As more and more companies face disruption from globalization, new technology, and startups that have more capital than the incumbents, the continuing cry from Wall Street investors is, “Why can’t companies be as innovative as startups?”
Why You Can’t Just Tell a Company “Be More Like a Startup”
Sometimes, being like a startup means breaking the law.
June 19, 2017
Summary.
As more and more companies face disruption, the continuing cry from Wall Street investors is, “Why can’t companies be as innovative as startups?” Here’s one reason why: Startups can do anything. Companies can only do what’s legal. One of the unheralded advantages of a startup is what at first glance appears to be its weakness: Initially, a startup has no business model and no market share to defend. Its employees and investors don’t have to worry about upsetting existing customers, partners, or distribution channels. Yet those very weaknesses give startups an overwhelming advantage in innovation. Startups can try any idea and any business model — even those that on the surface are patently illegal. In contrast, companies are constrained by local, state, and federal laws and regulations. The risk of breaking laws can result in large penalties and shareholder lawsuits. The Justice Department and state attorneys general find large companies attractive targets. Yet trying to stay within the legal lines, companies paint themselves into a corner by creating their own internal barriers to innovation. Instead of innovating, most industries being disrupted turn to litigation.