The big businesses learning how to think small
- 14 October 2011
- From the section Business
"We're the biggest start-up on the planet."
Of the many quotes recited in the days following the untimely death of Steve Jobs, it is perhaps that one, told to a conference in 2008, that resonates most with the many businesses admirable of Apple's success.
His insistence on "no committees" and talking to everyone at least once a week was, he said, enough to keep Apple focused, efficient and successful.
For big corporations, with their vast resources and bewildering bureaucracy, operating with the attitude of a technology start-up is at once terrifying and yet also a distant dream.
"Start-ups try, they fail, they adapt, they move on. They try, they fail, they adapt, they move on," muses Ian Ellington, general manager of Walker's Crisps, part of global giant PepsiCo.
"In our marketing, we tend to make a campaign, put it out there and hope it works."
It's a candid admission, but one which goes some way to explaining why in 2010, for the first time in 23 years, Pepsi opted to ditch their advertising slot during the Superbowl.
Instead, and to the great surprise of many, they splashed out on a $20m social media campaign.
Gone were the days when simply buying up big names in pop music was enough to kick start a promotion.
Now it was all about utilising small, nimble companies to glean expertise the likes of PepsiCo could never hope to produce from within.
It's a strategy the company has continued with the announcement of the PepsiCo10 - a group of UK and European technology start-ups that will be receiving financial help in return for working with PepsiCo on "innovative marketing".
"The genesis of it was: look, this landscape is shifting very very quickly," Mr Ellington told the BBC.
"We're kind of living in a little bit of a bubble in a big corporation.
"I think at its simplest the idea was how can we get ourselves really at the leading edge of some of those new technology ideas as an organisation?"
While the scheme has its obvious commercial benefits, Mr Ellington says the small-scale financial help also gives them chance to let some of the start-up culture rub off onto their own teams.
"We've got lots of folks in our marketing team who I think are really going to enjoy working with these start-up businesses because they do come at the world from a different place.
"One of the things I hope it will do is just breed a much more entrepreneurial spirit and mood in our marketing.
"It's infectious. It sets your mind spinning - they're people who just operate in a completely different way, and think in a totally different way."
Crucially, however, Pepsi are not buying the companies, or even acquiring a stake. To do so has proven fatal for start-ups in the past, causing great losses for the acquirers.
Shikhar Ghosh, a senior lecturer at Harvard Business School, is not surprised to see the likes of PepsiCo and other large retail companies beginning to lean towards the start-up way of thinking.
He does, however, offer a grave warning to any business haphazardly dipping their toes in acquisitions.
"They think that the company will continue to innovate in its old form as part of their big bureaucratic organisation," Mr Ghosh said.
"When they do that, they usually kill the very thing they've bought. They kill the spark in the company."
Bureaucracy aside, another killer of motivation can simply be the fact the once-impoverished founders are now multimillionaires.
"In a traditional big company you incentivise people by giving them promotions, by giving them a 7% raise instead of a 5% raise, by giving them a slightly higher bonus.
"All of these levels that you have become pretty much useless when someone's just made a big amount of money on day one and is probably richer by an order of magnitude than their managers."
That was certainly true for Joshua Schachter, the founder of social bookmarking site Delicious. He sold the site to Yahoo for reportedly about $10-$15 million.
He told the BBC that running his start-up from within Yahoo! was "suffocating".
"I'd make a decision and my boss would decide he didn't like it and just block me.
"Start-ups, and innovation in general, are a way to take risk.
"Middle management doesn't like risk and typically fails to provide the right environment for the start-up to thrive."
Delicious has since been sold by Yahoo! and relaunched by AVOS, a company founded by Chad Hurley and Steve Chen - the pair behind YouTube.
Do it yourself
Case studies like Delicious do little to deter corporations from looking to acquire promising start-ups. Cisco, for example, are considered masters of the art - with specific board-level staff specialising in the intricacies of taking start-ups on board.
Yet away from attempting acquisitions and PepsiCo-style mentoring is another emerging tactic: do it yourself.
Aviva, one of the world's biggest insurance companies, is experimenting with QuoteMeHappy.com - a car insurance site which draws heavily on the style of the likes of Innocent smoothies and O2's off-shoot network GiffGaff.
Aside from allowing Aviva to resurrect an old advertising slogan, the QuoteMeHappy launch is a rolling experiment in recreating the start-up "feel" within a multinational.
"We've got a different attitude," says QuoteMeHappy managing director Marco Distefano.
"Effectively we have one floor, we've got a customer services team, we've got our retail and trading element, and our operations element which includes technology - and that's all together."
In addition, Mr Distefano's team is based in a building away from the rest of Aviva, giving it the breathing room, they say, to remain focused and save time.
"It removes all of the layers. We still need to do compliance, but what we don't need to do is when we're making decisions as a team is go through that hierarchy."
Whichever route these big companies opt to take, all seem to revolve around a single aspiration - the ability to take risks and adapt quickly.
"You can try 10 different approaches and see which one works the best," concludes PepsiCo's Mr Ellington.
"And then build on that, rather than put all of your faith and hope in one 30-second TV ad that you've spent months making.
"Five years ago we weren't thinking in that way at all. It's a totally different mindset."