With at least 1500 self-declared start-ups currently operating in Australia – and a spate of recent global success stories like Atlassian, Freelancer, and OzForex – larger enterprises are taking notice of their up-and-coming counterparts like never before. Many big businesses are proclaiming their intent to “disrupt like a start-up”; some are taking it further with seed funds, incubators, and employee stints in co-working hubs. But what does disrupting like a start-up really mean? And can traditional organisations really do it?
Recently IBM, together with start-up industry partners and incubators, decided to try and answer those questions through a technology lens: namely, looking at the role of cloud computing in start-ups. Most of today’s start-ups are “born in the cloud” – they’ve never had a fixed IT infrastructure, and never will. Many businesses have proven so disruptive precisely because of the cloud: according to Inventus Capital Partners, 1 in 5 IPOs last year were made by “software-as-a-service” (read: cloud-based) companies. We’re extremely interested in figuring out how important being “born in the cloud” is to start-up success – and whether we can translate these birthright attributes to bigger enterprises, including our own.
In compiling our Born on the Cloud whitepaper, we talked to a range of entrepreneurs, developers and investors to define the most important attributes of being a cloud-born start-up. Here are five which larger businesses would do well to emulate:
Just do it
All the start-ups we spoke to agreed that cloud services and platforms were their default choice when building their businesses. For many start-ups, the resulting ability to immediately sell to global and niche markets has proven critical to becoming financially viable and profitable. “If we’ve got an interesting idea,” argues Leon Gouletsas of Indiegogo, “it might (only) resonate with the smallest of niches on the other side of the planet, but we can reach out and connect to them.”
That’s a far cry from many enterprises which are still mulling over the potential risks of cloud. As Darcy Naunton, the founder of co-working space York Butter Factory, puts it: “Cloud removes the need for IT to be a core competency within a business, and encourages more risk-taking because less time and money is at stake.”
Be flexible, and ready to fail
Attitude towards risk is one of the biggest differences we see between traditional organisations and start-ups. Enterprises see failure as unacceptable at worst, and undesirable at best; start-ups take advantage of it to improve their products, services, and business models. To do this, being able to design through rapid iteration is essential. But while some start-ups highlighted the cloud’s role in providing design and developmental flexibility, even more emphasised the importance of a nimble mindset. “You’re more open to taking risks because everything is like an experiment,” says Zezan Tam of PowerPointProductivity. “If your objective is to experiment, you don’t fail if the outcome of the experiment fails.”
Go direct to the problem
The other common factor we noticed in “born in the cloud” start-ups is having clarity of objective: they could all clearly outline the problem, challenge, or market failure they were trying to solve. Apart from putting failure into context, this also underpins the entrepreneurial disdain for convention – when you’re bootstrapping for funds and time, you can’t afford to waste either with abiding by business norms. “A lot of business models in the cloud world are disruptive because they are able to circumvent certain regulatory constraints,” says Ben Wortley of Platformer.
Make outsourcing your lifeblood
The cloud was once known as “distributed computing”. For today’s fast-growing start-ups, it’s all about “distributed everything”: outsourcing tasks to whoever can do them best and cheapest, as well as sharing expertise and skills amongst incredibly tight peer networks. “People like me are taking the credit for all the hard work of all these service providers, by basically going and putting a front out there,” jokes Duncan MacNeil of Cartesian Creative. Rather than trying to do all things, larger enterprises need to take a more fluid and trusting approach to outsourcing – focusing on results instead of control.
Give the customer a say
Even more than simply delivering exemplary service, start-ups increasingly involve their customers in co-creating their products and offerings. The cloud helps because it makes product iterations faster and easier to roll out, but putting trust in customers is a major – and necessary – leap for many bigger enterprises. “Not enough big companies embrace user groups and communities to gather on-the-ground feedback about their products,” says Gouletsas. “I don't care whether you're coding all day or whether you're working in marketing or finance - go and speak to real customers.” The same applies for employees. “Success is defined by user satisfaction, not meeting KPIs,” says Leslie Barry of Thoughtworks.
If anything, it’s a mix of cloud and its culture – with values like flexibility, scalability, and a focus on service levels – that are driving the success of Australia’s start-ups. And values can be cultivated in any business environment. Larger enterprises can start with small changes (like redefining KPIs, or staggered cloud rollouts), or by creating “skunk-works” outfits with different cultures and technology to their parents (UBank, which belongs to NAB, is a great example of this).
The head of Bendigo Bank’s Customer Led Connections team Andrew Cairns says Bendigo and Adelaide Bank is working with IBM to investigate ways of using BOTC processes to provide better outcomes to the bank’s customers. “What we want to do is bring together our assets for the betterment of the customer - to provide them with more information and more knowledge and more value beyond just the product, and to provide a connection which puts them in power over the knowledge that they give us.” The Customer Led Connections team has been created to visualise problems and opportunities and is tasked with taking ideas and creating rapid prototypes for testing. These ideas are then fed into the delivery arms of the business.
According to Gouletsas of Indiegogo, operating like a start-up means saying “I create” instead of “I do”. That focus on problem-solving is what’s driving start-ups to disrupt almost every industry in the world. It’s one which enterprises, cloud-born or otherwise, will need to adopt if they’re to innovate, compete and thrive in today’s marketplace.
David Mast is the head of Asia Pacific Sales of IBM's new Platform as a Service, Bluemix