Agility is more than a buzzword. For the vast majority of start-ups in the tech and digital sectors, this magic word is the key to success. The secret: agility makes you flexible. Flexibility makes creativity. And creativity breeds innovation that differentiates any company from others in the marketplace. Long-established, larger companies sometimes literally look "stupid out of the blue".
In this article, you will learn-
- what makes agile start-ups so successful
- what methods do they use
- and how traditional companies can also establish a lean startup method
When big companies lack entrepreneurship
Many large, established companies look with a mixture of admiration and suspicion at the thousands of small companies that are springing up all the time and suddenly seem to be celebrating huge successes with just a vague idea. Perhaps you have already noticed this feeling in yourself. And the question was asked: How do they do it? And above all: What do they have that we don't have?
It can't be because of the budget – that much is certain. Startups often start with a handful of dollars, from home or in a tiny business space. They have no or only a few employees, the latest office equipment is not guaranteed, and rarely years of proven expertise in one area. So what makes their fast growth possible?
When you start growing a company, then you are quickly adapting to market needs and driving incremental growth and volumes. If it happens off a small base, as I point out, then the additional growth will diminish.
Let us say that you make 3% growth a week on a million sales per week; it would imply that you increase from 1 million to about 4.65 million sales per week within a year.
That would be a tremendous growth rate. Some companies do this - mainly by “growth-hacking” where they focus on subscriptions and growth. I did this previously and initially, even an existing business you can get 1% a week growth, and if you push hard, you can get this to 3%. I managed to sustain this with a team that I worked with, for two years and we had 300% growth. It was in an existing, relatively large business. The challenge is that very soon, the types of changes that you need to make become much bigger, have longer lead times to create high growth results, and you constantly have to train, retrain and grow people to be more responsive. The investment costs are high and do not necessarily translate into higher profits.
Growth must not be confused with profitability. You can grow without being profitable. Growth and survival are independent of each other, and the challenge of sustaining high growth is that you run out of cash to do the next big thing.
There is a guideline that says that the lifetime value of the customer should be equal to 3 to 10 times the cost of customer acquisition. I have found that businesses that grow fast maintain ratios of at least 20 times. That means, if it costs 1 to get a new customer, then you must know that you can make 20x as much from that customer over time. Then it is meaningful for you to spend money on getting new customers.
Startups grow fast because they are in learning mode and they typically are introducing a new concept or new approach. The investment should price in the growth. As soon you have “set” the production, and you are looking for a return, growth is typically bad - as it costs money to invest in growth. If the return is not short-term, then growth is not always good.
Startups often fail because they run out of cash. One of the main reasons why they run out of money is because of the investment in growth. Having more customers is great, as long as your production capabilities scale, and you can have a relatively stable delivery.
Affiliate marketing is not necessarily better - but it is a way to grow. It does reduce the cost of customer acquisition.
10 things startups do better
1. Start-ups react faster
Decisions are made quickly, changes are noticed and processes are immediately adapted. This speed or velocity forms the principle of agile working methods. If you plan agile, you can switch quickly, change course and adapt projects to changed conditions. The result is results that best meet the needs of the user at the time the project is finalized. A company that manages its projects in the classic sense of the waterfall method cannot possibly keep up.
2. Start-ups dare to try things out
While established companies often have no hesitation in any innovation, start-ups actively try different variants until they find the one that works best. Of course, it's much easier to just take risks when there's little to lose. On the other hand, as I said, start-ups have hardly any financial backing if something goes horribly wrong. This is exactly why the speed at which things are tried out and analyzed is usually much faster than in established companies. Start-ups test, test, test - and immediately draw constructive conclusions that they implement.
3. Start-ups always see their product from the customer's point of view
Of course, established companies also try to keep their customers in mind at all times. However, this perspective sometimes loses some of its sharpness over the years. Customer wishes and company principles easily become blurred, although they may no longer fit together. It's different with start-ups. To be initially successful, they need to see their product or service 100% through the eyes of their potential customers. This leads them to constantly compare whether their assumptions about customer requirements actually match reality. As a result, they can make product adjustments much faster if the needs of their customers require it.
4. Start-ups' bold advertising
Of course, there are also large, long-standing successful companies that dare to dare in terms of marketing. Then, however, this strategy established itself as a brandmark, Example of SIXT - An international car rental company with over 2,000 locations spread over 100 different countries. SIXT is currently the 5th largest car rental company in the world, maintaining a car rental fleet of over 225,000 vehicles. Start-ups, on the other hand, dare - according to the principle of trying things out - to always take a new direction in terms of public image. Of course, this only works as long as they remain true to their corporate values. The "how" of marketing can then help enormously to sharpen your positioning. Many established companies simply don't have that "on their radar" - and shouldn't be surprised if they don't address a new target group.
5. Start-ups have short paths
As an established company, you can now joke that there is no room for long distances in a 1-room shop either. Of course, that's true. But apart from the physical proximity of all employees, which is also desired in start-ups, the proximity in the heads plays a much larger role. Flat hierarchies prevail in start-ups. Ideally, everyone talks to everyone else - and can make decisions independently to a far greater extent than is the case with established companies. The bureaucracy is almost minimum. A flat organization (also known as a horizontal organization or flat hierarchy) has an organizational structure with few or no levels of middle management between staff and executives: They simply work faster.
