The difference between a successful start-up and a legacy company: intense customer focus

I work with several traditional companies that are all adapting to the changing (digital) landscape at varying speeds. What I see more often than not, is that it is the company culture rather than digital prowess, that can make or break this process.

The world is your competition

Before we can talk about the technological solutions to drive a company forward, we need to appreciate the wider landscape.

With the UN now considering the internet as a human right, the days of only competing in isolation are limited. New products and services keep popping up all over and, more to the point, it no longer necessarily matters whether they are in the same town as the customer or not. This means that in some industries, you are literally in competition with the rest of the world.

What’s even more worrying is that it is your biggest customers that can be the least loyal, as a Harvard Business School research found. An interesting conclusion from this research states that “… managers should avoid service complacency—or the tendency to rely on pre-existing service advantages—and invest more in proactively increasing relative service levels when they’re faced with even the potential threat of increased service competition”.

Start-up vs. legacy

It was something as casual as a conversation with a taxi driver that made me realise that the main difference between a start-up and a legacy organisation is not the age difference of staff, level of technological maturity, spirit of innovation or any other myriad of things that consultancies would have you believe can make your company more successful than the next one. It is something far simpler – customer focus.

A start-up company by definition is still in search of the perfect product-market fit (an excellent description of this process can be found here). How you successfully find that is identifying a customer need that is painful enough for them to pay for it. The best way to do this? Talking to customers and potential customers. A start-up literally lives or dies based on whether their service is a sufficient improvement on that of the incumbent supplier.

This is not the case for an established business. As the now-famous saying goes “nobody ever got fired for buying IBM”. This may now be slightly out of date, however it perfectly encapsulates the reluctance of decision-makers to take risks with new products and services. This is why so many traditional companies are still able to make decent profits and plod along nicely, sleep-walking into the abyss.

Tech will save us

As I may have alluded to previously, many companies place a large amount of faith in new technologies being able to revolutionise their company and suddenly give them the edge over the competition from both new and old companies.

Whilst there is absolutely no doubt that implementing technologies, like machine learning, can bring an edge to a company when properly implemented, it is often the more established technologies – when implemented in new ways – that can make a real difference.

Just look at Estonia’s e-government and the resulting e-residency programme. None of this technology is anything revolutionary. They used tried and tested software in common business use to do something new.

So, it’s not the newness of technology that matters, it’s what you do with it. And what you do with it largely depends on what you expect to be able to do with it.

Think like a start-up

One of the key differences I see when running workshops with start-ups and legacy organisations is the willingness to explore ideas with an open mind. Regardless of the age of the people involved in a start-up, they tend to be a lot more open to questioning “the way we have always done things” and even revisiting past ideas. This is rarely the case in established companies where quite often, an idea will be raised only to be shut down with “we tried that in [insert year/project/ department/ location] and it didn’t work”. Once we get past that blockage, magic happens.

Where most successful start-ups focus on solving a problem through technology they’re developing or using, traditional companies often focus very intensely on implementing a shiny new technology (the current favourite being AI). The organisation involved is usually nowhere near ready for this, despite frequently being more digitally advanced than they imagine themselves to be. Identifying a problem and then letting that guide the technology selection would be a far better course of action.

To truly capture a market, a new company needs to concisely establish their key offering and their niche; you cannot be everything to everyone. Established companies have gone through this process already and diversified, which makes perfect sense until you start to implement digital solutions. Many companies waste a lot of time, resource and money on a huge number of concurrent digital transformation projects (a client once counted over 100 projects of varying sizes). In fact, what tends to be far more successful is deciding on one or two key projects and seeing these through, before starting new ones.

In summary – start small, be effective, and solve the most painful customer issue first.

This article first appeared in Fourth Source in October 2018.