Found startups or use micro-business-units - Why startups nearly always are more successful
Once a corporate has understood the need to invest in disruptive business ideas that one day might cannibalize the entire existing business another important question arises: Why should we separate this idea from our company and invest in founding a startup?
I and my team know that there is certain arguments that surely favor using micro-business-units over startups. Micro-business-units, units with a certain self-government within a corporate organization, naturally have direct access to resources that normally only corporate resources have. Routined processes, direct access to hiring teams, purchasing, and legal departments, industry expertise and the brand of the corporate easing access to potential customers. One might argue that these processes and organizational support is slow and rigid and not at all suited to serve the needs of a startup organization and we surely agree with that. However, independent startups struggle with gaining access to the above resources very often and would be relieved to be granted the support a micro business unit has.
The remaining, obvious advantage independent startups have is the strategic freedom to quickly react to any market movement and customer feedback. A freedom a micro business unit does not have on all levels. While they do have the freedom to decide more on their own than an ordinary corporate department, there are many limitations to that freedom. Even if this freedom is extensively granted, staff members of the micro-business-unit will not forget about their future career ambitions within the corporate organisation and thus make sure to follow a certain 'political correctness'. This costs time.
Of course startups founded by a company builder bring in the best of both worlds, but corporates still often favor micro-business-units because they are afraid of losing control on a great innovative idea.
So what argument is left? Is there a reason beyond strategic freedom and resulting lower time to market that might convince corporates to spin-off a startup instead of adding another micro-business-unit to their organization? YES! The need to perform to survive.
What I mean by that is best explained by an analogy by Eric Thomas, a famous U.S. American motivational speaker. Eric Thomas tells the story of a man who wants to be successful:
There was a young man who wanted to be successful and make a lot of money and so he went to this guru, an old man who had been really successful and made a lot of money out of that success. And he told the guru: "I want to be on the same level you are". The guru said: "If you wanna be on the same level I’m on, I’ll meet you tomorrow at the beach". So the young man got there at 4 A.M. ready to rock n’ roll. He wore a suit, because he didn’t know about what was about to come. The old man grabs his hand and said: “How bad do you wanna be successful?” The young man said: “Real bad”. So the Guru said: “Walk on out in the water.” So he walks out into the water. When he walks out to the water he goes waist deep even though the water is freezing cold. The young man said: “Hey I wanna make money and he got me out here swimming in freezing cold water. I didn’t ask to be a lifeguard. I wanna make money” The Guru replied: “Come on a little further” So the young man walked out a little further. He already had the water up to his shoulders and thought to himself: “This is crazy, but this old man knows how to be successful…” And the Guru said: “Come on out a little further” So he walked out further. The water was right at his mouth and he said: "This is crazy, I am not going any further!” The old man said: “I thought you said you wanted to be successful?” And the young man replied: “I do.” So the old man shouted: “Then walk a little further.” The old man came, dropped his head in, held him down, hold him down, hold him down. He had him held down, just before the young man was about to pass out, he raised him up and said: I have a secret for you:” he said: “When you want to succeed as bad as you want to breathe than you will be successful.”
Any founder that ever came to success knows this feeling. As a founder of a startup you simply do not have a choice. There is no safety net, there is nothing protecting you. This is why startups are nearly always are more successful than micro business units. Because they simply have no other choice than to be. And this is why we encourage corporates to spin off startups. Just to stay competitive!