Why startups are different from traditional companies

Why startups are different from traditional companies.png

A key misconception is that startups are a smaller version of corporations.

I’m here to tell you that they are very different in many aspects and require different skill sets.

A startup company is a high risk to undertake, looking for a sustainable way to survive, then grow. A startup is still looking to understand who the customers are, what exactly they want and most importantly how to sustain revenue.

At the beginning, you will have assumptions about the above which you will need to turn into hypothesis, which in turn can be validated by testing and measuring and iterating.

On the other hand, corporations or large companies are less risk and way more stable. They have existing customers, a brand and revenue. The wheels are already turning compared to a startup where the wheels still need to be created.

Because of these differences, traditional ways (corporate methods) of managing these high risk startups will put emphasis on the wrong priorities.

As a founder, you really need to understand that startups deal with a high level of uncertainty which in turn equals risk. Your job is to de-risk your startup to make it a viable business opportunity.

Forget what you have been taught in your business class. Here is why:

Startups and corporates vary on three key levels,

  • The strategy level;

  • The process level;

  • The organisation level.

 

Strategy

Senza titolo.png

In terms of strategy, startups are focused on searching for a viable business model (that is finding people who want to buy their product, the right channels, revenue, partners and so on). Large established companies focus on execution. That is managing and growing an existing business model and their focus will be on executing operational plans and forecasting financials.

 

Process

Senza titolo.png

In terms of processes, startups are heavily focused on customer development and agile product development.What I mean by that is focusing heavily on finding customers and building products for their customers. Corporates are more focused on product management with a focus on developing for existing clients based on existing data. 

Organisation

Senza titolo.png

In terms of the organizational structure, startups are very focused on the customer development team which is very founder driven. Everybody will do sales, talk to customers, come up with new features and be more flexible in the work they do on a daily basis. Large companies are structured in their functional teams. That is a sales team, and R&D team, development team, accounts team and so on. Each team focusing on their core role.


Learning

Regular advice that will work for corporates will not work for startups and if anything will be damaging to the beginning of any venture. Traditional tools will not work in startups because big companies or corporations and startups use different approaches and have different skills. While a large or established company will focus on processes that manage the existing business model, startups need to focus on finding a repeatable business model.