The following blog post was written by Timothy Bosco, Senior Vice President of Investor Services at Brown Brothers Harriman. Tim will be hosting a webinar on this topic on Thursday, July 28 at 2 p.m. EDT (rsvp here).
Clearly, the “eat-or-be-eaten” environment in which most startups operate has a way of forcing efficiency and creativity. When something is not working to plan, only those with the willingness and the ingenuity to shift fast enough have a chance of making it.
It’s that dexterity large organizations envy most. In fact, there probably isn’t a corporate innovation team out there that hasn’t, at some point, incorporated the “fail fast” mantra into their lexicon.
Large companies also recognize that many of the same factors that threaten a startup’s success can impact their own product strategies to the same degree – technology can evolve overnight, customer preferences are fickle, funding is always limited, and new competition can spring up from anywhere at any time.
The difference for startups, though, is that they have the most to lose by ignoring signals to fail fast. In most cases, it is their survival instincts that draw out the entrepreneurial resiliency needed to bootstrap success even if that means setting aside their original ambitions.
Pinterest is one of many great examples of a startup that was forced to abandon its initial plan only to architect an even bigger opportunity. In 2009, the founders of Pinterest initially attempted to launch the very first mobile-enabled shopping application called Tote. Despite strong customer demand, retailer support, and adequate seed funding, the idea never took off because of the relative immaturity of mobile payment technologies. Instead of doubling down and waiting for payment technologies catch up, Tote switched gears and relaunched a much simpler application that kick started a new visual social network phenomenon. It turns out that Pinterest is among the most likely IPO candidates in 2016 with an anticipated $11 billion valuation.2
While large companies can’t necessarily manufacture the competitive environments that shape actual startup behaviors, there is still a lot they can learn from successful entrepreneurs about staying lean, focused, and in control of new product innovation. The following table outlines a few key success factors commonly found among startups that reinvented themselves early in their lifecycles.
Adopting Successful Startup Strategies
Within the corporate context, these startup strategies also suggest an ideal investment profile for mitigating risk. The minimum and maximum ranges depicted below illustrate the relative levels of investment in terms of both time and money throughout the product development cycle.
Creating the Right New Product Investment Profile
It clearly takes both practical decision making and an unconditional commitment to make it big as a startup. The people who run them are responsible for every detail, every success, and every failure. It is that entrepreneurial perspective that guides startups to fail fast. For that reason, established companies must understand the importance of empowering their product teams to own their decisions about how to incorporate failure before it gets expensive or even worse… before it becomes destructive.
1 Forbes, 90% of Startups Fail: Here’s What You Need to Know About the 10%, January 2015.
2 Nasdaq, Is Pinterest a Top IPO Candidate for 2016?, December 2015.