Four reasons why corporate startups fail (and how yours can be succesful)
After discussions with more than 40 decision-makers on their pitfalls and success stories on corporate startups, we are happy to share main learnings with you.
In our recent research on why corporate startups fail and what makes them successful, we had an insightful discussion with more than 40 decision-makers and project leaders from various corporates.
They provided us insights into the pitfalls and success stories of their intrapreneurship teams (some of them later spinoffs of corporate startups) and we want to share some of our most interesting learnings with you.
The story of MOBIKO
Nicola Büsse, Co-Founder of MOBIKO, is one of those intrapreneurs who managed to make the jump with her team from an internal innovation project to a successful spinoff.
The story of MOBIKO starts at Audi Business Innovation in 2017. Back then, Nicola Büsse oversaw the development of new business models and worked on a project to make a classic company car use more efficient. In doing so, they quickly noticed that company cars only meet a small fraction of the employees' mobility needs. What the employer offered the employees in terms of mobility at that time was extremely rigid and outdated.
This is when the idea for MOBIKO was born, as the team wanted to break up this "either-or" construct and create a sustainable and demand-oriented mobility benefit that serves all employees equally.
Soon after MOBIKO joined forces with an external company builder, it took off and became an Audi spin-off in February 2018. Now, MOBIKO offers a mobility budget service to companies and continues its ongoing growth.
In this post, we will share her story and the four main reasons why she thinks corporate startups usually fail and how to overcome that.
1. You lack motivation in your team
Intrapreneurs are easy to be motivated once they have found an idea worth pursuing, and that might have a chance to generate real value. Also, intrapreneurs get motivated by being able to break out from their daily business.
In the case of MOBIKO, the setting was similar. Soon a team was formed that was passionate enough to build something from scratch, purely intrinsically motivated. Here Nicola adds that "the project cannot be successful if you staff people that cannot identify themselves with the idea."
In the same way as startups, also corporate startups must go through the startup rollercoaster. Therefore the team has to be staffed with people that can cope with uncertain and high-risk situations and stand with the idea even in hard times. To keep the motivation levels constantly high, corporates need to consider extrinsic incentivization for intrapreneurship teams and not only rely on purely intrinsically motivated employees.
Nicola states that "corporations are still struggling to include team members to the startup's success - their way of thinking towards this direction is just not there yet." However, there are some options corporates are already applying, with virtual shares being one of them.
2. You underestimate stakeholder management
For corporates, radical innovations are, in most cases, a nice-to-have or the cherry on top of the cake. Rarely innovation projects are being prioritized over the daily business. Therefore, it takes much more energy and explanation to justify the pursuit of such projects and much more persuasion on the stakeholder front.
Now looking back to the early days of MOBIKO, Nicola Büsse agrees that stakeholder and expectation management greatly influenced the success of MOBIKO. "On the corporate side, there were very high expectations regarding the achievement of KPIs. As a startup, we, especially in the beginning, cannot achieve the classical KPIs of a corporate." Corporates want to see numbers such as revenue, ROI, etc., which define projects' success.
In contrast, for (corporate) startups, especially in the beginning, KPIs are often based on milestones, such as first paying customers, positive feedback, and learnings. Corporates are not used to such KPIs and resist to accept them.
However, MOBIKO found a way around this issue by being in close contact with important stakeholders, having regular update meetings, and implementing a goal-oriented collaboration while still reporting classic SaaS KPIs to keep track of the business case in the later phases.
3. You hold on to the corporate too tightly and for too long
Since the agility and speed of a startup do not match with the big structures and complex processes of a corporate, it is of great importance for a corporate startup to step away from process conformity and rather choose the "just do it" approach.
In the case of MOBIKO, they have understood soon enough that they would lose a lot of time and resources by holding onto the AUDI AG structures. As Nicola Büsse says "we were fortunate not to be tied to Audi's infrastructure and to be able to decide for ourselves how to approach things, which helped us define our own pace, independent of the mother company."
What many often overestimate is the synergies between corporates and (corporate) startups: "The synergies between large corporations and startups are often an illusion - at least at the beginning of such journey", as Nicola Büsse mentions. When thinking of such cooperation, benefits that pop up in one's head are the sharing of corporate structures or even providing a list of possible customers.
However, especially in radical innovation projects, the customer segments are so different that it just does not make sense in most cases. Even in a mobility startup such as MOBIKO, which was born within one of the world's leading car manufacturers, there were at first little synergies related to the customers. Also, the internal support was just of methodological nature. This does not mean that a (corporate) startup cannot benefit from such a cooperation, but sometimes it makes more sense for a startup to go its own way without being too dependent on the corporate's support.
Once processes are established, and the startup becomes more mature, synergies will play a way more important role than in the beginning as the startup and mother company become more alike. Thus, they can benefit from the support and legacy of each other.
4. You only focus on the front funnel
What happens when an idea is successful? Many corporates are investing much time into the ideation and the process to come up with a great idea, and at the same time, forget to think about the process until the end: "Corporates are mostly creating innovation processes that focus on the front funnel, ideation, and tend to neglect the thought of an idea being successful. If you don't think beyond the front funnel, you lose credibility and speed", says Nicola.
Typically, intrapreneurship programs are focused on generating many different ideas and mostly end with a proof of concept. What happens after the proof of concept is often not very clear and unstructured, leading to loss of speed and motivation. Hence, when pursuing radical new business ideas, corporates need to evaluate various strategies at the start of every innovation endeavor, ranging from integration into a business unit to a spin-in or even spin-off.
To successfully transform your idea into a sustainable business that is working as a standalone spinoff, it takes not only a great project execution but a whole lot of work around the project from the very beginning.
If you are curious about more insights from interesting corporate spinoffs, stay tuned for our next blog post!