The Newbie's Guide to

Playing with Startups

HYPE Innovation White Paper
by Jaspar Roos

www.hypeinnovation.com
 HYPE Innovation Report

The Newbie’s Guide to

Playing with Startups

by Jaspar Roos

Chief Inspiration Officer and Innovator at XL family

https://www.xlfamily.com/
http://futureideas.org/
http://chiefhumorofficer.com/

Content
Introduction 3

Failure to launch 4

If you can't beat them – join them! 12

Getting to know startups. Step into wonderland! 16

Meeting with startups 21

The Lean Startup 28

Growth hacking 30

Experiments (short-term collaboration) 33

Putting things in persepctive 39

Epilogue 40

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Introduction

The Newbie’s Guide to Playing with Startups follows the story of an experienced
innovation manager, Jim, who has the task to solve his company’s biggest innovation
challenge that threatens its entire existence.
Along the way, Jim learns a lot and gets to dive into an unfamiliar world – that of startups,
where nothing seems to be done the way he was thought it should be done.

***
Jim closed his eyes and concentrated on his breathing for a second. His head was full

of confusing thoughts, going back and forth. And he had a nasty feeling in his gut –

ever since the 10 a.m. meeting he’d had that day with Jeff - the CEO of Enterprise Inc.

"Look Jim, it is clear that drones will have a major impact

within the next ten years on a number of industries, including

the delivery industry – our industry. Amazon is already far

ahead of us with that Prime Air drone service of theirs…

and now Google is experimenting with deliveries in remote

locations!

What are we doing, waiting on the side-lines for drones to get

full commercial integration? These deals will be off the market soon and there will be

no room left for us. We must catch on! Need to come up with a new strategy. YOU

have to solve this!”

When he opened his eyes again, he realized he was in the middle of a circle of people,

all peers – each and every one of them an innovation manager at some bank or a tech

giant. It was there and then that he stood up and said:

“Hi! I’m Jim, innovation manager at Enterprise Inc. At our organization, we are

struggling with innovating and we need to change. We are progressively losing our

position and our markets are shrinking by the minute. We need a new approach to

innovation and we need it fast.”

The Newbie’s Guide to Playing with Startups 3

 “Hi, Jim!” said the rest of the innovation managers.

Yes, it was official now; he had joined a support group for innovation managers. What

they all had in common was the fact that, despite of their organizations’ legacies,

market reach, and vast resources, startups were threatening to take them out of

business.

Jim was longing for the old times – albeit not so long ago – when corporations were

dominating the business scene. Business was all about them and customers were

all about the next big and exciting product they would introduce to the market.

Nowadays, no one cares anymore...

***

Failure to launch

Globally, companies are under increasing pressure from multiple stakeholders, e.g.
the government, if you are in the financial markets, NGO’s and ecological institutions
for anything in the farming or energy sector, law enforcement agencies, if you are in
markets where parties like Uber dominate, and, of course, shareholders. More and more
companies are failing to meet their expectations or struggle to deliver better results than
their competitors. The current environment is increasingly volatile, uncertain, complex,
ambiguous and interconnected, and it is of great importance for companies to learn how
to adapt faster than the pace of the market.

In the midst of the “digital disruption” era, the market expects innovations and inventions
to come in any form and from any place. There is an evident shift in existing business
models. Take, for instance, the way we get news these days – the entire industry has been
disrupted by moving form an offline to an online medium of distribution. And it’s a fact
that in cases like this, big companies are the last ones to make a move. Corporations are
slow to accepting and adapting to such disruptive movements but in order to survive they
need to take action and get involved.

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As a great disappointment to big companies, R&D departments are no longer considered
the cradle of the “new”. The mantra “innovate or die” is truer than ever before. The
stability that corporate giants were once thriving in is now a myth. Markets are changing
faster than ever before. The life-cycles of companies are shrinking alongside their markets
as startups are radically disrupting the business scene. Think about InterContinental
Hotels Group, which has become the largest player in the hospitality world over the last
hundreds of years with over 674,000 rooms. Now look at AirBnB, which has created more
than one million new ‘hotel rooms’ over the last seven years without owning a single
square of property.

At the current churn rate, 75% of the S&P 500 will be replaced by 2027 1. As in the case
of Kodak, which went bankrupt in 2012, newer, cheaper technology disrupts giants’ core
businesses, making it difficult for them to survive or sustain competitiveness.

1 Creative Destruction Whips Through Corporate America

The Newbie’s Guide to Playing with Startups 5

 So Kodak took the wrong path. But how come startups are able to accelerate so fast? The
costs for starting a business are constantly and continuously decreasing as the business
scene is overflowing with new-comers. They are everywhere and no industry can dodge
the bullet. Take for example the financial world: it is a Game of Thrones kind of bloodbath,
with new entrants bringing new business models. It started with standard services such
as payments and savings – PayPal, Apple Pay, TranferWise, or for example Knab. New
initiatives are coming down hard on insurance, pensions, services for wealthy clients, and
even complex business services.

