Startups vs. Traditional Companies
Demos Parneros on the Strategies of Startups and Traditional Companies
From his experience of leading City Park Investments, an organization that funds and advises consumer and retail tech startups, Demos Parneros suggests that traditional and larger companies adopt some agile practices of startups, to stay relevant. Integrating the two approaches is the way forward.
Much has been said about the culture clash between older, slower, more traditional companies and younger, more dynamic, faster-moving tech start-ups. Naturally, the two are in opposition to each other because they are completely different stages of a company’s life cycle with different strategies, processes, and priorities. Each style has its advantages and disadvantages.
The thinking among start-ups is usually to “move fast and break new ground” which has led to rapid success, with companies such as Google and Amazon growing larger than traditional competitors who have been around for decades. However, start-up investments are also high-risk. Of the large number of start-ups entering various industries, very few truly ‘make it big’ and therefore do not make a good return on the initial investment.
Traditional companies, on the other hand, provide more reliable employment opportunities, great institutional knowledge, and decades of business experience, but they often rely on cumbersome processes which make them slow to move and respond to change. They can be blind to, and even fearful of, innovation and new technology, leaving them at a disadvantage. Among other examples, the Photo Company Kodak, lost almost all its business because it didn’t adapt quickly enough to the rapidly changing digital landscape.
As mentioned, there are advantages to both approaches, but is there a way to combine them to find greater success? Is it possible to have older businesses work, at least in some ways, like more agile start-ups? The answer is yes, but it isn’t easy.
Innovation Without Disruption
Given their tendency to disrupt through innovation, one of the greatest fears of traditional companies is having their business undercut by a growing start-up. In this case, one of the best defense mechanisms for an older company is to instigate some of the changes themselves.
To begin, all businesses should invest in digital transformation, even though this can be a slow process. The implementation of machine learning, predictive analysis, artificial intelligence, and other digital tools can enable older businesses to become more efficient in responding to changes in today’s marketplace and remain competitive.
While investing in new technology, businesses should also act with diligence and commitment. Instead of getting cold feet, give the new technology a chance to prove its worth before drawing a conclusion as to its effectiveness. To adapt to the growing digital landscape, business leaders must ensure the right amount of investment and resources are allocated to innovation, along with giving new ideas enough time to grow and reap benefits.
Change from the Top
We’re all familiar with the idea that change is the only constant. It follows that the only way to succeed in life is to adapt to the changes around us.
Larger, more established businesses can incorporate the strategies and characteristics of start-ups to their benefit, and many do, with significant success. Those most likely to succeed have a committed leadership team that invests in new digital tools with cautious confidence and determination. They are active in educating their employees and encouraging them to be open-minded and supportive of the use of new technology. These are businesses that genuinely walk the talk.
The road to success means supporting digital innovation that could make business processes more efficient. It means treating new initiatives as part of the overall business strategy, and not as an expendable project. It means leading by example to support new thinking. If this is achieved, greater success through the adoption of start-up-centric strategies is well within reach.
Demos Parneros is an experienced and innovative retail and e-commerce leader, helping Staples grow from a startup to a Fortune 100 company, serving as President of North American Retail and E-commerce businesses. He subsequently took on the role of CEO at Barnes & Noble, leading a focused transformation plan, which eventually led to the sale of the company. In addition to previously serving on several high-profile company boards, Demos now leads CityPark LLC, which has invested in leading-edge consumer and retail tech startups.
