Can we modularize/specialize the startup management processes?

By Kotaro Sasamoto

How well would lean startup management practices apply to new business development in big corporations? Well, it is said that setting an independent division with different business processes, performance measure, incentive systems and culture should be one of the best ways for big corporations to handle new ventures (Yes, I took BSSE and read “Innovation’s Solution”!). However, I feel kind of cheated with this approach. It seems like “running a new business in the same way that all the other small startups do, but with the name of the parent big company on it.” In order to truly evaluate the applicability of startup management practices to big corporation, it is necessary to consider the unique characteristics of big corporations, which I think are modularization and specialization of business process, and to examine how well we could leverage these characteristics to the startup management practices.

So, the question should be “can big companies effectively modularize and specialize the lean startup management processes?” If each process requires different type of expertise and performance measure, which means it fit to modularization and specialization, the answer would be “yes.” Let’s examine the startup management processes one by one below.

1. Technology/Market trend information gathering

This division gathers technology/market trend information, filters/structures gathered information, and provides ready-to-cook information to the next division. Analysts are the best fit to this division. Performance measure should be based on the quality of information they provide (insightfulness, conciseness, action-oriented, etc.).

2. Ideation

This division explores wild ideas based on the information provided, without considering technological feasibility or business viability, and passes the rough product ideas to the next division. “Creative” people who are good at coming up with random ideas are candidates for this division. Performance measure should be based on the quality of ideas, but this time it should be on team-based. Collaborative environment, rather than competitive ones, better fits to creativity.

3. Business model development

After filtering the rough ideas, this division develops polished CVP, TOM, GTM strategy and profit formula of new ventures. MBA graduates are the best fits to this division. Performance measure should be based on the number of business models that are accepted by the next division and the potential financial value from them.

4. MVP testing/PMF iteration

This division develops MVP, conducts the variety of customer tests, and polishes the business models based on the feedbacks. This process requires solid project managers rather than creative/entrepreneurial people. Performance measure should be based on the number of products they pass to the next division and how efficiently they conduct testing/iteration.

5. Scaling with marketing/sales strategy and partnership

This division handles scaling through effective marketing/sales strategy and developing partnership with others. Traditional marketing/sales/business development managers are suitable for this division. Performance measure should be similar to those of traditional corporate divisions and thus based on sales, profit, number of new customers, etc.

Well, since each division seems to require different types of talents and performance measures, is the answer “yes” to the question above? There are two more things that big corporations have to care about for successful mobilization and specialization of startup processes.

First, since a lot of speedy iterations are inherently required in the new venture development, all the processes should be interconnected smoothly so that they are responsive enough to each other. Setting up the inter-divisional evaluation system, in which the division of post process, as a customer, evaluates the performance of the division of previous process, would be one of the solutions. This chain-evaluation system strengthens the coordination between divisions, and enhances the speed and quality of iteration.

Second, big corporations should assign “the owner,” who oversees overall processes for each new venture. In order for a new venture to fly in the uncertain and rapid changing environment, it must rely on outside resources such as business partners, early adaptors, investors/advisors, media, etc. And to develop the solid and deep relationship with these stakeholders, a new venture must have a person with personality and passion, instead of a division. People communicate with people, not division or company, and this personal relationship really matters in new venture development.

Through successful modularization and specialization described above, I believe big corporations can not only apply startup management practices to their new business development, but also achieve higher-level efficiency and effectiveness in the processes.