Never before has it been as easy to start a company as it is now and this permits one-to-
many players in the game. In the current market situation, big companies are standing
face-to-face with their younger, more agile, flexible and adaptive competitors.

The situations, described as such, could seem a bit exaggerated and slightly extreme. It
is not that doomsday for corporations is around the corner, but there is a rising threat for
big companies out there that refuse to jump on board and surf the “change wave”. Instead
of making a safe bet by clinging onto the present, companies must find a way to ensure a
steady inflow of ideas and products that respectively will deliver value to clients.

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We have seen these waves of digital disruption overtaking markets in a similar fashion.
First digitalization of the industry, being followed by small startups claiming not well
looked after niches in an industry. After the niche has been taken, the startup acts like a
wedge to prepare the industry to be disrupted in many ways.

More and more, innovation is at the center of attention when it comes to undertaking
a different growth (survival) strategy. Big companies that fail to innovate are at risk
of extinction. When they cannot find the right solution inside, they must search for it
outside the company boundaries.

The Newbie’s Guide to Playing with Startups 7

 Evidently, high-performing and forward-looking companies do generate more value by
responding to trends and by being prepared for, or even shaping, the future. However, to
a certain extent, corporations are prisoners of their past success and their conservative
culture. They have issues surviving the law of disruption. The law of disruption describes
the different acceleration paths of political, social, and business systems, which
change incrementally, while technology has been accelerating exponentially. For many
incumbents, it is hard to imagine the possibilities of new technologies. They often
perceive technology as changing incrementally, which creates many opportunities for new
entrants in the market.

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Accepting and fighting their risk-averse nature is still a difficult step to take. It wasn’t that
long ago when corporations had everything needed to sustain a constant flow of products
to the market – the best talents, market influence, resources, finance and technology.
The traditional, closed approach to innovating no longer fits its purpose. Coming up with
the next breakthrough idea is quite a challenge, especially if you restrict yourself to think
inside your own organization’s boundaries.

The Newbie’s Guide to Playing with Startups 9

 The majority of big companies is bad at innovation, as you might agree. Typically, big
companies are quite conservative – at least in comparison to their younger counterparts,
and won’t engage in activities that are risky and with an uncertain outcome. Moreover,
the risk-averse culture within big organizations acts counterproductively to the outcomes
to any undertaken innovation efforts. As a manager you have performance indicators
that you need to comply with. If you don’t live up to the short term indicators you get
the boot. This stimulates incremental innovation instead of radical which is the true
source of innovative value. And while waiting for the right circumstances, bureaucratic
organizations are losing their competitive positions to smaller players that are more prone
to taking risks and experiment.

By starting off with a non-friendly innovation perspective, corporate innovation behavior

is destined to fail at launch. Stunned by their philosophy and culture, corporations are
arriving way too late to the innovation scene. Often the biggest barriers to innovation
come from within the company. A C-level manager clearly understands that in order to
grow, sustain competitiveness, and deliver new value it is imperative to start collaborating
with startups. But that often doesn’t meet the understanding of the executors of a
decision like that. Often the middle management team may disagree with doing things
differently and rather stick to proven techniques.

At the same time, it happens more often than not that talented, young people are
dropping out of university, and even out of high-school, to start their own companies.
There are numerous well-known examples from the past few years, for instance, Arash
Ferdowsi who dropped out of MIT to found Dropbox, Mark Zuckerberg – Facebook, Bill
Gates – Microsoft, Matt Mullenweg - WordPress. PayPal’s co-founder Peter Thiel is
among the rising number of proponents to the claim that going to college is not worth it
in the age of startups. Chances are that the next big market disruption is currently under
construction by a group of smart tech grads who joined forces and understood what the
market wants – better and faster.

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 ***

Remember Jim? Well, after his meeting at the IMA (Innovation Managers Anonymous),

he started reflecting on everything that had been discussed that evening. He could

clearly see a tendency among all of the innovation managers – all of them explicitly or

implicitly blamed the situation they were in on startups.

“Indeed,” Jim thought to himself, “in the past years startups have dramatically

changed the business scene. They always seem to have the first-mover advantage,

coming up with these ‘garage’ inventions. Seriously! It’s like they are pulling those out

of thin air!”

“Moreover,” he was wondering, “are the brilliant minds at Enterprise Inc. simply

unable to come up with great ‘garage’-like inventions? If this is so and we can’t do

it ourselves, maybe we should look for ways to bring such innovations in from the

outside.”

***

The Newbie’s Guide to Playing with Startups 11

 If you can’t beat them – join them!

