The 8 biggest challenges you’ll face running a corporate lean startup, and how to tackle them
Congratulations! It’s an exciting and challenging time to be an intrapreneur.
While there were only 9 unicorns (privately held startups valued at over $1 billion) disrupting traditional industries in 2008, this number had risen to 138 by 2018 (QZ). Incumbent organizations are responding to the threat by creating spaces for rapid experimentation in great numbers. They may be called ventures, innovation labs, corporate accelerators, speedboats, or incubators. In this article, we’ll simply call them lean startups. Running a lean startup within a corporate structure can be beneficial for both the startup itself and the wider organization. Being part of a large corporate means having (almost) endless resources at your disposal — something very useful in the early phases of your startup. Need some legal advice? Just call the legal department. Need exposure to about 10.000 of your target audience to A/B test some copy? Check with the CRM manager and send an email!
When your lean startup does not veer too far away from the core business, the insights you gather while researching customer needs and testing hypotheses can benefit the wider organization. You’ll also be demonstrating to other teams how agile and fact-based approaches can generate valuable insights and increase execution speed. A third benefit to the wider organization relates to culture and attitude towards failure: projects in a large corporate are often ‘too big to fail’ and teams do not happily engage in sharing failures. In a lean startup, however, you test hypotheses on a small scale to figure out what works — and what doesn’t! — to learn and optimize. You’ll impact corporate culture step-by-step, shifting attitudes towards failing, testing, learning and being ‘right’.
All the excitement aside, as an intrapreneur you might also feel frustrated or lost, like a lone warrior battling bureaucracy. Benedict Evans captured this feeling brilliantly in a GIF.
Sure, running a corporate startup can be a lot more comfortable than running a bootstrapped or VC-backed startup. However, the job does come with its own set of challenges. We’ll outline some of those challenges, and the best practices you should follow to tackle them in this article.
That experience of having to involve six different departments to make one small change.
As a company grows, an increasing part of the organization moves further and further away from the customer. In a small company product, sales, customer service, IT, logistics and marketing communication are often handled by one team. But in a large corporate these different functions will be managed by a range big departments, potentially spread across the globe. Each with their own interests and objectives.
If you run a corporate startup using the parent company’s customers and ecosystem, you’ll soon realise that small changes can be very complex to implement. Imagine, for example, looking for a different fulfillment partner for your offering. This will require changes in the API-calls made to the existing fulfillment partner, instructions to customer service on how to handle questions and complaints from customers, changes to the e-commerce portal and changes to email copy. Running the startup completely separate from the parent company means more agility. However, it also means not benefiting from the corporate infrastructure, and a more complex integration when scaling.
Takeaway: as an intrapreneur, evaluate carefully at each startup phase and for each element of the customer journey whether it is better to stay inside or move out of the established corporate structure. Consider running the lean startup completely separate from the existing customer ecosystem.
Why is nobody attending the daily stand-up this morning?
Getting team dedication and clear business ownership in a large organization can be a challenge. With short term issues constantly demanding attention, it is difficult to run a successful lean startup. How to prevent your innovation efforts from being seen as something done ‘on the side’?
First, it is important to have clear, measurable objectives and a timeline for achieving them. Your objective should fit the maturity phase you’re in. So if you still need to prove that customers love the solution you’re offering, it is best to avoid ambitious growth targets. Second, the right people need to feel ownership of these objectives. If your objective feeds into a higher-level target, senior stakeholders will have a reason to help you move obstacles out of the way. Likewise, breaking down your objectives into smaller chunks will allow team members and stakeholders to take ownership in the challenge. KPIs can be a great source of purpose and teamwork when used the right way!
Takeaway: as an intrapreneur, you don’t operate in a vacuum. It is up to you to ensure that your project is given the priority it deserves. A great way to share this sense of ownership across your team and stakeholders is through thoughtfully selected objectives.
That constant battle between competing interests.
Working in a matrix organization entails inherent paradoxes that are especially relevant for intrapreneurs. As described by James Allen from Bain, a matrix organization produces a set of paradoxes, or conflicts, that can be healthy or unhealthy, depending on how they are dealt with. They are:
Takeaway: as an intrapreneur, be aware of the conflicts of working in a matrix organization. Realize that these conflicts serve a purpose, which is to find the right balance between the two extremes.
