Commerce, Innovation and Economies of ScaleThe evidence repeatedly shows that big companies are not the same as start-ups. Economies of scale strongly influence the way things are done for the majority of operational procedures. Larger, global firms have traditionally relied on long-established, habitual processes that successfully maintain their already successful businesses. Innovation isn't discouraged, but can be analyzed with respect to its impact on present enterprise operations, rather than its own merits, as a means to opening new markets or otherwise improving current performance.
To some extent, the position of these bigger firms in relations to start-ups remains unchallenged, due to sheer differences in size of operations. However, the contemporary workplace is changing. Innovative start-ups can acquire expanded share in niche markets, which subsequently might be grown into real competitive position. These developments have not gone unnoticed among big companies, seeking to retain their relative market power.
Five Bigger Firms That Operate Like Start-ups
Online enterprise, including social media applications and eCommerce in all its forms have provided start-ups and other small organizations inroads into opportunities for commercial and marketplace expansion previously unavailable to them, Crowdsourcing has generated access to expert solutions that improve the overall function and performance of these smaller firms, especially with regard to developing new products/services and penetrating market segments traditionally held by their larger competitors. Today's start-ups are often characterized by open innovation that combines their own in-house ideas with crowdsourced collaborators.
Five big companies that have noted these developments and use the example to run like start-ups are:
- Google – Applying the start-up mindset at bigger firms has been called "intrapreneurship," because it combines the entrepreneurial vision of start-ups, internally, within the R&D structure of the larger company. For Google, one of the world's most innovative organizations, this has led to AdSense, GMail and GoogleNews, among other familiar products. First among Goggle's 'Nine Principles of Innovation' is the basic premise that innovation comes from anywhere, an idea that fosters a corporate culture of interaction both within and external to the firm. To this extent, Google's Startup Grind program promotes start-up enterprise outside its own organizationally-specific businesses, already accounting for 40,000 entrepreneurs in 30 nations; participants are welcome to use Google tools to develop businesses, helping Google create its own global network of open sources of future collaboration.
- Microsoft - You might ask, "Can a company with 98,000 employees act like a start-up?" It’s not as unlikely as it seems. Microsoft, itself one of the world's most successful start-ups, has, over the years, become more a firm providing devices and services to customers; innovative, to be sure, but not as ground-breaking as it was originally. That has recently changed; a new spirit of innovation -- creating novel, untested products often through collaborative efforts -- has emerged within Microsoft, encouraged by top management. Its acquisition of social-networking Yammer and cellphone start-up Danger introduced a new start-up mentality. Also, similar to Google, Microsoft's BizSpark program encourages start-ups external to the firm, providing entrepreneurs three years of free software, support, and visibility to encourage their start-up's development and success, while simultaneously creating a strong collaborative community.
- Coca-Cola - Coke’s increasingly open business model might surprise those who think its long-term leadership in the beverage industry encourages only the most conventional enterprise approach. Coke has increasingly engaged in taking advantage of lean-startup culture, and provided development-services for local start-ups, seeking input from entrepreneurs and consumers for product improvement and project ideas. In partnership with Hypepotomus, it has started to construct its own internal start-up culture, taking cues from local start-ups about sourcing innovation for corporate problem-resolution.
- Salesforce.com - A worldwide cloud computing company, Salesforce is prominent in customer relationship management (CRM) and social enterprise. Its corporate culture has been ranked #1 most innovative company by Forbes for three consecutive years. Salesforce also promotes start-up ventures, with its €5 million Innovation Challenge designed to stimulate innovative new enterprise development. However, as a cloud-based firm, Salesforce has been in a nearly-perpetual start-up phase itself, since its origin in 1999; a condition reflecting the highly-charged product/service/application development characterizing the entire cloud industry. Salesforce's innovation derives largely from finding custom solutions to clients' ongoing cloud-computing problems.
- Amazon - Like Microsoft, Amazon has taken an active role in the local (Seattle) community, supporting the city's entrepreneurs. Yet, Amazon is building its internal start-up culture by hiring much of the regional IT-innovation workforce, some directly from neighboring start-ups. Amazon's customer-obsessed culture has a built-in start-up quality, resembling a start-up because it shares the same mission -- making the customer happy -- that new firms need to achieve sufficient success to remain in business. It’s true that Amazon's product innovation and customer-centricity are coupled to world-class marketing mechanisms seldom found in start-ups. Then too, Amazon's exceptionally committed management employs economies of scale few start-ups will ever achieve. But the similarities are there.
Start-ups have innovation engrained in their cultures, if they do not move forward at high speed and quality, they disappear quickly. All too often larger companies run at scale; efficiently and smoothly. However focusing on efficiency and process results in ignoring what made them the large companies they have become in the first place; fast paced innovation. More and more companies are agreeing that company culture is a critical component of innovation. Companies like Google and Salesforce have innovation driven systems in place. More specifically start-ups naturally practice open innovation, taking advantage of internal resources by cross department collaboration and an intrepreneurial spirit. Finally these companies look outside for innovation; taking advantage of customers and outside participants to increase the pace of innovation.