Every company wants to be innovative and disrupt the market. Innovative companies get
bigger and live longer. Simply being a successful company, though, doesn’t mean that the
organization is a disruptive one. Moreover, not every company can become innovative by
itself. A recent study by EY 2 shows that around 39% of big organizations globally have
been experiencing challenges in product innovation within the last three years.

Faced with innovation challenges, more and more companies are starting to recognize the
need for a different approach.

Who is hiding and who is seeking? Are corporations and startups looking
for each other?

2 EY - Delivering agile innovation

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To a certain extent and at a certain point in time, corporates and startups are looking for
each other as they share common interests for survival and growth. For corporations,
it is important to stay on top of global trends and to seek for inspiration in industries
other than their own. Pushing the limits is essential if they want to innovate. Although
most giants are not used to changing themselves and they are slow and unfamiliar to the
process, some of them are trying to be more flexible as they recognize the need to do so.

In recent years, we see a growing number of companies are starting to implement startup-
like techniques, such as the lean startup and scrum methodologies, in their efforts to
be more sustainable and efficient. As an innovation manager you can’t allow yourself to
be waiting on the side lines for a new technology to hit the market and try to buy it. If
you do this, you will just find yourself lagging behind. By the time you actually manage
to get your hands on the technology, the opportunity to turn it into a viable product that
would be of interest to the market will be long gone. Your organization cannot afford
to wait for innovation to knock on the door, but rather has to strive to stay in line with
current disruptions and be explicitly involved with those startups that are responsible for
the occurring disruptions. The speed of change is different and clearly visible comparing
Rogers’s market segment theory with Downes’ big-bang disruption.

The Newbie’s Guide to Playing with Startups 13

 ***

Jim clearly recognized the perks of working together with startups. After all, he wasn’t

blind to the tendency for new products coming from smaller, previously unknown

players on the innovation field (Uber, Tinder, Pinterest, Instagram, Xiaomi, etc.).

As he was walking home, he started wondering

whether working with startups was the inevitable, fast

approaching future for big companies. And if so, how to

get together and start the dialogue with them? If only

there was a guide for that…

***

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To some extent cross-organizational interactions mimic (inter)personal ones. Before
initiating communication, people observe the situation they are in and gather insights. If
there is mutual interest, the actual meet up and match up takes place. At a later stage,
when experiences and learnings are exchanged, a more profound interaction takes place.
In time, conversations about experiences graduate to sharing experiences.

When talking about corporate organizations and startups working together, it cannot
be expected (or recommended) that collaboration happens all of a sudden. Quite on the
contrary, collaboration is an ongoing, gradual process comprised of stages with different
intensity of interaction.

Collaboration between startups and corporations starts at point T0, when insights about
the situation, possible collaborators, and techniques how to approach them are being
gathered. The actual match happens after that point, followed by cross-organizational
exchange of knowledge and learnings, experimentation, and collaboration. Every next
stage of collaborative interaction implies a stronger engagement, commitment, and trust
between both sides.

The Newbie’s Guide to Playing with Startups 15

 ***

The next morning, Jim woke up full of energy. He was seriously considering the

possibility of working together with a startup, or even a few, to get his company out

of the deadlocked situation. By the time he got his morning coffee in his hand, he was

asking himself one very basic, but still vital, question: “Where should I start off?” After

all, he had spent the last fifteen years in a corporate suit. What did he even know

about startups? Not much. Before even considering getting involved with startups, he

needed to get some insights. He fired up his laptop and typed a single word into the

search box – startup.

***

Getting to know startups. Step into wonderland!

Startups – breezy, cool, and hip. They excel at bringing in the new, the other, and the
different. Their unorthodox approach is what brings them traction. They reside at the
edge of the existing business model and change the rules of the game by disrupting the
status quo.
Often startups are referred to as toddlers. Indeed, they could be emotional, naïve and
inexperienced. But just like kids, startups are not afraid to ask questions, experiment and
be creative.

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The world of a startup is profoundly different from the one of a corporation. Many
perceive them as the smaller equivalents of corporations, but it is really more like looking
at the two sides of a coin – they are in the game together and again quite so different.
The difference originates not that much in mission and vision, but rather in the way of
working towards achieving these visions. For one, a corporation works on the basis of
business cases and best practices. Unlike corporate organizations, startups function on
the basis of “fail fast and cheap” and favor a “can do” mentality, rather than a “let’s think
about it” one. And this is challenging for stability-oriented, risk and adventure-averse,
bureaucratic giants.

The Newbie’s Guide to Playing with Startups 17

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Despite the general differences, there are plenty of motivations for startups to collaborate
with corporations:

• Credibility. Thanks to the abundance of technological advancements in the past years

it is pretty easy and cheap to start a company nowadays. Startups are popping up
all around, delivering solutions and life-hacking tools. Still, many of them fail. But
collaboration with an established company can help the startup to be perceived as
serious business and to attract the clients it needs to survive and grow.

