For business leaders driving New Zealand’s large enterprises, the constant competition offered by agile startups can be exhausting. After all, 97% of NZ’s businesses are in the small business category (those with fewer than 20 employees).
Around the world, organisations of significant size and power are being outmaneuvered by their pop-up counterparts. Should New Zealand’s major enterprises be trying to compete? If so, how can they remain agile?
Should large enterprises try to compete with startups?
Innovation is key to sustainability in today’s business climate. Startups know this because it’s their entire business model: appear, innovate, and then go viral – or go under.
Startups also bank on their larger, older competitors struggling to reposition themselves and keep up. Just look at Uber and how it dethroned almost every established taxi company in the world.
In Peter F. Drucker’s famous book “Innovation and Entrepreneurship”, he said:
“The companies that refused to make hard choices, or refused to admit that anything much was happening, fared badly. If they survive, it is only because their respective governments will not let them go under.”
How to encourage innovation in an organisation
Needing to innovate is one thing. Innovating is another. Large organisations can suffer from tangled bureaucratic systems. Though designed to keep multinational offices afloat and working toward a single goal, the lack of movement, freedom and communication can inadvertently stymie creativity.
So how can New Zealand’s business leaders get that creativity flowing again?
1. Offer employee autonomy and reward success
By offering employees room to experiment – and more importantly, encouragement to do so – business leaders can give them the ability to fix their own problems. Few know better how to fix an issue than those who work with it on a daily basis.
But it takes effort to reduce time pressures on staff at all levels of the business in order to give them this time to think creatively.
Google’s famous ‘20% time’ is perhaps the best-known example of employee creative freedom in a large multinational company. The organisation paid people to take time out of their work hours to think about new ideas, leading to inventions such as AdSense, Gmail and Google News.
2. Encourage failure
Business leaders can adhere to one of two schools of thought – punishing people for failing, or rewarding people for trying.
One reason employees may not be willing to express ideas is the fear of repercussions. Should their venture fail, they don’t want to be punished. However, failure is a natural part of innovation. As commentator Michael Malone once wrote: “Failure is Silicon Valley’s number one strength.”
Expect failure, for it is an essential part of the learning process.
3. Flatten your management structure
Communication is vital to innovation, but improving it requires a cultural shift. Change has to start at the management level across New Zealand businesses to further promote creativity.
As many startups know, a flat management structure – one where even the highest business leaders are accessible, friendly and willing to discuss ideas – can give staff confidence to speak up.
That said, a totally flat structure is much easier in a small organisation than a large one, especially if that large business has multiple sites to manage. In these cases, it may be prudent to flatten individual team structures as much as possible, and then create ‘innovation champions’ who have a good relationship with those higher up the org chart. Individual teams can innovate within themselves, then bring their top ideas up the ladder via their champions.
4. Start an incubator
Outright acquiring a startup is one way to expand a business. However, it’s not the only way to integrate existing startups into a large organisation. Instead, local enterprises could create incubator programs, also known as accelerators.
A startup incubator is a program that supports early-stage companies through mentoring and financing in a fixed-term period. Often companies group multiple startups together in a single incubator. The goal is to accelerate what would normally take years of work into a few months.
Large enterprises that run their own accelerators have an opportunity to work with an agile startup model and the talent that comes with it without breaking their existing business structure.
Successful startups can be integrated into the wider company, or kept as a separate investment.
Innovation and success go hand in hand, but innovation is not restricted to agile startups. Major organisations can foster a similar sense of creative freedom with a few simple changes, or with investment in key new processes.
Ultimately, it’s not size that matters. What matters is mindset. Foster intrapreneurialism, encourage creativity, expect failure, and you can achieve innovation regardless of headcount.