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Graham says: There is no doubt that the COVID-19 pandemic is causing business disruption, the like of which has not been seen in generations. For some fortunate innovators these disruptions have been positive. For example, telemedicine has advanced years in just 12 months. But for most sectors of the economy the challenges and upheaval brought by COVID-19 are very real.
That said, companies can use this time of accelerated change to experiment with new, more effective ways of doing business, turning market difficulty into opportunity. I’d like to focus on one aspect of our approach that is proving particularly fruitful; encouraging large corporates to explore behaviours and tools commonly used by start-ups.
A start-up business is usually characterised as being short of either time or cash. But the fact that small, new firms are normally in existential danger can also be a superpower. They have a fresh, agile and innovative approach to getting things done which is often the envy of larger organisations.
I joined CDP after many years working for major corporations, including one of the world’s largest consumer goods companies and one of the world’s largest pharma companies. These were powerful, profitable businesses with great products, but I saw at first hand how difficult it is for these companies to adapt to changing market conditions, and to mimic the ethos, speed and drive of a start-up. Let’s take the example of the men’s grooming sector. It may seem quite astonishing that the world’s giant FMCG companies have been buying up punchy start-ups with razor subscription models. How could these commercial titans, with their huge R&D budgets, not have launched and grown subscription razors-by-post businesses themselves?
My feeling is they were hampered by their size, ethos and different risk model, meaning they preferred to spend billions on acquisitions rather than incubating such services themselves. But can global giants have it all, enjoying the fruits of their size and power and the agility of the start-up?
Much as major corporations want to use the most nimble and effective approaches to market research, their governance structures and sources of data can mean that long established processes hold sway. These processes work well, in that they generate useful and accurate insights, leading to effective business decisions, but they will be slow. There’s also the issue of what success looks like for employees. When you know you have line managers to answer to and hope to climb the career ladder you have a different set of incentives to those running start-ups, who will be more directly concerned with the success of the venture. Noam Bardin, the CEO of Waze, saw his business acquired by Google and stayed for several years afterwards. He writes fascinatingly about how incentives differ in a start-up compared to a huge corporate.
An archetypal approach to corporate market research would be to create a focus group of 20 people, who are then asked what they think of a prototype product, its branding and packaging. By contrast, start-ups are often constrained by cost but freed by their imagination. Why gather a focus group of 20 people when you could work with thousands of people online? Here at CDP we’ve applied this approach to reach out in a highly-targeted way to very specific consumer groups, often determined by their (young) age. This means that instead of creating prototype products and asking a few people in the relevant consumer group for their views, we can opt instead to do our research via social media. Before creating any prototype and before any discussion of branding we can set up a campaign appealing to specific consumers on a range of social media platforms for help and expect to receive seriously useful insights, such as the most desirable properties of a particular consumer product. This type of campaign can reach many more consumers than focus groups, typically in the hundreds of thousands, with thousands of active engagements.
Once a prototype is ready for trial, how do you get consumers to try it? Start-ups are used to putting their products in front of customers quickly, with a minimum viable product, before embracing client feedback with equal speed. In the world of corporate product launches, things rarely happen so quickly. Our own approach to this challenge is to offer our clients a low-cost, fast-turnaround method of trialling products. We create rapid prototypes and can ship them to consumer homes directly from our design studios within hours of production. We can then gather and analyse online responses from the consumers, sometimes even that same day. This agile process ensures near instant access to a diverse set of consumers and their valuable feedback.
Another approach we favour, which draws heavily from the start-up world, is to create online communities via social media. These can be canvassed to react to brand information or products provided by our clients. The market intelligence they generate is hugely useful. Whether you are looking to explore a new idea or refine a product, online communities are a great way for companies to learn, adapt and if necessary, pivot rapidly. Sometimes we work through YouTube advertising, Facebook groups, Reddit and even online patient groups. Of course it’s vital that these communities are built with transparency – motivations must be clear – but in the digital age, communities of interest and consumer advocacy are more important than ever.
The use of external resources to keep development programmes moving forward is something that start-ups do all the time. This is primarily because they simply don’t have the scale, expertise or resources to do the work themselves. But such an approach can have many benefits when adopted by larger firms whose first instinct might be to keep a project in-house.
By their nature, start-ups adapt quickly to changes in their environment, look for solutions and are not limited by previous ways of working. They are prepared, as the saying goes, to ‘sell a little, learn a lot’. Huge corporations may be able to afford such an approach, but (perfectly reasonably) they will have layers of decision making that are used to the need to sell at scale and profitably. As we emerge from the pandemic, I’m convinced that start-ups will secure an advantage as they test, learn and optimise for the new commercial environment. Corporates that can embrace this fast-outsourcing approach will learn quickly and can then use their superior resources to scale proven product concepts.
Over many years we’ve helped client companies to react to disruption in their markets by investing in smaller start-ups. We’ve acted as a discrete third party, approaching start-up companies, preserving anonymity and carrying out due diligence on behalf of larger client companies. A further step is in partnering with us to launch start-up companies that explore specific ideas. In some cases, our involvement with clients has been such that we’ve had CDP staffers – expert commercial or technical minds – on the board of new start-ups created in this way.
A particular challenge that giant corporations face in today’s highly digitised world is how to offer the same depth of emotional connection as that offered by smaller start-up companies. Large firms are very good at rationalising products to drive scale and efficiencies, but this doesn’t always inspire consumer loyalty towards a brand.
There is so much more to consumer businesses than simply offering a product to be consumed. With a start-up mindset, we help our larger clients to connect with their consumers on a one-to-one, personal basis. Connecting in this way, especially digitally, can demonstrate a genuine desire for your products to fit into their lives and enable new levels of personalisation.
As Winston Churchill famously said, “never let a good crisis go to waste”. The current disruption is an opportunity for all companies to take stock and consider what they can do differently. For our global multinational clients, this is a time where they can exert the power of their scale and with some smart strategic decision making, embrace the best elements of start-up agility.
North America Business Development Leader
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