• Market reach. Startups have limited reach and distribution on the market. Through
leveraging corporate distribution outlets they can get to the market faster.

• Publicity. Experienced companies that have been out around for a while have been
through all the ups and downs of public relations. They can help young firms to get
through tricky situations and avoid tragedies by sharing the lessons they have learned.

• Funding. It is not a secret that companies need money to survive and grow. Usually,
big companies have it and small, developing ones are looking for it.

The Newbie’s Guide to Playing with Startups 19

 ***

“Ok, so far so good,” said Jim to himself, “So what could be the best way to meet and

get connected to these young disruptive minds?” He continued his search…

***

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Meeting with startups

Meeting up and connecting with startups is getting easier and easier. There is quite a
range of activities that a big organization can engage in to start the dialogue with smaller
organizations.

• Keep track of startups via databases; startup databases can be thought of as address
or phone books for startups. This a straight forward approach to sourcing contact and
other general information about small companies in the market. Some examples are
platforms like VentureScout, DutchStartupDatabase, BetaList, AngelList, or
www.ventur.es.

• Attending and hosting startup festivals; startup conferences, festivals, and fairs
are a good place to meet and network with startups. At events of this sort, startups
usually show off their products and services. This is a great opportunity to get a first-
hand demonstration of what the startup’s solution is, get insights on the product and
potential pitfalls.
Startup festivals and annual summits have shown how big companies can directly
engage with the startup world. For instance, Unilever engages with startups through a
direct call for collaboration at global events such as the annual Mobile World Congress
(MWC) in Barcelona in 2014, where they managed to sign contracts with 11 startups.

• Reverse pitching; usually we have entrepreneurs, innovators and startups pitching

their ideas to corporations. With reverse pitching events, the tables are turned –
corporations are pitching their pain points to startups the same way entrepreneurs
pitch to investors on a daily basis. This is a great opportunity for corporations to
source solutions from startups that have unique capabilities and to reach talent for
future projects and engagements.

The Newbie’s Guide to Playing with Startups 21

 • Crowdfunding platforms; crowdfunding platforms are another good source for gaining
insights on the hottest new startups and breakthrough innovation products. As the
venture world is looking for the next batch of million dollar unicorns, investors are
eagerly turning to the crowd to source deals. Crowd-based investment platforms, like
Indiegogo and Kickstarter, have made it possible to also track the crowd’s interest in
those products, thus pointing out trends in consumer behavior. Indiegogo has a good
track record for spotting winning startup ventures, including social robot Jibo, home
security system Canary, and the Misfit Shine wearables.

• Tours to startup hotspots; during the past few years, it has been quite trendy for big
companies to organize trips and tours to startup hotspots. Companies such as Citrix,
Google, Walmart, Cisco, Wipro, Intel, and Bosch pay visits to the incubation and co-
creation Startup Warehouse in Bangalore. Moreover, among the top hotspots in 2014
are Silicone Valley, Sydney, Tel Aviv, Sao Paulo, Melbourne, Chicago, New York, etc.

With a more European focus – Stockholm is a cradle for entrepreneurs, being

responsible for big brand names such as Spotify, Skype and Soundcloud. The
Netherlands are currently at the forefront of the continental digital startup scene.
Dublin is also considered a global startup scene with a remarkably good access to seed
investment from a growing number of accelerators. And of course London and Berlin
play an important role, both in the financial sector as well as incubating the new USD 1
billion companies, the so called unicorns.

• Startup networks; Microsoft, Orange, Google, Adobe, Paypal, McAfee, TCS, Sasken,
Morgan Lewis, and Bank of Ireland are all companies that actively leverage startup
networks, such as MobileMonday, Startup Week, Open Coffee Club, Creative
Sundays and Startup Weekend to meet up with startups. Regularly, at such events,
entrepreneurs meet up to discuss current industry trends, talk about issues and
solutions, and promote their ideas.

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 ***

Jim stepped away from the computer. He never thought there were so many different

ways to connect to startups, but in all fairness, never before did he need to even think

about how to work with them.

The opportunity to meet startups in person got him quite enthusiastic. He wanted to

attend a startup event (of any sort), dive into that world and see what all the fuss was

about. Big innovation-focus news outlets like FastCompany and TechCrunch seemed

to praise the startup culture and claimed that one does not simply talk to startups the

way you do to other enterprises.

