What start-ups can and cannot do

"Start-ups are NOT, as is often assumed, the small version of a large company; they are not even a real company". Johannes Ellenberg, entrepreneur, author and start-up enthusiast, explains how start-ups work and what they can teach established companies.

Johannes Ellenberg: Start-ups are, so to speak, seeker-organizations. I like to use the image of a cord tangle to explain start-ups: imagine a tangle of cords, a cord that has simply been thrown down and not properly wound up. It's impossible to draw up a plan for how to unravel the pile. You pick at it here, then there. And little by little – by trial and error – the bundle starts to unravel, and finally the cord can be rolled up properly. This is similar to how start-ups proceed until they have found their product and the right business model. When they start unraveling the pile, they only know that they want to solve a problem. At first, it is hard to see which solution is the best one. They look for an idea, for an innovation.

Start-ups often consist of several founders, of a small team where everyone does all the necessary things and everyone is informed about everything. There are no hierarchies, no static organizational structure divided into individual areas or departments.

Start-ups are in seeking mode; established companies are in planning mode.

Most importantly, however, start-ups think differently from established organizations and therefore act differently:

• They think starting with the customer. They have no production facilities or other goods, nor are they even able to: they usually have no resources. It is enough to have access to such things – for example, by means of leasing or outsourcing. The same is also true for employees. The most important thing for start-ups is to occupy the customer interface.
• They use digitization in every respect, wherever it makes sense.
• They have a clear answer to the question: “Why should we exist?”
• They don't limit themselves. Everything is conceivable.
• They do not strive for perfection, but for speed: they have only very limited capital resources and thus have little time for implementation. The product is developed together with the customers while already on the market (in an unfinished, minimal version).
• They allow failure to happen, understand errors as opportunities to learn and are thus faster in finding the right path.
• They move in networks, learning from others and working with others.

The features that distinguish start-ups at the organizational and management level show that they are predestined to cope with the new laws of the digitization age. This is precisely why start-ups serve as a good example for companies intending to still exist twenty years from now.

Of course, my starting point is based on the ideal image of a start-up – a model that certainly does not apply to all start-ups. If all start-ups were ideal, there would be no stories of failure – but they do exist in large numbers. Nevertheless: if you have realized that your company must change, if you are no longer sure your business model will last the next few years, take a closer look at the start-ups.

Established companies become their own stumbling block when times are uncertain

Established companies hinder themselves in uncertain times: they follow fixed strategies, plans and processes and are bound to property and employees. Their development efforts focus on the customer’s perspective only to a limited extent; they often have long decision paths, manage limited resources and find themselves dependent on banks, shareholders and other stakeholders.

Established companies should always examine themselves, keeping the following four points in mind:

1. How long does it take to develop a new product? Days, weeks, months or even years?
2. How high are the costs for doing so? Specific example: how long did German car manufacturers need to develop everyday electric vehicles? When it launched a completely new car that could travel longer distances without having to be plugged in, Tesla was far ahead of anyone else.
3. If a company discovers that its customers are no longer satisfied with the previous sales channels, it must respond. Is there a way for a company to respond so quickly that it can stand up to new competitors? By the time the stationary book trade began to regard Amazon as a serious competitor, Amazon had already moved past bookselling. The company had long since turned to other industries.
4. Today, when a customer decides to use 3D printing to self-manufacture parts that were hitherto supplied, the supplier faces a great problem. The question is: is it possible to fill this gap at short notice? And even more importantly: while this development was probably predictable, it still came as a surprise. In this case, it is urgent that the supplier consider why it was a surprise.

Developing new “shoots”: using start-up methods

Now, you as a reader will probably be wondering how your company – successful on the market, perfect products – can transform itself into a seeker-organization. That is unlikely to happen! Just as a proud, stable tree can hardly turn into a flexible, adaptable sprout, an established company will also hardly be able to develop into a start-up. But it can permit a tangle of cords in one place or another and see what develops – just like an old tree develops new shoots. The methods and management approaches of start-ups can help in this respect, and they can ultimately also be applied throughout the company to put the established business on a more flexible footing.

Start-ups…

• work according to the principle of “start small, fail fast, learn faster”,
• have groundbreaking ideas and innovations,
• have an entrepreneurial mindset,
• follow the idea of networking,
• are extremely customer oriented and
• rely on new technologies.

SMEs and organizations...

• have experience and history,
• are financially strong, have a brand and a customer base,
• have expertise and special core competencies,
• are specialists in economies of scale,
• have processes, discipline and execution skills.

About the author: Johannes Ellenberg, together with Kathleen Fritzsche, Harald Amelung and the association StartUp Stuttgart e.V., created a community for founders from the region in 2011. Less than a year later, he founded Accelerate Stuttgart as a digitization and start-up hub for Baden-Württemberg. As managing director, he supports both start-ups and established companies in developing digital business models and innovation ecosystems. In addition, as a coach and speaker, he supports companies in their transformation into the digital world. For more information: www.johannesellenberg.com.