Business Strategy

Why a startup mentality may not help big brands

Why a startup mentality may not help big brands

Large brands are increasingly turning to smaller ones for inspiration. These brands are hoping that by learning and adopting a startup mentality, they can fend off disruption and continue to lead their industry.

In many ways, copying or even acquiring smaller players makes sense for larger brands. As digital natives, younger startups know how to use new technology to drive growth and can teach established players a new thing or two. But while learning from the small guys may yield some good ideas for improving the customer experience (CX), what works for these startups may not always work for the big players.

Established companies must be mindful of industry trends, but these bigger players must tread lightly. Blindly following what works for other companies could be a recipe for disaster.

Here’s a look at examples of big brands learning from the little guys, and the lessons all companies can learn from this trend.

Thinking small to get bigger

Nike has heavily invested in digital transformation and recently adopted a direct-to-consumer approach rather than just relying on retail partners. The digital age has made this direct approach possible—Nike is aiming “to be more personal at scale.” The apparel retail brand acquired a consumer data and analytics company so it can use data to treat every customer as a unique individual.

Large food companies such as Cargill, meanwhile, have been establishing their own accelerators and incubators. The goal is to acquire insight into emerging brands and their operations.

Similarly, retailers such as Walmart and Nordstrom are tapping the insight of smaller companies by buying them. Nordstrom has bought retail tech startups BevyUp and MessageYes as part of its strategy of forging customer connections. On the other hand, Walmart’s acquisitions allows it to pursue a “specialist positioning” rather than going after the masses.

The efforts of Nike, Cargill, Nordstrom and Walmart have yet to be fully proven, but there’s already evidence that buying a smaller upstart won’t always work. For example, HBC bought Gilt Group to help it improve online sales, but sold it again to focus on its core business of running department stores.

4 questions to answer

Copying or buying a smaller player to keep up on market trends and fending off disruption is never a silver bullet. It’s important to understand how drawing inspiration from a startup will help improve you CX.

To truly take advantage of having a startup mentality, large companies need to ask the right questions. If you’re an insight-driven company already, you’ll yield answers that can guide you to the right decisions:

1. Do you really have the same customers? You may sell similar products, but the people buying them may be different. That startup you’re eyeing may be serving an entirely different demographic.

2. What do your own customers want? Just because people want something from an upstart that’s disrupting your business, doesn’t mean they will buy it from you. Be sure to test new strategies and “fail fast” so you can gather insight. At the same time, be careful not to alienate your existing customers in the process. It’s important to understand why your customers are buying from you and why they are buying from a startup.


“Success stories are meaningless unless your business is identical to the one you’re copying.”


3. How do you know the same strategy will work for you? Success stories are meaningless unless your business is identical to the one you’re copying, and even then, the “why” is critical—you need to validate ideas with your customers. If you’re not testing, you’ll never know unless you learn the hard way by blindly implementing another company’s strategies.

4. What is it that these startups are doing that make them successful? Startups don’t just succeed by selling what people want. Disrupters generally do something different, and you need visibility into those activities so you can effectively apply startup strategies to your own business.

Startups are also able to be more agile because they’re smaller. There’s little distance between having an idea and being able to act on it. A large, established brand must break down barriers that come from bureaucracy and inertia to effectively apply startup thinking.

All companies should be customer obsessed

Regardless of the strategy for responding to disruption, large retail brands must confirm their assumptions with their own customers, no matter what the little players are doing.

Ultimately, disruptive startups are obsessed with CX, so adopting a startup mentality means adopting a customer-obsessed culture. It’s not enough to acquire smaller companies or follow their lead. You need to shift the entire organization to one that solves buyer pain points based on the feedback and insight of customers.

Considering establishing a direct-to-consumer channel? Learn a data-driven approach to your strategy

 



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