That was the point when Jim googled “what to do when going to meet startups”. What

he found was:

***

The Newbie’s Guide to Playing with Startups 23

 Six tips to get you prepared when going to startup events:

1. Keep it casual; meeting startups is nothing like the average stand-up or board
meeting you attend. Loose the suit – a regular pair of jeans and a hoodie will “buy”
you an entrance ticket. Naturally, suits are almost always appropriate, but you’re
going to stand out rather than blend in. Moreover, in a startup environment this
could convey seniority and superiority. This, subsequently, can result in pushing
away the entrepreneurs you are trying to get a hold of and miss out on opportunities
for collaboration.
Note: Bear in mind that quite a few of the entrepreneurs starting companies have
their background in the corporate world. They are seldom impressed and are a tough
audience to deal with.
2. Learn to understand basic startup language; startups
and corporates speak different languages. Often there
is a discrepancy between what one side says and what
the other understands. In order to collaborate efficiently,
corporates must learn how to decipher the startup
language. Here is a short dictionary of phrases that can
come in handy:

Startup language English translation

Pre-Money Valuation A number that you made up.
Post-Money Valuation A number that you made up alongside
your VC with the addition of some cash.
A person who had a couple of ideas, that
“I’m a serial entrepreneur.” all had failed.
Failure A bad thing that the Silly Valley has
recently put on a pedestal as something
to be celebrated.
“We’re doing great.” “We are not doing great”
“We’re a design-centric organization.” “We don’t know how to code”
“We’re seeing great gross margins, and “We lose money”
so are investing in growth given our
strong, SaaS unit-economics.”

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 3. Don’t show your true face; as it is with most conferences you end up wearing a
badge with your name, organization, and role at the event. Still, if it is possible,
avoid using one. You can dress like them and speak their language but if your badge
says “corporate”, be sure you are going to get the “investor treatment”. Wearing a
badge that says “corporate” will immediately attract fund-raising startup founders,
but also means that you get information tailored for corporate ears. If you want
to learn the full story around a startup and its product, try wearing a “startup” or
“founder” badge. You can be sure that then you will hear all about the juicy details,
the challenges, and pitfalls.
4. Don’t try to change them, they do it themselves every day; be prepared for chaos.
Startups thrive in a creative chaos and their vision and behavior changes quite
often. That is unfamiliar to stagnant giants and can come as a slight shock, creating
an urge to reconstruct and bring things in order. But startups don’t want to be
influenced and be pressured to change by big corporations. They want to stay true
to their vision and follow their purpose. For that many startup founders will stray as
much as possible from corporate giants.
5. Try to see the glass half full; in 8 out of 10 cases when you talk to startups at events
they will sell something that is not quite finished yet. Be patient and open-minded.
Don’t dismiss a good concept right way only because it is not ready for the mass
production phase you envision.

The Newbie’s Guide to Playing with Startups 25

 6. Beware of “kissing frogs”; startups need funds and some of them will bend the
truth if it gets them the deal. Be cautious when mingling with startups – some will
stay frogs but others may turn out to be the real thing.

***

Jim was excited. The information he had gone through for the past few hours got him

even more interested in startups. He found the way they function, their beliefs and

spirit both puzzling and inspiring. Jim clearly felt the need to dive in and explore the

startup world.

He did a quick search. Luckily for him, there was the Pitch Your Startup event this

same week.

A couple of days later Jim went to the event. He took a look at the crowd of young, hip

people and sighed, “Let’s go and meet some entrepreneurs!”

You could tell he was not in his element, but judging by the way he looked, he had

followed all the recommendations that he found in his research. Apparently, he left his

corporate suit at home and wore jeans and a blazer, instead (a hoodie just wasn’t his

style and seemed to be a little bit over the top). Moreover, he went undercover and

skipped the “corporate” badge. With an open mind for adventure he dived into the pool

of energetic, future-minded founders.

After spending over four hours of talking to people, Jim began to grow tired. So much

information, most of which was basically incomprehensible technological terminology.

In his opinion, many of these kids did have great ideas but only little understanding

of how the business world works. And it was a shame that only a few would make it

because of lack of proper management and guidance.

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Among these founders was Steve. His company provided drone technology solutions

to a couple of delivery giants across Europe, currently being used for short distance

deliveries. They enjoyed a pleasant chat, and now Jim was thinking about if and how

to continue their conversation and bring it to a more serious level of discussion. He

recognized an opportunity for both of them to benefit from each other’s knowledge,

experiences, skills, and expertise.

***

Knowledge sharing and exchange

Startup strategies are not only for startups anymore. There is a whole lot that
corporations can learn from startups. It is not that people working at startups are
smarter or more skillful than those at big companies; their advantage is a culture of
experimentation and adventurous spirit.

Bigger companies can clearly benefit from assuming some characteristics of the startup
mentality.

• In times of rapid change, rapid movement is required. Speed has become an asset
that big companies rarely possess. Unlike them, startups are moving fast and gather
momentum.
• Startups don’t play by the rules because they don’t care about the existing business
and the market modalities. Rather than that, they focus on delivering customer
solutions by redefining the market.
• They rarely do market research the conventional way. Instead, they build a very simple
and cheap product version and give it to real customers to assess.
• Startups recognize needs and focus on filling the void even before coming up with
a business model. It is all about creating the asset first – profit comes later. Vivid
examples of this are most digital businesses today, e.g., Facebook, Twitter, Google.

