Thursday, March 12, 2015

STARTUP SPECIAL ................How Startups are Forcing Established Companies to Change



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 There is the paranoia that they may get outdated; there is also a realisation of the potential in learning to work like startups.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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