Startups and established companies: what leaders can learn from each other
People who found a startup usually aim to make it a successful company in the long run. Established companies, on the other hand, are being told to act like a startup. Only then would they be able to remain successful in times of digitization, at least that’s what you hear everywhere.
Sounds paradoxical? It’ not, on the contrary. It shows that both can learn from each other. The pivotal point of it all are the founders and leaders.
“You also have to think a little left and right. Think out of the box.” Such a sentence can drop in a group’s middle management, said by some head of something. Digitization, disruption, war for talents - these terms have repeatedly been discussed at the management level and now waft through the organisation. And then they roll, the eyes of middle management, because the managers know one thing: they don’t have time for it and, in the end, no one really cares.
What suggestion ever came from the middle and reached the top level and was then implemented? None. If management then notices a lack of innovation emerging from the middle, and that everyone mutated to a yes-man, they like to take one measure: a trip to the country’s startups. There, the managers see offices with few doors and many fruit bowls and foosball tables, state-of-the-art technology and little carpet. And this is the new working environment whose structures and methods will save the big companies? No, of course not. But those symbols actually stand for something that many companies are lacking:
Lychees don’t make you creative, but create time and space
For example creativity. Neither lychees nor foosball tables make you creative. But the possibility to change perspective as well as regular informal communication can indeed. Companies expecting new ideas from its management and employees have to give them space for that, literally and figuratively. You won’t need to tear down walls but regular meetings outside the usual office premises would be a good start. Or have you ever had the next great idea while you were sitting in your old office chair answering the 110th email?
Most ideas pop-up spontaneously and unplanned while you’re talking to others - or while we’re doing something completely different than working (off). For creativity to flow, as many parts of your brain as possible need to be active. This happens most likely by changing your surroundings, moving around and not being under pressure. Creative people like to talk about the ideas they had under the shower after exercising. So a shower for every office? No, but regular off-site sessions where you can work on different issues detached from hierarchies, functions and the daily business would be a good start.
Daimler is cutting-edge: since 2016 about 20 percent of all departments have been transformed into so-called “Schwarm-Organisation” (swarm-organization). This means that employees are linked in autonomous networks working on defined issues, which makes them independent of hierarchies and departments in order to work on the most important issues of the group. Those and other measures are apparently already bearing fruit. At least in April 2017, employee satisfaction at Daimler reached top rates in regard to future orientation as “top employer in change” according to the rating website kununu. There are also smaller options: Try a BarCamp from time to time as a first step.
Flexibility is no buzzword anymore
Another principle that is lived naturally in almost all young companies and only reaches top management of groups very slowly is flexibility. You could think that it has become a worn-out buzzword because you hear it so often. But it isn’t. At the right place, flexibility is the order of the day. “At the right place” means where something new should be developed, and at the touchpoints of these areas. This is also something that established companies can learn from fresh market participants.
In a nutshell, flexibility means a company’s capacity to act flexibly, actively, adjustably and with initiative in times of change and insecurity. In this context, flexibility doesn’t (necessarily) mean fast. It’s rather the important factor to consistently focus on the current customer needs. Since those aren’t static and are changing more and more quickly, a high flexibility is as important as vast decision authority within working teams.
Projects and products can be adapted fast in short, concentrated iteration loops to the changing outside conditions instead of being stopped by them (e. g. Agiles Projektmanagement, Jörg Preußig, Haufe 2015). Management is taking a central role here. They have to encourage and train their teams and learn not to get stuck in details. At the same time, a lot of discipline and frequent, constructive and appreciating communication is essential.
Openness towards new technology
No matter to what extend a company becomes more creative and flexible: appropriate communication methods are mandatory. Here, startups are way ahead of established companies. There’s nothing to say against the good old email, it will stay and makes sense in many respects. But not if something should be developed in self-organized teams. Who’s writing whom, who’s in cc, who has to forward what to whom, do I have to confirm that I’ve read the message, reply and if yes, to whom and do we have the official “go”? People working in a common hierarchy know that such discussions can take weeks and months - for decisions about something irrelevant.
If you have ever suggested to use a modern communication tool to solve that problem, you may have received the following answer from project management: “Sounds good. I’ll ask IT”. There, they get the answer: “Legal department won’t approve. But we can try. I’ll need an inquiry from the managing director for that.” So the project manager contacts the managing director (but not without informing his direct superior and including him in cc). The managing director replies four days later via his assistant that he needs to know what exactly it is, what it costs and its benefit. There has to be a good reason to involve the legal department or in smaller companies an attorney. And so on.