The Newbie’s Guide to Playing with Startups 27

 The Lean Startup

Corporations are rather risk-averse, especially as for them failures are more public. They
tend to spend months and even years in developing a new product without ever showing
it until it is perfected and ready to go to the market. Ironically, as new products are
being delivered to the market with an increasingly rapid pace, their approach holds the
exact risks they aim to avoid – not meeting customer needs and wants, an increase in
development costs, and, eventually, failure.

The adoption of Lean Startup methodology within corporate innovation programs is on its
way to becoming a mainstream technique for bigger organizations. The approach changes
the process of innovation and starting a new venture. It builds on rapid experimentation,
customer feedback and iterative design development. Lean startup adopters ask a
“should” rather than a “could” question, namely: “Should we build this product?”
Some big companies like General Electric, Amazon, Qualcomm and Intuit, have already
started to implement the lean startup methodology to transform the way they innovate.
At the core of the methodology is the build-measure-learn feedback loop. They start with
a minimum viable product (MVP) that addresses a problem. Once an MVP is established,
it goes under a learning process of validation, allowing for figuring out what the customers
want and how much they would pay for it, and tailoring the product according to these
learnings.

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The Lean Startup calls for failing fast and cheap. Failing is something that large
companies should embrace – if there are learnings attached to the failure. It is a common
misunderstanding that failure is valuable by itself. It isn’t.

The build-measure-learn loop lowers development costs by minimizing the risk of having a
failing final product. Instead, the process provides timely feedback that allows for making
improvements during the early development stages.

The Newbie’s Guide to Playing with Startups 29

 Growth Hacking

Whether talking about a startup or corporation, growth is the lifeblood of an organization

and it should be woven in every aspect of the organization. Usually, within big companies,
there is a clear structure and distinction regarding responsibilities across teams and
departments – the coders build, the marketers push, etc. But growth should be a priority
not only to sales and marketing departments but to all teams across the organization.
A product designer should think about growth in terms of user experience. Similarly, a
customer support specialist should think of growth in terms of customer satisfaction.
After all, displeased customers leave, and negative word-of-mouth doesn’t generate new
leads.

Traditional marketers are skilled at understanding traditional products, but the internet
has so radically changed the way we define products that traditional tactics don’t cut it
anymore. Growth hackers are not substitutes of marketers. They are just different as they
are obsessively focused on the single goal of growth, doing things in a non-traditional way.

Currently, growth hacking is a startup’s practice. As startups usually lack resources and
established (partner) affiliations that would allow them to effectively apply traditional
marketing tactics, they are, in a way, forced to growth hack.

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However, there is nothing in the toolbox of a growth hacker that cannot be applied within
bigger companies. The practice of growth hacking obviously works without bigger resource
investments. Just imagine what the outcome would be if you did invest resources...

Getting a growth hacker into the organization

If you want someone to market your product – get yourself a marketer. But if what you
are actually looking for is a person who will be actively involved in helping you shape your
product – then your organization is in need of a growth hacker.

Growth (hacking) is still a developing field. There is a growing number of young growth
hackers who are looking for opportunities to learn and gain experience, but the number of
experts with strong history of delivering results is not that big.

How to find a growth hacker for your company?

1. Be aware of what the company needs; in order to find the best candidate and
ensure a successful fit for your organization, you have to be in line with the specific
company needs. Every company is different and has specific needs for growth that
are not universally applicable to other companies. Before even starting to look for a
candidate, try answering the following questions:
1. What stage of growth is your company currently in?
2. What weaknesses does our company have that a growth hacker could help
address?
3. What particular measures would help your company to grow?
4. What metrics do you need to determine the “success” of a growth hacker’s
work?

The Newbie’s Guide to Playing with Startups 31

 2. Ask for referrals; a certain amount of caution is advised when looking for a growth
hacker for your organization. There is a lot of noise in the field and the worst thing
that you could do is picking the best looking resume that says “growth hacker”.
Instead, refer to well-known, well-respected growth experts for recommendations.
This is a solid way to ensure you will actually meet a top candidate.
3. Recruit from established growth teams; think about Facebook, Quora, LinkedIn,
Twitter, Instagram, Pinterest, BuzzFeed – they all have their well-established
growth teams. Looking for candidates within already existing growth teams is a
common hiring approach and candidates are already known for their growth wins.
For instance, Uber hired Ed Baker from Facebook and WealthFront got Elliott
Shmukler from LinkedIn.
4. Acquire-hire; early stage companies are known for their determination for growth.
To ensure their growth, these companies equip themselves with growth hacking
talents. Acqui-hiring a growing early-stage company is a smart way to bring in
growth experts.

