In the past, we’ve worked on a corporate start-up lab within wholesale banking innovation. The initiative was a new customer-centric product offering that focused mainly to ease the frustrations that corporates face during the KYC (know your customer) AML process of the banks. For 2 years, the initiative continued to receive support and funding to progress from the concept phase into the pre-scaling phase.
This report has been written with a goal to share learnings and to create awareness, amongst similar initiatives and corporate innovation strategy teams, on the challenges that start-ups face within the corporate environment.
Corporate start-ups sit in a sweet spot between corporate venturing and an external start-up. These initiatives have the luxury of the big brother organisation watching over them, but it also comes with the policies and procedures of the big brother. Listed are some of the topics that worked well for our initiative and some that needed further improvement to better the chances of success for corporate start-ups.
What works well
To point all noses in the same direction: Why are we doing this? What is our vision? What is our moonshot? Where is that dot on the horizon? Visions directly impact the formation of the value proposition, competitive space and approach to reach the intended vision. It is important to know why we are in the market, how to position ourselves and what we want to achieve.
They are the networking and influencing backbone to open doors and to advocate for your product offering or service to the internal organisation or external market. To avoid disengagement, these sponsors need to be appointed at the right time so they can provide the support during that stage.
A hustler lead
Someone with the inside network and know-how to navigate, represent and lead the initiative through the different stages and structures within the organisation.
To identify customer jobs (pains and gains) for designing and validating the product. This can help to gain buy-in from customers as well as business stakeholders. Customer centricity can also differentiate value proposition from competitors in the market. To make better decisions based on behaviour or outcomes, experimentation should be encouraged.
Be more data-driven
Data analytics can enable better-informed decision-making and can be used for the optimisation of business processes and enhanced understanding of customers (Wamba et al., 2017). Some of the examples are: To drive marketing campaigns for client acquisition, retention and growth, improve customer relations and experience by analysing journeys and captured customer insights & feedback.
Team capability and culture
A mix of skills that encompass business, technical and innovation capability to take the idea from concept to market is beneficial within a team. Empathy, active listening and conflict management are soft skills that glue the team together. Creativity goes hand in hand with innovation; higher creativity leads to more innovation. Cultures that stimulate and promote creativity and innovation is imperative for seeking a competitive advantage. Strongest associations for creativity were related to psychological safety in the workplace and interpersonal relationships in the workplace (Tala et al, 2016)
Diversity & inclusion
Diversity refers to who is at work, whereas inclusion refers to how people feel at work. Studies show that teams that have gender diversity (C. Díaz-García, A. González-Moreno & F. J. Sáez-Martínez ,2013) and cultural diversity (Max Nathan & Neil Lee, 2013) were more likely to introduce radical new innovations into the market and more likely to develop new products than those with homogenous leadership.
Way of working
By combining best practices from Agility, enables closer collaboration between the business, development and operations in a bid to reduce lead time, increase deployment frequency whilst maintaining a high-quality service.
Training the team early on innovation methodologies, such as lean start-up, experimentation, agile practices, design thinking, helps create a common language and joint approach to building innovative products. It also helps in setting expectations amongst all stakeholders. One common word that seems to get interpreted differently within and outside the team is ‘MVP’. Although a term may have different interpretations, it is important to establish and communicate uniformly what the terminology means for the team.
What you need to watch out for
It is crucial to know how a business can eventually sustain. Although business models pivot over time, the key to finding the right business model is to experiment and validate models including the price point in the market.
Focused and measured goals
Given resource availability and time constraints, it is key to focus on a few probable wins rather than all options. There are several frameworks on how to set targets and measure strategic implementation of initiatives; Key performance indicators (KPIs), Object Key results (OKR) framework, Spotify Rhythm and ‘The art of action’ are a few. Mastering any methodology takes time and each framework has its pro’s and con’s. Suggest incorporating the best practices of different frameworks and adapt it to the situation at hand.
- Objective setting and tracking can help the team to:
- Prioritise long, medium- and short-term goals
- Communicate a clear intent of the prioritised goal
- Empower cross-functional teams to own the solution to the problem
- Allow teams to set metrics in-order to track progress
- Adapt tactics based on data and insights from experiment outcomes
Legal, risk and compliance constraints
Can immensely delay the launch of products into the market. It can take over a year to get a sign-off from the legal, risk and compliance teams. By then the competitive landscape can change and go-to-market plans may need to be adapted. We suggest to separate a team or add resources to support the team within these areas. Also, corporate legal, risk and compliance requirements should be eased to fit the pace of the start-up. By no means is this an indication of ‘no rules’, but an easing to enable growth and a continuous step-wise maintenance to ensure full compliance.
Bring the innovation back to the business
Initiatives need to be aware that the processes and incentives per department within the corporate need to undergo a mindset change to accept innovations into their department. Most departments are not ready in terms of processes, policies, and systems to adopt products or services that arise from innovation teams. It is important to gain early buy-in from the business if the innovation projects need to be adopted internally. The business needs to be involved and commit prior to scaling. An executive sponsor from the business should be appointed to support the scaling phase within the business.
Crossing the chasm
“There is something fundamentally different between a sale to an early adopter and a sale to the early majority” (George A. Moore, 1999). A segmented approach leads to a focused sales and marketing strategy to acquire and retain clients.
Customers weigh the benefits or value in using a product or service. Each segment can have potentially different needs and hence the same product offering, or service may not 1-1 prove beneficial to all segments.
In addition, new client acquisition is costlier, and it could take away the teams focus on retaining and servicing existing clients. Taking time and a data-centric approach to choosing the right customer segment helps avoid this struggle.
Cultural bias within innovation labs
Culture plays a crucial role in a corporate start-up. The initiative may come across as the child playing within the safety net of the parent. However, this also creates a risk-averse mindset within the start-up and could impact decision making that could prove beneficial to the start-up.
Bringing together similar initiatives to share knowledge, best practices and identify collaboration opportunities. Collaboration is key to innovation.
In summary, a corporate start-up is complex and tough. The privileges of being within a big corporate can be felt but the pains and tedious policies and procedures also come with the package. This should not necessarily be the future direction for organisations who foster corporate start-ups.
Corporate start-up can enjoy being a start-up and yet be autonomous by providing them with the right support to go-to-market faster and thus realise return or reduce risk sooner. They also need to give accountability to take more risk within an acceptable tolerance, to avoid hitting critical path blockers during delivery.
On the other hand, corporate startups help organisations to continuously innovate and stay ahead of the market. Especially given the COVID crisis, it is important that organisations rethink their business models, engagement with employees and their network relationship with external partners and consumers. Innovation is key to reactivation of the economy and eventually the long-term survival of the organisation. So, let us continue innovating!
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