This way, which by the way is an entrepreneurial attitude, even small changes are hard to develop and push through. Openness towards new tools and technology, a short check of security and feasibility (mostly done by others and you can get the information easily) and a basic curiosity towards new developments are the minimum necessities to develop yourself and your products.
Just do it
The example mentioned above is basically a sign of fear. The concern that a decision could become too expensive, less lucrative or somehow wrong still lingers around. However, it’s much more expensive and even less lucrative to not make a decision at all. As the speed of new processes and possibilities increases constantly, you just can’t help it: you have to try new things. And every head of department has to take on the responsibility that something could go wrong.
Just (let someone) do it - this still is hard for most managers. The interesting part is that many managers think they have a much higher margin of error than other employees. According to a study of the “Transformationswerk” and the management consultancy “doubleYUU” a mere 18 percent feel that they are involved sufficiently in the decision-making process. But 53 percent of managers believe that they handle it in a proper way.
Innovation capacity includes the capacity to learn from mistakes, says Dr. Willms Buhse, managing director at doubleYUU. Instead of centralising decision-making and minimising risks, he suggests to establish regular reflection loops in the process. Obviously, this is not the case for every process and all the time. But the percentage needs to shift - avoiding mistakes shouldn’t be the first goal, which is only neglected when facing the threat of a shutdown. It's exactly the other way round: mistakes happen and they should only be excluded in worst cases. Long-existing companies whose success so far relied on their risk-avoiding planning do have a real long way to go.
So everything that has been done so far was wrong? You’ll only survive if you manage to translate the principles of the digital natives and their companies into your group structure? No, definitely not. However, the mentioned principles need to find their way into the leadership culture of established companies, but of course there are achievements from past days that should and have to remain. Young companies mostly have to learn them the hard way to be able to maintain their business model on the market in the long run.
Build your organisation structure on goals
One of the most important factors is structure. At the beginning, there are one or two founders with an extraordinary idea, courage, business sense and maybe some money. When they launched their product or are just about to do so, more people join in. One of the founders remembers Michael from university, he was already working in sales back then. They need someone like that now. Michael, on the other hand, knows a great controller who can also take care of the accounting stuff. His girlfriend is a great graphic designer, she rebuilds the website. By chance, she also can do press and online marketing and soon she’s responsible for the whole external company communication. And because she fits in so well and is a very nice person, she also does the internal communication including HR and contracting. The husband of her friend is an IT developer and joins the team as internal system administrator.
And this is how the once small company grows slowly and steadily until someone leaves - and cannot be replaced. The reason: the tasks had been built around the person and not vice versa. Now is the time to build a structure that is based on the company’s goals. This is hard since this will obviously lead to tasks that don’t match the employees, their talents, needs and passions in some points. But this has been the reason why everybody liked to work there, because the company was adapted to the employees! But there’s nothing you can do: after a certain company size, you’ll need to have decision-making structures, no matter how agile and open the workflow is. Otherwise this effect will turn around and the company will become slower instead of faster, because all topics will be discussed over again and again.
And there’s another thing that young entrepreneurs and managers are struggling with. A controlled communication. Something which is over-controlled in groups, is mostly lacking in startups: who talks about what with whom? Most established companies have clear rules for communication. And also rules for who works on what with how much effort and until when. Young entrepreneur often have problems with that. Either because they founded their own company to get away from this controlled communication or because they simply don’t have enough experience.
If you have ever developed a product in a small team, you may know this. After discovering an error, there are no consequences. This is due to the misconception that creative freethinkers and freelancers know how to do things. Of course, this is true, but only as long as it is actually about the development of processes or products. However, the handling of feedback needs clear agreements. Who’s responsible for the correction of the error, until when does it have to be done, what are the indicators of success? Those arrangements can of course - completely in the agile spirit - be discussed from several people at eye level.
It isn’t necessary that a manager, project manager or - in the frame of a scrum process - the project owner or scrum master formulates the agreement. But it is important that the project manager pays attention that the agreement is understandable for everyone. Many young entrepreneurs tend to mix agreements with orders in this context. The first is crucial for success, the latter should remain negotiable.
The managers of established and young companies can learn a lot from each other to become and remain successful. Only companies who don’t move at all, don’t do additional training, review and challenge their learned behavior and values regularly and don’t try anything new can be sure of one thing: the days of success are numbered.
About the author
Susanne Thielecke is the founder of LaRenzow personnel. After many years of working in an international group in the HR management department and a vast education in economic science and psychology, she has been consulting companies for years now in all staff issues and coaches its managers. She’s combining her experience in a large, traditional company with those in flexible startups and builds bridges between both cultures. She also holds workshops about future-oriented leadership, feedback and other current topics in leadership, communication and collaboration. This article was originally published on Linkedin.
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