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Experiments (short-term collaboration)

The very essence of experimentation lies in trying out something new and finding out
if and how it works. On one hand, we have startups, whose existence is based on the
philosophy of being lean, agile, and flexible. In that sense, experimentation is their driving
force. In contrast, large companies don’t have a let’s-try-some-things-and-see-what-
sticks type of culture. The majority of giants is neither lean, nor flexible, which makes
them less prone to engage in experiments.

However, there are good reasons for experiments, even within bigger corporations:

• They are short-term commitments. Short-term engagements and sampling can

save a lot of trouble. After all, you don’t buy a car without having a test drive first.
Similarly, you should not jump into a long term engagement with a startup before
trying out a short-term collaboration first.
• They require fewer or no investments. Collaboration has many facets. It ranges from
informal resource sharing, research partnerships, sharing of contacts, workshops to
challenges and competitions. Financial engagements should come at a later stage,
especially for companies that have no experience in working with startups.
• The associated risk is limited. Since experiments are short-term engagements and
have an end date, the risks associated with this type of commitment are small.

The Newbie’s Guide to Playing with Startups 33

 Types of startup-corporate experiments

• Outsourcing tasks (reports, research, challenges); often opportunities for growth and
desires to expand exist within the company. Outsourcing various activities is a great
way to look for inspiration and ideas from the outside. In many cases, outsourcing
allows access to expert talent, innovative approaches, latest technology, and creative,
cutting-edge solutions that otherwise aren’t available.

The objective of reaching out to smaller firms is to obtain new knowledge, applicable
to your business' needs, which can eventually result in new or improved products,
processes, systems, or services.

• Organizing hackatons and hackdays; at hackatons and hackdays, companies have

the opportunity to engage with creative and future-minded entrepreneurs to solve
specific company issues – ranging from technical to business to social challenges
they encounter. These occasions deliver new insights into problem solving and give
companies the opportunity to develop ideas into tangible, working products and
services. Moreover, events of this sort allow for the identification of bright minds and
for monitoring the ideation process.

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 • Startup challenges; startup challenges, usually launched by large tech giants, are
aimed at attracting and cultivating the best talents from around the world. Such
include the Intel Global Challenge, GE’s Ecomagination Challenge, Microsoft’s Imagine
Cup, and Amazon Web Services Global StartUp Challenge.

• Accelerators; it is quite common for big companies to establish and foster startup
accelerators to drive disruptive innovation. Accelerators help startups get off the
ground, providing small seed capital and access to a mentor network usually in
exchange for a small percentage of equity. Among the most well-known accelerators
are Y Combinator, Techstars, and Brandery.

The goal is to “accelerate” the growth of an existing company, shortening the process
from a couple of years to a few months. Within these few months, startups are being
guided and helped to get the company into the best possible shape – getting to the
point where their product is impressive enough to raise investment.

The Newbie’s Guide to Playing with Startups 35

 • Incubators; there is a common misconception that accelerators and incubators
represent the same thing. Indeed, incubators also provide fruitful environments for
startups to grow and get better chances for attracting future investments. However,
incubators focus on developing disruptive ideas into viable business models and
companies.

Incubators can be independent but also sponsored by large corporations, venture

capitalists or government entities. Depending on the sponsor, incubators can have a
specific market focus. For instance, an insurance company may look for home security
automation technology startups.

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Sealing the deal and long-term collaboration

Once the experimentation phase has proven successful, we are looking into a potential
long-term commitment between the startup and the corporation. In other words, this is
the “dating, pre-marriage” phase – discussing, brainstorming, and trying to meet each
other half-way. At that stage, potential hurdles are being discussed and questions and
concerns about the shared future spring up:

• Kissing frogs. “Frogs” (startups) are willing to “kiss” a lot

“royalties” (corporations) in order to get the funding they
need to turn into a prince (as the fairy tale goes). They
need to stay alive so they are willing to “date” anyone with
money, give promises and pledge their love. It all comes
down to the trust factor of human relations. Can we trust
them? Are they who they say they are? Do we want to be working with these people?

• What if the founder flees? A lot of startups are built around

a technology and one or two visionaries. The question that
arises in regard to this is, how sustainable and scalable will the
technology be without the founder? Is it useless without the
brainpower and the passion of its creator? Can we continue
developing the technology by ourselves and is our knowledge
sufficient?

• Keeping the startup mentality alive. Corporate culture differs significantly from the
culture of startups, and it is quite difficult for them to comprehend and embrace the
chaos that comes when working with smaller companies. Thus, keeping the startup
mentality alive can be quite the challenge. To bring back the balance, corporations
could be tempted to impose their rules. However, if the startup culture suffers,
creativity will suffer, too.