How many forms do I need to fill?!
Depending on how detached your venture is from the established organization, you may be facing a lot of approval loops. This is especially challenging when you are testing add-ons to an existing business (e.g. value-added services or new channels), as opposed to a stand-alone venture. Being drowned in paperwork does not help your rapid experimentation efforts.
Takeaway: as an intrapreneur, realize that legal, privacy, IT, risk, brand compliance and procurement departments play an important role and can serve as invaluable coaches or consultants if you manage the relationship the right way. You can do this by having someone from each team serve as a ‘startup consultant’ helping you navigate their area of expertise. You could meet with each of them bi-weekly for 15–30 minutes.
That moment you realize not everyone is as excited about doing things differently as you are
Large corporations tend to be more risk-averse than startups, for good reason: there is more to lose and relatively less to gain. To reduce resistance to change, it is important to minimize risk for your colleagues (what does this mean for my job?!) and the corporation itself (what if we fail our customers?!). Three forms of risk to watch out for at the corporate level specifically are:
Takeaway: an important part of running any venture is minimizing risk. As an innovator at a large corporate, quantify risks, benefits and costs and communicate them effectively to your stakeholders. Realize that demands for minimizing risk are not unreasonable and that a VC investor at a startup would require the same accountability for risk from a founder!
How do I show progress when all the normal business metrics are effectively zero?
It is likely the case that your lean startup is not (yet) making any significant revenue, especially compared to your costs. Tracking performance and effectively communicating to stakeholders can be especially challenging if the organization does not already have a structure in place to manage innovation projects, such as innovation portfolio management or a corporate venture lab.
Even if there is no structure in place for managing innovation programs, there are still ways to estimate and track the performance of your lean startup. We’ll go into these topics further in an upcoming article, but here’s the summary:
Takeaway: it’s possible that the traditional performance metrics and project selection methods are stifling innovation in your organization, or encouraging you to build unrealistic business cases. There are alternatives, and it’s worthwhile to discuss with the finance team against which metrics your project should be evaluated.
You have the facts, but none of that seems to matter…
You hire a service designer to create the best customer experience, an analyst to create and run clean experiments, and a developer to write clear, simple, effective lines of code. Everything you do is informed and validated by data and customer insights. Then, when you share progress with senior stakeholders, they give their unsolicited advice that you should have done things differently: a more formal tone of voice, a different color, a lower price point, etc. Even though fact-based decision making is cited as the biggest advantage of adopting lean startup methods by innovation leaders that doesn’t mean it is easy to implement.
Takeaway: as an intrapreneur, make sure that your investors (the senior stakeholders financing your project) know their role: to give direction and purpose, challenge you on results and help remove obstacles. Autonomy is a key element of successful agile teams. Leaders can have an opinion about whether the product you are building should be blue or green, and are welcome to share that opinion, but they need to trust the expert to make the right decision.
Yes, we are talking about you now
As an innovator within a corporate, you’re in an interesting position: you are asked to act like a startup founder, with the comfort of having a fixed position and getting a paycheck every month. This is a great position to be in, and executed excellently by most corporate entrepreneurs. However, being in this situation does bring a specific set of challenges that you should be aware of. Three things to look out for:
Takeaway: The temptations are real. Beware of them.
Was that a lot to process? Don’t worry, we’ve got you covered. Keep calm, and follow the below recommendations to tackle your corporate startup challenges:
We hope those recommendations will help you navigate life as a corporate innovator with a better sense of direction. Looking for more tips and practical advice on how to run a lean startup in a corporate setting? Stay tuned for more articles!
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Contributors to this article:
About Riverflex Riverflex is a new type of consulting firm. We deliver digital expertise and value by combining top consultants with the power of independent specialists — providing digital consulting, staff augmentation, and interim management services. For more information visit us at http://www.riverflex.com/
Originally published at https://riverflex.com on April 30, 2019.
The 8 biggest challenges you’ll face running a corporate lean startup, and how to tackle them
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