How to Nurture Startup Creators

LARGE CORPORATIONS WITH CONSOLIDATED INTERNATIONAL BUSINESS MAINTAIN THEIR POSITIONS WITH ORGANIZATION, NOT ENTREPRENEURSHIP. TO SEEK NEW OPPORTUNITIES - AND AVOID THE RED BULL DILEMMA - THEY MUST FIND ENTREPRENEURS AMONG THEIR EMPLOYEES: HERE'S A HOW-TO IN THREE STEPS

In 1982 Dietrich Mateschitz, then marketing director for a toothpaste manufacturer, took on drinking a local energy drink to fight fatigue during his frequent trips to Thailand. The drink was called Krating Daeng, which means “red bull” in Thai.

Observing how popular the product was in its domestic market, Mateschitz decided to try to market the product in Europe. He signed an agreement with Chaleo Yoovidhya, founder of TC Pharmaceuticals, the company that had launched Krating Daeng in Thailand in 1976, and invested all of his savings into the launch of Red Bull in Europe. As a carbonated drink with a modified taste with respect to the original, Red Bull was launched in Austria in 1987 and today it is global market leader in the energy drinks industry.

In 2008 CocaCola decided to launch its own energy drink (Monster), and in 2009 Pepsi followed suit by signing a distribution contract for a similar drink called Rockstar Energy.

One could wonder how strong brands like CocaCola and Pepsi, with their virtually limitless production capacity and major resources invested in business intelligence failed to see this emerging market, and are now trailing behind by at least a decade with respect to Mateschitz’s market coup.

This highlights the fact that established corporations are seldom very entrepreneurial. Entrepreneurship is the process by which value is created by seeking business opportunities.

Three conditions must be fulfilled for individuals and organizations to pursue entrepreneurial activities: the business opportunity must be located; resources must be combined to build an organization able to extract value from that opportunity; the venture must be managed in a way that limits the risk and uncertainty inherent in the launch of any new business initiative.

Startup creators (like Mateschitz) have shown a tested ability in managing the three steps of the process and have done it in a way that differs from the tools and procedures used by big companies. Experienced entrepreneurs prefer a more experimental, less planned, quicker and more flexible process. These creators of startups are characterized by stronger determination, passion, perseverance, and determination with respect to managers and employees.

In order for large corporations to become more entrepreneurial, they must involve managers and employees in a concerted effort, because entrepreneurship needs entrepreneurs. In order to do so, companies must focus on three areas: leadership and strategy; organizational structures; management systems for entrepreneurial projects.

In strategy, innovation metrics are important, as well as portfolio planning with respect to entrepreneurial initiatives. Interfunctionality and flat, informal structures are crucial in organization. Budgeting processes and stage-gate selection based on performance and market feedback are essential in project management.

In particular, a research study conducted on a sample of 190 managers followed for two years in a row has shown how these churn out innovative ideas fairly frequently (on average, 11 business ideas per year each), but 25% of them don’t even reach the paper stage. The main motivation that seems to drive startup creators is not economic reward or career advancement, but the possibility of ownership, i.e. to remain involved in the launch and development of the new venture.

by Mikkel Draebye, SDA Bocconi School of Management
Translated by Alex Foti