Remember Marc Andreesens famous quote "Software is eating the world"? You can see it happening in many industries: Startups are innovating at a rapid pace and are often disrupting established companies. Eventually every industry will be disrupted by digital technology. Here is what is fascinating: 1. Big corporates have plenty of resources, a huge customer base, experts in market research etc. Why is it that they fail to innovate? 2. Startups most of the time lack resources, a customer base, experts in market research etc. How do they come up with innovative, disruptive and eventually successful business models? Luckily both questions have been answered. Clay Christensen has described the answer to the first question in his book The Innovator’s Dilemma. Go read it, it is really good. Steve Blank and Eric Ries have built a framework called The Lean Startup to answer the second question. This slide deck explains the innovators dilemma, how startups build businesses and what corporates can learn from them. It merely scratches the surface but it is a start for now. Tell me what you think in the comments.

1. What Corporates can
learn from Startups
Manuel Koelman
Cologne, 2013

2. manuel koelman
dutch entrepreneur | living in cologne |
founded three companies | chairman of the
pirate summit | consulting on lean innovation
and agile enterprise | getcontext | pirates on
a plane | the pirates inn | nrw-startups |
mailfred | practical philosopher | productivity
geek| mentor at seedcamp, startup weekend
etc. | father | caotina lover | cheese addicted

3. There are many areas in which Coporates can learn
from Startups. This talk has its
main focus on Innovation.

4. Picture: Andreessen-Horowitz.
„Software is
eating the world.“
- Marc Andreessen

5. Consumption spreads faster today
% of US
households
Source: Visualizing Economics

6. Computer technology is changing industries at
unprecedented scale and speed.
Remember, the consumer internet is <20 years old.
Mobile
Internet

7. Music
Hotel
Retail
Startups are
changing industries.
Photography
News
Navigation
Television
Files / Folders
Print / Magazines
Cash Registers
Taxi

8. Game changing innovations
mostly don’t come from
“established” companies.
What do Amazon, Google, Wikipedia, Skype and Facebook have in common?
in the market

9. Performance
Measure
Time
Most demanding
customers
Least
demanding
customers

10. Performance
Measure
Time
Disruptive innovations
almost always start in a
niche and below
„normal“ market
performance
Established companies
add features /
performance measures
that exceed the need
of mainstream
customers
Disrupting innovation
Innovation
startups tend
to do

11. Performance
Measure
Time
Early digital cameras suffered
from low picture quality and
resolution and long shutter
lag. The convenience of small
memory cards and portable
hard drives that hold
hundreds or thousands of
pictures, as well as the lack of
the need to develop these
pictures, helped.
For decades chemical photography was the
market standard. Innovation happened
mostly around camera features.
Kodak, one of the market leaders, invented
the first digital camera in 1975. It was
dropped because of fear it would threaten
Kodak’s photographic film business. In 2012
Kodak filed for bankruptcy after over 130
years of operation.
Chemical
photograhy
Digital
photograhy

12. Performance
Measure
Time
In the beginning mobile
telephony was far inferior
than fixed lines. It had bad
connectivity, bad sound
quality and was far more
expensive. However, it had
the main advantag of being
portable.
In 2009 there were 1.26
billion fixed-line subscribers
and 4.6 billion mobile
subscribers.
Fixed line telephony has been
invented in the 19th century.
In the last half of the 20th
century digital technology
was gradually introduced.
Fixed line
telephony
Mobile
telephony

13. Performance
Measure
Time
Wikipedia is a free, non-
profit, community-edited
online encyclopedia. It
was launched in 2001
and was initially laughed
at as a “laymans”
encyclopedia. It currently
is the sixth most visited
web page in the world.
The Encyclopædia Britannica
ended print production after
244 years in 2012. It was
market leader for centuries. The
content was written by selected
domain experts.

14. Do you always listen to your best
customers and focus where the
profitability is most attractive?
If yes, you might be in trouble.

15. Asymmetry of motivation
Disruptive strategy
Leader is motivated to flee/ignore.
Entrants almost always beat incumbents.
Sustaining strategy
Leader is motivated to fight.
Incumbents almost always beat entrants.

16. The existing opportunities of
tomorrow are small today.
The larger a company gets, the harder it is to prioritize small opportunities.

17. Management asks for a
new idea “Bring me an idea that is...”
Project group goes to
work
Pitch day
ground-
breaking
fresh
super
innovative
Increase
sales
sexy
bold
“If you can prove that these
ideas worked before, we
will do it.”
A true story

18. WTF!?!
They want something new, risk-free which
has already proven successful before.

19. Mindset matters.
Manager
Strives to keep bad things from happening
Focused on efficiency
Main skill: Optimization
Risk averse
…
Entrepreneur
Strives to make good things happen
Focused on effectiveness
Main skill: Creation
Risk prone
…

20. “What is the ROI of this project?”
Disruptive innovations aren’t initially measured by ROI.

