Eight factors to consider when creating a corporate start-up
The idea of an innovative start-up does not need to be limited to net-new companies. Perhaps you work for a large corporation and want to create an in-house start-up. It might be for a new product or a new service. It might require forming a new team, a new division, or even a new legal entity. But where should you start? Here are eight factors to consider, based on our experience working with corporate start-ups.
1. Share your business caseShare the business case with everyone on the project. This provides a common goal (traditionally this is where companies fall because the goal and vision are not properly communicated). If your team doesn’t know where the project is heading in 3-5 years’ time, they won’t be able to make decisions today. During the first 6-18 months, there will be some real workload challenges, and you'll need to refer to the business case.
2. Manage your stakeholdersFrom our experience, you'll be given a lot of freedom running the corporate start-up, and at some stage you’ll come under a lot of scrutiny (sometimes caused by another, unrelated part of the business underperforming and resulting in a wider examination including your project). By setting up monthly steering committee meetings to provide regular, detailed progress updates, you will be more prepared for any review and your key stakeholders will be kept in the know, avoiding any nasty surprises.
3. Keep it lightAvoid buzzwords like LEAN but do try to keep everything you do as lightweight as possible.
Focus on the simplest business plan to get you going, the easiest market trial, the smallest management teams, and so on.
You're not trying to build a Rolls Royce - you're seeing if customers will purchase your new product or service and how much they are willing to pay for it. Once you have established that there is demand and you will need serious scale, that’s the time to adopt the Rolls Royce approach.
You might want to split this into stages – a design concept, a small trial group, and then seeing if people will pay for the service (or use it regularly), all before going into the official pilot and production launches.
4. Keep your focusWorking in a corporate start-up, you will become very busy very quickly, juggling a lot of stuff. It’s important to keep yourself and your management team focused on that business plan.
Choose a communication channel that everyone will check regularly and share the key focus for the next few days and weeks with your wider team. You may also want to consider having weekly meetings with the whole team, from the executive team to the most junior roles.
5. Think product not projectContinuously evolve the product. Don’t just build the service and then disband the team.
Do you think Mark Zuckerberg wanted to stop developing Facebook when he reached 100, 1,000, a million, or a billion users? So why do corporate ‘product’ projects disband teams after going live?
Think long term and have a clear, yet agile roadmap. Set up a product strategy early on, and don’t be afraid to show it to your end customers, to take them on a journey with you.
The first launch should be the smallest, minimalist, quickest product you can get to the market to sell. This can be trickier in regulated industries, such as insurance and banking, so in these instances choose a partner with experience who can help you avoid unforeseen pitfalls.
6. Invest in Sales & MarketingIn balance with the product and price, this is key to your success. It is often the case that corporates think they know what the product should be – but avoid taking shortcuts or making assumptions. It is important to use empirical purchasing information when drawing any conclusions.
Theory is fine but paying customers will be your shining light. You'll need local expertise for each market you consider launching in. For larger markets like the US, you'll need wide coverage. It’s easy to underestimate the size of the sales team you will need – it’s like expecting a couple of people in London to be able to do pan-European customer research, which is unrealistic or ineffective.
To confirm your pricing strategy, get customers paying as soon as possible.
Finally, don’t underestimate marketing costs. In 2018, Uber spent $3.2bn on sales and marketing, of which $1.4 billion comprised discounts, promotions, refunds, and credits for customers. Monzo bank spent £390,000 on marketing in the same year. Also in 2018, Netflix spent $2.37bn in marketing expenses compared to $1.44 billion in 2017. That's a 65% increase in marketing spend.
7. Don’t forget about PRDepending on what the product is, you might want a professional PR agency which understands your market. These agencies can open doors to both influencers who can test and promote your product as well as journalists who can publish well-placed articles that will get your product noticed. Organic PR is much more valuable than paid ads or sponsored content, as consumers are becoming wiser to these marketing tactics and legislation dictates that it needs to be clearly marked as such. Your PR agency can also help refine your go-to-market message.
8. Build a public website sooner rather than laterThe quicker you launch a public website, the quicker a few big challenges will be solved. By having an external “shop window”, you'll be answering several internal questions about "What is it that you are working on?".
It will also provide credibility to your potential customers and market research. Again, the website should be minimal - allocate approximately one month on designing and building the first public website.
This is of course not an exhaustive list of all the things to consider as you explore the possibility of a corporate start-up, and while it may seem like a daunting task, there are numerous success stories that demonstrate how valuable this exercise can be. Use the clout of your large corporate and your industry knowledge of the unique niche that only you can fill, put the customer at the heart of your planning process and get ready to spread your wings.