The Newbie’s Guide to Playing with Startups 37

 • Bureaucracy & slow decision to action. When it comes to processes, big companies
have everything worked out. They stick to models that are tested and work. Any
deviation from the established order brings a feeling of losing control. Unlike bigger
organizations, startups are not used to this degree of formality. Complying with
organizational bureaucracy decreases the speed of decision-making and action-taking.
Thus, the entire innovation process gets slowed down. And the idea behind bringing a
startup in was to accelerate innovation, right?

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Putting things in perspective

A lot of things can be said about working with startups. However, as a corporate, you have
a solid base for innovation established before you start working with startups.

1. Create a culture for innovation. This is the most important element in any
organization. Make sure you have an organizational culture that supports innovation
and has commitment from all management layers, including the top management.
Involving cross-functional teams from all over the organization in creating a culture
innovation helps to recognize new innovative possibilities in the first place. The
cultural aspect is the most important element to stimulate people to learn to free
their minds, experiment, and dare to challenge the status quo. In this way, as a
leader, you empower your staff to be more innovative, and you build the confidence
to say, “Yes, we can do this here.”

2. Start internal innovation in a structured way. Corporations become more

innovation-savvy by putting in place a systematic way to gather and process the
best ideas from their internal teams. Whatever the process may look like, from early
ideation to full-fledged innovation projects, make sure your employees can rely on
it. This will result in sustainable engagement and repeatable success. Make sure you
take it easy in the beginning and deliver some first results to inspire trust among
your employees. In turn, this will positively influence your overall company culture
(point 1).

3. Open up for open innovation and start-ups. Open innovation programs and the
collaboration with external parties will take your innovation program to the next
level. Whether you work with partners or startups, open programs can allow for new
market entries, cross-market insights and business changing innovations.

The Newbie’s Guide to Playing with Startups 39

 Epilogue

***

So, in the end, Jim got his innovation. First, he met up with several startups. He chose

Drones Inc., a new startup based in Hong Kong. Drones Inc. was a typical university

spin-off, with great vision and a first prototype, destined to conquer the market.

After several Skype meetings, Jim invited them to come over and give a pitch in front

of his senior management. In the following days, several delays occurred. Compliance

and Legal departments first came in with a lot of regulations he had to comply with.

The Enterprise Inc. departments were used to work with peers who were able to deal

with a lot of legal jargon and thick contracts. This startup didn’t have a similar legal

office and had trouble sifting through all the hundreds of corporate clauses. So Jim

had to find a workaround for this. Help came from his CEO, who gave him a waiver to

go ahead with the deal.

Second, there was a long dialogue on what the value of the startup was, as it was very

difficult to assess this with the existing valuation models of Enterprise Inc. Should he

focus on getting a minority share or a huge part of the shares? He asked for several

experts and there was no definite answer. The best answer what he received was a 50

percent split.

Clearly, this was not wat Drones Inc. had imagined beforehand. Although they had

no serious sales yet, they believed they should keep the majority of the shares in

the company. The three consecutive days, he was not able to close a deal on an

investment with them.

40 HYPE Innovation White Paper

However, what he was able to do is create a launch pad for the product of Drones

Inc. Combining this into a new service, he was able to leverage both the power of the

cooperation as a lead partner and get the cooperation with the startup going. This was

much easier. Not only for Enterprise Inc. but also for Drones Inc. this made a lot of

sense. They wanted to experiment fast to show the world what they had in store. With

a strong partner like Enterprise Inc., they would be able to gain credibility fast and get

traction on the sales.

This deal got closed pretty easily.

Jim realized two things:

1. A large organization is very appealing for startups, but many internal corporate
processes are not well designed for cooperation with small and emerging startups.
You need CEO support to get this off the ground.
2. If you want to get around bureaucratic processes, you need to show some results
first by launching experiments with startups. That also helps to understand the
process better.

And just to conclude the story, Jim graduated from IMA (Innovation Managers

Anonymous) and got his CEO Jeff back on track… ;-)

***

The Newbie’s Guide to Playing with Startups 41

About HYPE Innovation

HYPE Innovation is a global leader in full-lifecycle innovation management

software. HYPE’s powerful platform allows organizations to engage thousands
of employees in idea generation and collaborative problem solving. We help
you focus on measurable business outcomes that can be tracked through to
execution. Companies work with HYPE for our flexible products, our deep
expertise in innovation management, and our long history of success with
some of the largest organizations in the world. Our client community includes
global companies such as Siemens, Bosch, RWE, AkzoNobel, Bombardier, DHL,
Roche, Nokia, Daimler, Airbus, Petronas, Saudi Aramco, Clorox, and many more.

Visit our website at www.hypeinnovation.com to learn how HYPE enables

companies to transform their best assets – employees, customers, partners,
and suppliers – into dynamic and engaged innovation communities.

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