21. Startup = Experiment.
Startups act in an environment of extreme uncertainty.

22. That’s why
most startups fail.

23. Why do startups fail?
Rarely because the product doesn’t work.
Usually because there are no customers.

24. Problem (Market) is unknown.
Solution (Product) is unknown.

25. No business plan survives first
contact with the customer.
Ideas are based on faith, plans are based on guessing.
Lean innovation helps to come from faith to fact based
business model.

26. Lean is about reducing waste. Lean innovation too.
Everything that does not
support “learning” is waste.

27. Learn Fast. Fail Fast. Adapt.
Being “agile” and open for change is key.

28. €
Resources
Time
The time you have to find a business
model / product market fit

29. Possible
problem
area A
Possible
viable
solution 2
Possible
viable
solution 1
Experiment
Experiment

30. Possible
viable
solution 4Experiment
Possible
viable
solution 3
Experiment
Possible
problem
area A
Possible
viable
solution 2
Possible
viable
solution 1
Experiment
Experiment
Possible
problem
area B

31. LEAN INNOVATION
FOR CORPORATES

32. Disruptive innovationSustainable innovation
Problem is not well understood
New market
Innovation is dramatic game changing
Market is unknown
Market is unpredictable
Customer doesn‘t know
Problem is well understood
Existing market
Innovation improves performance,
lowers cost, incremental change
Market is known
Market is predictable
Customer is believable
Traditional business methods fail
Learning organization
Talk to early adopters
Customer development
Test for learning
No business plan
Traditional business methods are
sufficient
Executing organization
Talk to mainstream
Market research
Test for process optimization
Business Case / ROI planning possible
Characteristics
Methods

33. Sustain/
Extend
Core Business
Lean Innovation Methods Agile Enterprise Methods
Grow
Proven small business
Validate
Prototype in
unknown markets
Idea generation
Business ideas (pre-
product)
Growth stage
Business model has shown a
proof-of concept
(product/market) fit.
Full-market potential unclear.
Product has customers and
some revenue.
Ready to scale.
Early-stage startups (incl.
research projects, prototypes,
inventions, products in pilot
phase, and strategic
investments in external young
companies)
No revenue.
Most will fail.
Idea stage.
Some customer validation.
Technology limited to mock-
ups
Unknown market.
Unknown problem.
Unknown solution.
Sustainability stage
Business model is well
understood.
Accounting for most revenue.
Primary focus is near-term.
Full execution mode.
Methods used
depend on stage and context

34. Customer Development: “Validating the Problem”
Find product/market fit before
investing into marketing/sales.

35. Most important advice!!!
Get out of the building.
Before you start coding.
This is the only slide with red text, that’s how important this is.

36. Agile Development
“Building the solution”
Release in small iterations. Continuous deployment.
Continuously analyze (gather data and insights).

37. Problem
statement
Build Test
Launch /
Scale
Viable?
Iterations, Adjust solution
Redefine problem / business, „Pivot“

38. Not only for technology companies.
Lean Startup is for all
companies that face
uncertainty about what
customers will want.

39. Leave the (startup) team alone.
Put them in an organization outside of your current corporations.

40. Encourage contact with creative
minds and startup scene.
Go visit startup hubs e.g. London.

41. Choose your reporting metrics
based on the stage the team is in.
Instead of revenue or profit look at e.g. net promoter score, engagement
and conversion.

42. Not only the F&E department but every
employee can create innovations.
Google lets employees spend 20% of their time on anything they want.

43. “Since around 2000, we let engineers spend 20% of their
time working on whatever they want, and we trust that
they'll build interesting things.
After September 11, one of our researchers, Krishna Bharat,
would go to 10 or 15 news sites each day looking for
information about the case. And he thought, why don't I
write a program to do this? So Krishna, who's an expert in
artificial intelligence, used a web crawler to cluster articles.
He later emailed it around the company. My office mate and I
got it, and we were like, this isn't just a cool little tool for
Krishna. We could add more sources and build this into a
great product. That's how Google News came about.
Krishna did not intend to build a product, but he accidentally
gave us the idea for one.”
- Marissa Mayer, Ex-Googler, now CEO of Yahoo -

44. Work in cross-functional teams.
In idea and validation stage, creativity and effectiveness is much more
important than efficiency.

45. If you haven’t failed, you’re
not trying hard enough.
Accept failure as part of “learning”.

46. Any questions?

47. Websites
www.getcontext.de
www.leanentrepreneur.com
www.piratesummit.com
www.mailfred.de
@manuelkoelman
Find me around the net
fb.com/koelman
de.linkedin.com/in/koelman