New economies of scale: starting up, spinning off and going global

In the new economy, spin-offs from large organizations are increasingly common and, like independent start-ups, face a range of challenges when scaling the business. So having started relatively small and with a good idea, what do you do next to take smart steps forward and grow?

My business region encompasses the Nordics and the UK, both home to a lot of exciting and innovative start-ups and spin-offs. Typically, these companies have had a good idea and have reached a certain level of critical mass, but then need a clear vision on what to do next to move forward. That generally involves knowing what to do to go from being a relatively small and local business to a global one. It’s often complex and challenging.

I’ve seen several companies seeking to scale their ideas from local to global. And that’s the challenge for enterprises: you’ve realized you have a core component in what you already do that could become a spin-off. It’s valuable in itself and something you could potentially sell as a new venture.

That can mean a few different things. A spin-off like Bring for example, which emerged from the Norwegian Post Office, realized it could create value from its own last-mile logistics application. Or an automotive insurance player like Octo Telematics, which created an innovative way for insurers to assess risk. Or it could mean a fintech spun off from a larger enterprise that has developed a digital platform that enhances a financial process. All these things require being different from what the company was previously: you’ve become a logistics player with a new platform, or you’ve become a software company where before you were a financial services organization. These changes require different mindsets, different ways of marketing and selling, and working with different partners.

McKinsey says if you have something so markedly different from your core business, it is in your best interests to split it from your main company. This is because it is a different activity that will require you to embrace new practices and skills.

When scaling, strategic and inclusive is advisable

Spin-offs that come out of larger companies begin the journey with certain advantages. To begin with, your core product or service is already in place and proven, and you aren’t desperately seeking seed or VC funding like start-ups tend to.

So, with a product or solution in place, you then have to work out what you need to do to scale it. That can mean having the right skills and talent in place, such as salespeople with digital know-how. If spinning off a digital-powered idea, there will be challenges in supporting a new product, and customers will likely have different expectations. User experience (UX) and customer experience (CX) will be vital to keeping customers and users happy and loyal.

Think about your ecosystem

Ecosystems can be a huge advantage to start-ups and spin-offs wanting to scale – it can really help to think differently to grow a new concept. Engagement with stakeholders, employees and partners can bring different ideas from experts outside your traditional boundaries. Tesla is a good example of an organization that scaled quickly by taking an ecosystem-first approach and embracing different thinking. In 2014, Tesla made all its patents open source and encouraged other companies to use its concepts and intellectual property.

Tesla realized that to grow and scale its electric vehicle (EV) business, it needed partners that could build charging stations and deliver the infrastructure to support its vehicles. By making itself the hub of an ecosystem of smart partners, Tesla created the foundation it needed to snowball. So it can help to get the views of the digital-native industry, for example, to gain a different perspective on what you’re offering and how to offer it.

Ideas can also come from within

Ecosystems aren’t only made up of external experts – there’s also talent and ideas to draw on from inside your organization. So it can help to give your experts a platform that makes them comfortable putting suggestions forward. Intrapreneurship can be a powerful adjunct to projects: Google still uses its “20% Rule,” for example, where employees are encouraged to dedicate 20% of their workday to projects outside of their compulsory tasks. This is designed to throw up intrapreneurial ideas that might positively impact the company in some way. It’s something younger team members in particular are keen to do: they have different ways of thinking, they’re used to gamifying things, and they’re familiar with no-code. They’re also the next generation of the workforce.

So if you’re thinking of how to scale up your spin-off, it helps to consider all the potential partners you have around you who can bring value to your initiative, both internal and external. With a smart idea and foundation in place, it’s worth taking the time to add the right expertise to your team to drive forward and scale quickly and successfully.

Find out more about how Orange Business can support your business moving forward.

Simon Ranyard
Simon Ranyard

Simon Ranyard is Managing Director for Nordics, UK and Ireland at Orange Business and is based in London, England. With 20 years' experience in ICT in sales functions, Simon is driving a revenue growth plan by focusing on the innovative services that Orange can bring to its customers and on continuously improving the way we work with them.

In his spare time, Simon is a keen cricket fan and enjoys supporting youth development in the game.