6. Start-ups tackle things together
A side effect of the flat hierarchies in start-ups is a high level of active personal responsibility among employees. While in traditional companies department A often does not feel responsible for department B at all or even communicates with it, in a start-up everyone ideally feels committed to one thing. This goes hand in hand with an intrapreneur minimum and the most valuable thing you can find in employees: they feel responsible for the company as if it were their own. Everyone helps where necessary. Everyone directs their actions towards a common goal. In other words: everyone forms a team.
7. Start-ups value employees
In start-ups, all team members know each other personally. That alone naturally leads to an atmosphere of family intimacy. But what is even more important is the minimum behind it: Every employee is understood and valued as a person. Constant feedback rounds, team events, and discussions at eye level are usually more common here than in established companies. All of this leads to a strong identification with the success of the company and the increased will to work hard for it.
8. In start-ups, everyone thinks outside the box
A central factor of functioning entrepreneurship is the willingness to constantly learn. In start-ups, this is naturally very high. Many things are tried out for the first time, completely new processes are set in motion and unknown markets are opened up. It is therefore necessary that as many team members as possible are willing to constantly learn, share information generously and look into each other's work areas. Agile start-ups often work in cross-functional teams– i.e. those that consists of team members from different departments. In contrast to the traditional composition of a team, where only employees from one and the same discipline sit together, mixed teams use concentrated knowledge. This gives start-ups an extreme advantage in terms of speed and professional development.
9. Start-ups communicate better with each other
Flat hierarchies, personal appreciation, and team spirit - all lead to more active, direct communication in start-ups. Openness is the main keyword here. While it is often little or no exchange between some employees in larger companies, regular events, and team meetings ensure a constant flow of information in start-ups. It is important to make everyone with relevant information available to be heard.
10. Startups don't rest on their glory
A real entrepreneurial mindset is characterized is before the sale. Successes are duly celebrated - and then get started again. In traditional companies, this do-it-yourself mentality has sometimes died out, since success is already used to it. This can lead to a lack of innovation and stagnation. Motivational events always fuel employees with positivity.
The 4 basic rules of the Agile Manifesto for start-up mentality
The Agile Manifesto is a widely used and practical set of rules for companies that want to work agile according to Scrum. It is strongly based on the principles of the start-up mentality. This is applied in four hierarchically structured mottos:
- Individuals and interactions are more important than processes and tools.
- Working software is more important than detailed documentation.
- Cooperation with customers is more important than contract negotiations.
- Responding to change is more important than sticking to a plan.
The start-up mentality is therefore based on a clearly defined understanding of values.
"People are more important than profit. Functionality is more important than bureaucracy. Direct communication and cooperation with customers always have priority in any contract negotiations."
How to establish a start-up mentality in your own company?
Do you know that a start-up mentality is important in your company so that you can secure and define future success? Then you have certainly not only been thinking about how to establish agile working methods and a do-it-yourself mindset in your team since this article. It is not that easy, because of course it is one thing to start from scratch and go to work with the fresh energy of beginners. The other is to reawaken that energy when a team is already larger and a company is already established in an industry. The following steps can be useful:
1. Create immediate communication spaces everywhere
A lean start-up mentality is based on sharing. So make room for it. It is important that complex processes can be visualized so that everyone can understand them. Project boards or entire design thinking spaces are ideal for this. Let your walls do the talking. Use every room for direct, reduced to the bare essentials, and attractively visualized information transfer. Always be as transparent as possible. This creates closeness to your employees.
2. Establish agile processes throughout the company
If possible, introduce agile project control not only in the IT department but in your entire company. Scrum or Kanban is the appropriate framework for this. Take part in Scrum training courses or train your employees to become Scrum Masters. Of course, you don't have to strictly fix all the rules of Scrum. However, many patterns of the agile processes can modify as per your team's needs. For example, continuously work in sprints and leave each sprint a retrospective follow, in which all employees involved in the project exchange ideas. Always keep these meetings focused by setting the duration.
3. Create intrapreneurship or ownership in your team members
Ensure that your employees are familiar with your company and the products they work on through discussions from all perspectives.
4. Form cross-functional teams
Start with a cross-functional team made up of members from different departments. Let them develop a project together as a test and ask them all about their experiences. The project results and the feedback from your employees will most likely be very positive.
5. Introduce Scrum of Scrums
The Scrum of Scrum is a daily update meeting in which representatives from different teams can meet and exchange information about the current state of affairs, necessary changes, and new planning steps. Information flows faster and necessary adaptations can be implemented immediately. A Scrum of Scrums is beneficial when you have large teams that cannot meet all at once but still need to work together.
6. Create a cross-departmental and transparent requirements management
Prioritizing projects or project steps becomes more and more important as your company grows. To ensure that efficient start-up thinking remains possible here too, the product owners should get together regularly and discuss the prioritization together. It is essential that these decisions are made transparent to the teams so that they can understand and support them.
7. Create places of learning
Agile working methods can only be established if they are understood well. Provide detailed information that can be used quickly, especially on your intranet. Or create in-house workshop rounds where employees can teach each other new things. Even a (half) learning day per week can promote the start-up mentality in the team.
8. Own your mistakes
Agility is based on constant learning. This means that you, as the company management, are also learning and are allowed to make mistakes. It is important that these are also communicated.
9. Reduce hierarchies
Of course, teams need representatives in the form of team leaders or product owners to simplify communication between teams of a certain size. That doesn't mean, that countless hierarchical levels have to be gone through for every small decision. The shorter the distances are, the faster you will reach your destination.
We hope you enjoyed the article and wish you every success in implementing your new, fresh start-up mentality in your company. If you have any questions, please feel free to contact us.