Space E: Start-up with neither safety net nor double bottom

 

Space C: new customer segments

Entering new, unknown markets with completely new products is the greatest leap a company can take. Demands, effort and risk are much higher than in the previously described strategic spaces. However it can pay off when you have the right product. An excellent example - at least until its downfall - was Nokia. The firm achieved a complete series of leaps: from producer of tires and wellingtons to manufacturer of electronic components to world market leader for cell phones. Maybe the downfall could have been avoided if Nokia had prepared for the next leap in time.

By the way, space E perfectly describes the situation of start-up companies: new products, no customer relations, often only marginal knowledge of the market and a high risk of failing. This is exactly the target group for which Eric Ries wrote his famous book 'Lean Startup'. The methods and processes he describes fit the requirements of established companies entering new markets with new products as well.

Advantages of space E strategies

Only very few companies that have a thriving business will be eager to transform their business entirely. But the situation will be different if the traditional market is endangered substantially. Then a shift of strategy – also known as a pivot – can open the chance for a fresh start.

In many cases, companies experiment with space E strategies apart from their core business. Skunk works, accelerators, incubators and corporate start-ups can be founded. The acquisition of an exciting new start-up can as well be a good way to space E. The huge advantage of space E strategies aside from the core business is that they provide a field for experimenting and learning without jeopardising the existing business. Not every project will end successfully, but those that do, as well as the lessons from the others, can contribute to long-term success.

Risks of space E strategies:

Any company that wants to deploy space E strategies will need a well-filled "war chest". It is the most expensive of all strategies listed here, but that is not the main problem. Not realizing the prerequisites of this strategy will be far more devasting. If space E strategies are deployed insufficiently they will fail. The most common mistakes are releasing an insufficient budget and keeping the most competent people out of the team while sending people who just happen to be available instead. Another way to make success unlikely is to submit the project to all regimentations, reporting obligations and expectations on return on investment like the rest of the corporation. Doing that, one can be sure to not only frustrate employees but also burn a lot of money. Corporate start-ups are under pressure of competition – competition with real start-ups where the best people with the highest motivation and extraordinary agility work on creative solutions for the same problems. They might be faster and better than a workgroup bound to tight corporate regimentations.

Success factors in space E

As already mentioned, it is crucial to build the right team and to provide it with a supportive surrounding: budget, space and tools. Sure, a high budget cannot guarantee a positive outcome. In many cases it is exactly the limitation in budget that stimulates creative solutions...then reiterate why the larger budget is crucial.

A very important factor is to protect innovation teams against inadequate demands. That is why companies install skunk works instead of fully integrated departments. They allow more independent and creative work aside from traditional corporate structures and restrictions.

An initial team building workshop can help to speed up and improve the performance of the team. That is especially true when many team members had been part of the corporate structure and are thus maybe too much focused on the way processes are managed there. Especially the start-up scene has developed a whole toolset and methods to gain speed quickly.

Nevertheless space E projects require some kind of control. The challenge is to find the right metrics that provide relevant insights into how the project is performing. And it should be clear when to end an activity. Start-up companies know it: If solutions aren’t convincing within a given time they will not be funded anymore and the project fails. Space E projects in well-established companies – especially corporates – sometimes run the risk of not being cancelled early enough. Costs are marginal compared to the company’s balance sheet and some top managers might be emotionally involved. To prevent these cases it is helpful to define clear criteria for an exit in advance.

 

Overview: digitization strategies

 

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published: December 10, 2018, © Uwe Weinreich

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