They play around in ball pits and brainstorm a string of bright ideas. Then they translate those ideas into algorithms overnight and create massive economics of scale while keeping costs in check.
These shooting-star companies are hierarchy free, but that doesn’t stop their founders becoming billionaires at the drop of a hat. They pair their success with a leisurely lifestyle, drinking beer with their startup colleagues alongside Berlin’s Spree River.
Many bosses at established companies cling onto such stereotypes of startups in Berlin. The traditional managers, worn down by shareholder votes, a prevailing silo mentality and corporate rigidity, view startups as conquerors of a brave new digital world.
Startups represent a beacon of hope for these protagonists of the “old economy”. Steve Jobs and Elon Musk are the poster boys for this sparkling new age.
Startups represent a beacon of hope for protagonists of the "old economy"...The idealized image of startups, however, is nonsense.
Armies of business executives are making the pilgrimage to digital hubs like Berlin, Tel Aviv and Silicon Valley, hoping to be infected by the famed agility of the tech newcomers.
When they are back in their corporate offices, the executives’ grinding of teeth gets louder. The buzzword ‘disruption’ is making the rounds, as the established business community accuses young, digital entrepreneurs of waging an all-out war on classic business models in publishing, logistics and machine building.
The principles of the digital economy – access not ownership, sharing knowledge instead of protecting it– are seen as sewing the seeds of a paradigm shift.
They’re right about the paradigm shift. Digitization is shaking up all business models. The idealized image of startups, however, is nonsense.
A study by the Lead think tank in Berlin, the University of St. Gallen in Switzerland and Company Companions busts the myths.
Instead of playing in ball pits, successful startups are usually forced by their investors to include structures and processes in their organizations. Economies of scale can only be achieved by standardizing procedures.
In reality, startups are constantly short of cash and often lag behind projected results.
Instead of creative experimentation, they are dominated by tough supervision and numerical targets. Rigid leadership is typical, rather than grassroots democracy. Founders are left trying to balance the constraint of fixed structures and their desire to preserve their original agility.
The harsh reality in Berlin’s new entrepreneurial hotspots is that very few manage to prevail amid the tough fight for talent and 20-hour days.
Still, there are important lessons established companies can learn. First, it is key to accept uncertainty as a day-to-day reality.
The mantra of achieving calm within a company is outdated. Instead, firms need to take things one step at a time and work in tamdem with their customers, also during the early stages of making a new product.
It is unrealistic to wait and take a perfect finished product to the market, given rapidly changing customer needs. Cooperation is key. Rigid hierarchies, organizational charts and job descriptions are relics of a bygone era.
At the same time, startups aren’t that different from anyone else. Instead of projecting aspirations on to them and running after myths, we should sit back, observe and learn.
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