and co-creation.
Thirdly, the management of the organization must focus on both the running business and on search. One way to do so is to set separate agendas for management team meetings focusing on running the business versus search. This prevents the meetings from being swallowed up by operational items and leaving no time left to reflect on innovation.
Last but not least there needs to be cross-pollination between both disciplines. If you do not properly organize this, you run the risk that both disciplines do not understand each other and will work against each other. It’s even best to run projects in multidisciplinary teams with people from both disciplines to ensure that the innovation has a good fit with the running business, that new insights gained in the innovation discipline can directly be used in the running business and that the knowledge and experience of the running business is being used in the search for new ways of value creation.
Organizations need to master both disciplines in order to stay future proof. If you don’t your start-up will never come to a point where you will have a scalable business model. Or your (corporate) organization will be successful today but will in the longer term no longer provide the best solution for your customers’ needs. Meaning that you will lose your relevance and therefore business to organizations who are capable doing so in the long term.