How Startups are Forcing
Established Companies to Change
Large companies are seeing startups mushroom
across the country and are learning from them.
Mondelez International makes $34 billion worth
of chocolate, biscuits, gum and can dy. But, as the world discovered about 10
days ago, it can also make entrepreneurs.
Betabox - a service startup founded by a bunch
of Mondelez employees and incubated in the company's office in the US, was
acquired by digital marketing agency VaynerMedia for an undisclosed sum last
fortnight.
Betabox -it helps companies build their
e-commerce presence -was born out of Mondelez International's Mobile Futures
initiative, which aims to create and incubate new mobile ventures in 90 days.
“We empowered our employees to be more
entrepreneurial and provided them with a unique opportunity to launch their own
startup,“ Bonin Bough, vice president of global media and e-commerce at
Mondelez International, said in a press release. “The fact that our startup
piqued the interest of a leading marketing agency is a testament to the
entrepreneurial spirit we were able to spark within.“
Back home, several such similar experiments are
underway. Large companies like Mahindra & Mahindra, Godrej Consumer
Products, Marico and Unilever are all sleeping with startups. Companies are
hoping that such intense engagement will help implant the startup DNA (hunger,
speed, innovation and agility) into their larger, slower selves.
“Traditional businesses need to learn from
startups in order to up their game,“ says Anand Mahindra, chairman, Mahindra
& Mahindra. “The new generation of startup entrepreneurs have a radically
different approach to every aspect of business: their minds are wide open and
they are willing to experiment with new ways of doing business,“ he adds.
Large companies are being drawn to startups both
by the scent of opportunity and by the smell of fear. There is the paranoia
that they may get outdated; there is also a realisation of the potential in
learning to work like startups.
“They (startups) are a wake up call to old world
companies to reinvest their monies to understand the way the world is
changing,“ says Pravin Gandhi, a founding partner at Seedfund, an early-stage
venture fund.
Some of that fear may not always be that of a
rapid business model redundancy, though even that is not very uncommon.
“I don't really see startups as a threat to
established companies,“ says Mahindra.“However, corporates do need to realign
themselves to changes in the innovation ecosystem. For example, formulating HR
policies that reward innovation, not just profits, is imperative,“ he adds.
PERSISTENT
HUNGER
Established companies are trying to become
nimble and innovative like startups.But they are also realising that it's not
an easy transition to make.
“It is the hunger that drives startups to
innovate and bring disruptive offerings faster,“ says A Mahendran, the former
managing director of Godrej Consumer, who now has a startup in the same
space.Large companies won't be able to replicate this easily.
For instance, Zomato founders and top executives
collected data for over 15,000 restaurants, often on foot and in extreme cold.
They also did all the quality checks in order to take the London edition of
Zomato live in 35 days. All-nighters were the norm.
“We went from zero to 22 countries, acquired
multiple companies across Europe and America, made product changes as per
changing user behaviour and requirements,“ says Deepinder Goyal, founder &
CEO, Zomato. “For an online product like ours, customer feedback is much more
real-time than it is for traditional businesses. This keeps us on our toes always.Growth
would not have been possible without our hunger to make it to the top,“ he
adds.
Godrej, M&M, Mondelez, Unilever Marico,
Oberoi-promoted EIH are all trying to create that hunger within. They are
encouraging employees to suggest ideas for innovations, even setting up
internal venture funds to back such ideas. Some are collaborating with
startups, others are offering `intrapreneurship' opportunities to employees to
drive innovation, stay ahead of competition and as a recruiting tool. But they
admit that a fair amount of re-wiring is required for them to usher in a
culture of innovation and entrepre neurship.
“This kind of empower ment (encouraging
employees to be entre preneur ial) involves significant risk taking,“ says Ma
hindra. “But as large companies search for ways to compete with smaller, more
innovative start ups, betting on people and ideas has become a way of life.“
At M&M, Mahindra is creating less
hierarchical management structures that help foster entrepreneurial behaviour.
“While innovation has historically been product or service-oriented, it now
increasingly involves the creation of business models, and that taps into the
unique strengths of larger companies,“ he says.
Several successful businesses like Mahindra
Rural Housing Finance, Mahindra First Choice Wheels (the multibrand used car
business), Genze -the electric twowheeler venture and Mahindra Cleantech were
birthed from entrepreneurial ideas from employees.
Global consumer giant Unilever recently set up
the `The Foundry,' a collaborative incubation centre, in markets including
India, South Africa, Brazil, Russia and China. It hopes to attract startups
with a `pitch-to-pilot' process. Marc Mathieu, global SVP, marketing, Unilever
has been quoted as saying, “We will work collaboratively to enable large
business to invest in new ideas without the fear of failure.“ The initiative
will also enable Unilever brands to put experimentation at the heart of the
marketing function and pilot new technologies more efficiently, effectively and
speedily.
“Although we have been working with startups for
years, we now want to scale up our efforts and, ultimately, embed this as a way
of working throughout our organisation,“ Unilever stated in an official media
communication. GCPL has incubated two businesses (haircare business: Bblunt and
new personal care products under the Protek brand) which report to the head of
innovation. “The company has dedicated `ring fenced' teams working on these
incubations. Some of our bright young talent has been given the opportunity to
work on these businesses,“ says Vivek Gambhir, CEO, GCPL.
Incremental innovation is easier in the midst of
the daily grind of business. But breakthrough innovations need a more
autonomous organisation, processes tailored for more uncertain work and metrics
that are different from the typical financial metrics, argues Gambhir.
“We have to continue being innovative for us to
remain relevant. Over the past couple of years, almost 40% of our incremental
growth has come from innovations,“ he adds.
Harsh Mariwala, chairman of Marico, personally
mentors 300 entrepreneurs giving away a significant amount of his time. The
learning though is two-way. His work with startups helps Marico learn from that
ecosystem. “We have to be in constant search of new ideas and initiatives
across processes. And, there is a high need to network outside of your
traditional community,“ says Mariwala. “I have also picked up a lot of learning
from my personal investments in startups“ he adds.
PRS Oberoi, chairman of The Oberoi Group, has
always encouraged his managers to treat the business as their own.“There are at
least 10 former middle-level or senior-level managers of Oberoi who have built
businesses of some significance,“ says Oberoi.
He points to examples such as Ravish Swarup
(Praxis Services, manages business processes for hospitality and travel
industry), Ajay Bakaya (co-founder of Sarovar Hotels, 61 hotels in 40 cities),
Sudhir Gupta (TLC Relationship Management, which customised marketing solutions
in customer loyalty and frequent traveller programmes), Ashish Vohra (founder
of Justa Hotels, eight hotels and four resorts across India) and Amlan Ghose,
who set up Prologic First -entrepreneurs born from the Oberoi group.
Oberoi gives employees the freedom to explore
new ways in which they can improve their areas of influence. For instance, when
The Oberoi Rajvilas, Jaipur opened, it did not have conference facilities. The
general manager at the hotel identified the opportunity, created a business
case for conferencing facilities and convinced the management. The same manager
made out a case for a new restaurant at the hotel and has made a success of
both the ventures.
How
startups are forcing old-world companies to rewire themselves:
Encouraging opportunities for intrapreneurshipolder
companies picking up learnings from startups Investing collaborating with
start-ups Reaching consumers through non-traditional channels Empowering
employees to contribute to innovation openly Backing ideas with funds and
resources
Kala Vijayraghavan and Lijee Philip ET5MAR15
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