Big Company vs Startup

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It’s a common fallacy amongst startup folks that large companies are incapable of being innovative or nimble.

Two words: Utter crap.

During the first five years of my career, I worked for small- to medium-sized companies, ranging from a small software house/systems integrator with about forty staff to a three-man dot-com start-up. Then, in the summer of 2000, as the dot-com bubble was collapsing (and after we’d shut down the aforementioned dot-com startup), I took a three-month contract consulting on e-commerce projects at Deutsche Bank, a 130-year old, multi-billion pound/dollar/euro bank that employed about 8,000 people in London alone, and over 100,000 people globally.

You’d imagine that this company would be a case study in Companies That Are Incapable Of Being Innovative Or Nimble but nothing could be further from the truth. At the time, Deutsche Bank had identified ecommerce as a key area for exploitation and it had a lot of very smart people working on a variety of projects that were aimed at giving it a head start on its competitors.What’s more, the company seemed to be very comfortable with the fact that not every project it invested in was going to be successful – an attitude that reminded me more of a venture capitalist than a massive financial services firm.

Individual business areas were allowed the scope and given the necessary support to explore new ideas, relatively free from bureaucratic constraint. Over time, I came to realise that, in the zero-sum game of the financial markets, companies like Deutsche Bank are fiercely competitive and that competitiveness leads them to react very quickly to opportunities (and, indeed, threats).

A firm’s ability to be innovative and to react  rapidly to take advantage of market opportunities does not depend on its size. It depends on its leaders. More accurately, it depends on its leaders’ propensity for change and appetite for risk. (Note that when I talk about leaders in this context, I’m not referring to those at the top of the company, but those who run individual business areas.)

It’s no surprise that startups have a propensity to be innovative and nimble – it’s easy for a small, new company to change and pivot, and, after all, a startup wouldn’t have started up in the first place if its leadership lacked an appetite for change and risk. However, an appetite for risk is not the exclusive purview of those who found startups. An entrepreneurial approach can work just as well within a large company as it can for a small one, and many large companies seek to foster an entrepreneurial culture. At Morgan Stanley, I undertook a project to investigate what underpinned the entrepreneurial culture within the Commodities and Emerging Markets departments and whether the same approach could be replicated across the rest of the company.

I think that people in the startup scene sometimes get a big snobbish and look down their noses at big, established companies (possibly in part because they lack the cool factor  possessed by startups) and there are lots of stories about large companies that failed to react to newer, smaller competitors. However, there are also lots of  large companies that have continued to thrive although I suppose that “David Vanquishes Goliath” makes for a better headline than “Actually, Elephants Can Dance”.

Written by jackgavigan

March 9, 2011 at 11:13 pm

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