Google was founded in 1998. Facebook was founded in 2004. In a world that has been transformed by companies that are younger than the legal drinking age, the startup has gained an almost mythical quality, with even the most cursory of Google searches yielding multiple articles encouraging startup behaviour in larger, more established companies. Large companies with paltry single digit revenue growth are clamouring for startup gold dust, rethinking strategy, R&D and even hiring policy along the way. However I am here to argue that the opposite should be taking place – why aren’t more startups acting like multibillion dollar corporations?
This may be against the currently held wisdom, but the numbers back it up. Forbes’ top 10 companies in 2013 made c. $175B in profit last year, while most startups don’t even generate any revenue. The latest and greatest startup tech companies might be valued in billions, but Walmart’s market capitalization is c. $250B. So why on earth are business gurus imploring these leaders of industry to imitate their lesser cousins? The sooner early-stage companies start to act like big corporate, the better.
As an entrepreneur, how is it best to go about this startup transformation? The first step is obvious, which is to focus on shareholder value at all times. While your shareholders are probably limited in number (indeed it might just be you), that doesn’t mean you shouldn’t adopt this crucial tenet of big business. It doesn’t matter if your lead developer’s latest idea could get you 100,000 new users, what does that mean in terms of market capitalisation? It doesn’t matter if a new idea might change the way in which people interact online – if it doesn’t increase your shareholders’ dividend then you don’t want to hear it. These things are important to big business, and as an aspiring big business, they are therefore important to you.
Having realigned your company’s focus, the next thing to do is to introduce some bureaucracy. Big corporate has lots of hierarchy, and so should you. Establish a layer of managers between you and your front-line workers. Hire some managers to manage those managers, with management team leaders to oversee it all. Introduce committees, bringing in people with disparate views, interests and competencies. Make sure that all decisions have multiple stakeholders, with diverse and vested interests. Only then will your startup start to mimic the dynamism of big business.
When hiring your myriad management structure, the approach is well-established – competency-based questions. Often startups focus a lot on company fit, and technical skills, when they should in fact be worrying about times their employees have historically dealt with conflict. What about your employees’ self-reported track record when it comes to team-work, and overcoming difficult problems? I, for one, would never hire anyone who couldn’t give me two examples of times when they have implemented change in their organisation. I would strongly recommend that you don’t either. Rely on competency-based questions, and you will get the loyal foot-soldiers your company needs.
Having established your structure, and hired your employees, how should you go to work? The key is to be as prescriptive as you possibly can. Some foolish startups encourage “free time” and “employee creativity”. This is to be discouraged, as it wastes valuable company time, and company time is company money, and company money is shareholder value. Lest you even consider wasting shareholder value, I will refer you to my first point – Shareholder Value, Shareholder Value, Shareholder Value. If you focus on that, you won’t go far wrong.
These changes may all seem large scale, and fundamental, and that is because they are. But if you are serious about making your business a big business, they are changes that you will do well to make, and you will surely be glad when you have done so.