In various presentations, papers and books on innovation or leadership I have come across an organisational pattern I like to call “Start-up “Startup then Core”. It is a pattern based on the idea that a new dawning business needs a special kind of leadership and special people, skilled and prepared to innovate in an uncertain world. Those in favour of this pattern also suggests that a mature business with “Execution” as its main mission needs leadership and people aimed to dwell in a more repeatable and secure world.
The new business is many times referred to as a Start-up Startup and the mature is called the Core Business. The Start-up Startup has very little revenue, few customers and is most often not profitable. The Core Business, on the other hand, is expected to make profit, thus striving to increase revenue and their number of customers.
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A Start-up Startup can appear in many forms. Any form between completely outsourced to an external party to just a few internal persons allowed to put time on future ideas. Sometimes the future work is very systematic with clear objectives, sometimes it is just random exploration. Anyhow, in all cases management have decided to do something about the future and reserve the resources they currently can afford.
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But what to do with the future ideas in the long run? When the "Start-up Startup then Core” pattern is practiced the ultimate challenge is always how to scale the ideas.
- Should the Start-up Startup be incorporated into the Core Business or should it stay as a separate entity?
- Should employees be exchanged or should they all or just a few get a proper competence lift?
- Is it possible to outsource any parts of the business?
- How will customers value the trademark when the new business eventually will take over or compete with the old business?
- Does our infrastructure including supply chain, marketing and sales the proper set up for the business?
These and many more difficult questions arise and management will need to handle them in a unique context, because success of Start-ups Startups are diverse and rare. These ample difficulties are well known and it is not a surprise that most Start-ups Startups will not fly. Forbes is one of many sources writing about the fact that 90% of Start-ups Startups fail.
Another well known fact is that many prosperous businesses will not keep on flying. A widely used measure is the list of the Fortune 500 companies. A number of articles point out that just 12% of the Fortune 500 companies included in 1955 were still on the list in 2017. Mark J. Perry, who is Professor of economics and finance, calls this phenomenon “creative destruction”. And all signs show it will get worse. In a report in 2016 Innosight writes that half of the S&P 500 companies are expected to be replaced over the next 10 years.
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Books like The Lean Startup, perhaps the most well known, and The Innovator's Method, which is taking the start-up Startup methodoligy a step further, asume a new and and old businesses need to be run in totaly different styles. I have many lean start-up Startup fans saying "A core business do work in completely different ways with large and long lasting projects".
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Then what is the alternative for any top executive who feels frustrated over the ability to stay in shape for the market and have at least the same development pace as the competitors. I argue that the "Start-up Startup Then Core" pattern is far too risky. It has worked for some and will work again, but without plenty of luck and a full wallet there are more reliable and deliberate paths. The organisational pattern I promote I like to call "Start-up Startup And Core". The name looks very similar, but the "And" changes everything. "And" is all about integrating any new business with the current business from start and let the two evolve together step by step. This is a pattern that is easier to sustain over time and it is less risky.
The "Start-up Startup And Core" pattern is based on the two main processes, Development and Operations, continuously going on in all organisations. Development primarily involves Product Development but also changes of Business Model, Processes and Tools, Mergers and Acquisitions and more. Operations is about running all daily business and interactions with customers of the entire value chain including Marketing, Sales, Production, Delivery and Customer service. Operations also includes supporting functions like Finance, Economy, IT-operations and Human Resources.
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So from where comes the need to split organisations according to the "Start-up Startup then Core"-pattern? Most likely from the belief that mindset and techniques are completely different when it comes giving birth to a future business. Many would argue; "Look, Google has start-up Startup labs which are working separately on new products. That is the way to go!" What these people forget is Google have mindset of creating new business also it their core. They foster all employees to be innovative and seek the future. This is not the case in most organisations, regardless of industry management has put current customers and cash flow first.
The second best argument for putting the new business under a separate umbrella is control and security. "We must ensure the current business without disturbance. The Start-up Startup has a small fixed budget we could afford to loose. If it fails we will just terminate it. The rest of us will continue normal operations and make sure cash is coming in". Does it sound familiar? When I here managers speaking this language I do understand why an organisations have a hard time being innovative.
I have heard many more arguments in favour of the "Start-up Startup then Core"-pattern and of course it is not easy to prioritize the unknown future. When it happens, initiatives for the future come as scattered sheds not seldom shortly after a new CEO has taken up the position. So what is the trick with the "Start-up Startup and Core"-pattern? How is it possible to make it a long lasting process that successfully will deliver?
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Both dev and operations need to improve quckly Never swift and easy to scale up a start-up Startup Establish continuous growth and change instead
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My plan is to write a small series of articles regarding the two alternative organisation patterns, "Start-up Startup then Core" or "Start-up Startup and Core". Next topic is innovation.
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Silos..picture of value chains and functional entities
ignite your coworkers passion and energy
Tech driven instead of driven by values and customer need
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