Start-ups: an opportunity, not a threat

We are in the middle of a tech start-up frenzy, but rather than just seeing this new competition as a threat, enterprises should take the opportunity to transform themselves, work and learn together – and bottle some of that entrepreneurial spirit.

Enterprises should be ready to immerse themselves in the start-up culture. They can learn from the way these new market entrants use the latest cloud-based IT, insight drawn from big data and the power of a digitally connected social world to create new experiences and services for customers.

Now, a global phenomenon, tech start-ups are now springing up everywhere. They are being driven by decentralized global technology investment and a voracious start-up culture, accelerated by an increasing trend to set up businesses, particularly amongst Generation Y.

According to the World StartUp Report, at the end of 2013 there were nearly 140,000 startups, with more than half of them based outside America. The success stories prove the start-up ethos is working: last year, the number of new pre-IPO tech start-ups achieving billion-dollar valuations went up 150% to 38 worldwide, according to market research company CB Insights.

“We’re seeing a growing number of high profile, emerging growth companies that have become disruptive forces in traditional markets, like insurance, hospitality, travel, healthcare, education, transportation, retailing, marketing, sales, advertising, payments, communications, entertainment, and investing,” notes Donovan Neale-May, executive director of the BPI Network. “Their shared economy business models and new digital channels of engagement and market access are producing rapid growth, astounding valuations and stratospheric multiples when they go public.” 

Embrace an ideas culture

A recent study by the Business Performance Innovation Network found that large enterprises are emulating and learning from technology-savvy, fast-moving start-ups. Key lessons include becoming customer-centric in their thinking, accepting that some projects fail, adopting radical approaches and disrupting the status quo via technological innovation.

Digital transformation and new ways of working are key in achieving these ambitions. Strict hierarchies and closed-door policies hobble innovation. Enterprises are fast learning they should foster so called Intrapreneurship’, where employers encourage an entrepreneurial approach amongst employees, giving them the freedom to collaborate, contribute ideas and input at all levels to grow the company.

The concept is about making employees feel part of the bigger picture and has been plucked from start-up culture. Google, for example, has kept at the cutting edge of innovation by tapping into its employees and letting the ideas filter up. AdSense, for example, which delivers contextual ads to websites, came about when an engineer put ads in Gmail. Google realised that this tiny project had legs and now AdSense reaches 90% of internet users worldwide.

Entrepreneur-driven market disruption in the technology industry isn’t going to go away. Start-ups can bring significant value to customers faster than you may think. Blockbuster is a classic example: in 2000, Blockbuster had 7,700 video stores and was riding high. Netflix was losing money and had 3,000 subscribers. Blockbuster had the chance to buy Netflix, but declined, unable to countenance the digital media revolution just around the corner. By 2010, Netflix created the biggest audience for internet traffic in North America in the evenings. Blockbuster filed for bankruptcy protection in the same year.

Standing still is not an option for big companies. “Large enterprises cannot afford to cede innovation and disruptive thinking to business start-ups and emerging contenders. Technology change is creating huge opportunities, and successful companies now believe they need become market disruptors themselves,” said CTL Chidambaram, senior vice president of North American operations at Tech Mahindra, an Indian multinational IT provider.

The lesson to be learnt is that enterprises should not rest on their last sale, they should act like start-ups, and ensure they are nimble, customer focused and have their pulse on the latest trends.

Tapping the start-up mindset

Another way of reaching out to the start-up culture is to offer your organization’s experience and knowledge as an incubator for new talent.  Orange Fab, for example, is a three-month accelerator program for start-ups with existing product lines, looking for support, funding, office space and distribution opportunities. Partners include Visa, Airbus, Hilton Worldwide and Peugeot Citroen. There are now eight Orange Fab accelerator programs based on four continents.

One of the success stories to come out of Orange Fab is Afrimarket. From the beginning of this year, Orange customers in France could access Afrimarket on their mobiles through Orange Money to make purchases on behalf of relatives who live abroad. The decision to take a minority stake in the company by Orange, reflects its new strategy of funding start-ups through vehicles such as Orange Digital Ventures, which as a budget of of €20 million in its first year to invest in minority interests.

“Afrimarket is a start-up in the development phase with an original and promising offer. It's a good example of the type of project that our new Orange Digital Ventures fund is interested in investing in. We’re supplementing Orange’s existing open innovation initiatives, such as Orange Fab,” commented Pierre Louette, Deputy CEO of Orange.

Microsoft has also seen the benefits of nurturing start-ups. The software giant, for example, has invested $25,000 in Slope via its Microsoft Ventures accelerator program. Slope software enables users to collaborate on videos without having to email files. Microsoft understands that start-ups using its software may see a gap in the market it hasn’t explored. So the relationship is mutually beneficial.

Adapt to survive

The large enterprises that will succeed are those capable of adapting to these disruptive technological influences. This means ditching outdated mindsets, dated business models and inflexible infrastructure. The clever ones will be able to answer the question “how would we react today if we were a start up?” and be ready to act in the face of digital upheaval.

Find out more about Orange Consulting, what Orange Business is doing to help customers innovate and how Orange Fab is giving startups vital support.