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What I Learnt Leading an Internal Startup

Contributer@tammythebhive-com-au

I had no idea what I was getting myself into when I launched a start-up inside a large corporate organisation. I was working as the Global Managing Director for the AAT Kings Group, one of The Travel Corporation’s major brands, when our consumer research came back showing a strong customer segment that wanted more active, challenging, adventurous and flexible holidays.

So, a new brand was born.

The Travel Corporation backed and supported this – their first start-up venture – when traditionally they have predominately and very successfully acquired, expanded and grown their core businesses. We launched Inspiring Journeys, a boutique experiential small group touring business that continues to thrive today. Starting up a business with a clean canvas is an amazing experience and a huge opportunity, but boy, we learnt some valuable lessons. What I would’ve given to know more about the ‘start-up way’. While we made some rookie mistakes and were up against it, we certainly celebrated the success of this business as it grew and prospered.

Our rookie errors

  • The program we released was too big and that put pressure on marketing and load factors.
  • We were sharing and competing for internal resources.
  • We didn’t adopt the build, measure and learn feedback loop that is the central principle of lean start-up.

The biggest internal corporate lessons

  1. Culture is the biggest challenge, particularly within a large rigid corporation, that is predominately risk-averse. We established a strong culture from thebeginning for the brand.
  1. The start-up was treated the same as everyone else. We were measured in the same manner as established businesses – submitting standard management reporting and financials. The customer metrics were firing but how we were measured was based on traditional expectations.
  2. Cooperation vs competition. Gaining support from the internal organisation was difficult. Some felt any investment dollars should be spent on existingbusinesses so building support for the start-up was a necessary but uphill battle.
  3. The battle for internal resources. This is not something to be underestimated as it goes right to the core of culture. Passionate teams want to protectresources to help them deliver on their KPIs and grow the business, while the start-up venture needs to hustle for resources.
  4. Shared services and capabilities are even more challenging as the start-up needs to fall in line for functions that are shared within the organisation. In an organisation that is a house of brands, it is super competitive to get access to these services, especially if increasing shared services is not an option.
  5. Headcount within the established corporate organisation is expensive andincurs the full cost of seats compared to an external start-up. This burns through cash in the early stages.
  6. Breaking the category requires a different approach entirely and that waslimited by legacy systems, approaches and cultures.
  7. Investment returns need a runway for the start-up to generate returns and get traction.
  8. Set realistic expectations on growth, budgets and timings to make it happen.

The biggest internal corporate lessons

  1. Culture is the biggest challenge, particularly within a large rigid corporation, that is predominately risk-averse. We established a strong culture from thebeginning for the brand.
  2. The start-up was treated the same as everyone else. We were measured in the same manner as established businesses – submitting standard management reporting and financials. The customer metrics were firing but how we were measured was based on traditional expectations.
  3. Cooperation vs competition. Gaining support from the internal organisation was difficult. Some felt any investment dollars should be spent on existingbusinesses so building support for the start-up was a necessary but uphill battle.
  4. The battle for internal resources. This is not something to be underestimated as it goes right to the core of culture. Passionate teams want to protectresources to help them deliver on their KPIs and grow the business, while the start-up venture needs to hustle for resources.
  5. Shared services and capabilities are even more challenging as the start-up needs to fall in line for functions that are shared within the organisation. In an organisation that is a house of brands, it is super competitive to get access to these services, especially if increasing shared services is not an option.
  6. Headcount within the established corporate organisation is expensive andincurs the full cost of seats compared to an external start-up. This burns through cash in the early stages.
  7. Breaking the category requires a different approach entirely and that waslimited by legacy systems, approaches and cultures.
  8. Investment returns need a runway for the start-up to generate returns and get traction.
  9. Set realistic expectations on growth, budgets and timings to make it happen.

My observations of start-ups

In the last two years I have joined an accelerator, mentored, and advised start-ups and my observations of the differences between start-ups and an internal corporate start-up are very different.  Below are the differences I discovered:

Start-ups

  • Singular focus
  • Take on the change the industry needs
  • Like the road less travelled
  • Creative, fluid structure
  • Live their values and values are actionable
  • Ruthless focus on making sure they are solving real pain points
  • Challenging and frank conversations. If team don’t agree, they say so
  • Strong focus on team recognition
  • Focus on customer and mapping the customer journey
  • Start with why and focus on how you make people feel
  • The brand is the change they want to make in the world
  • Start-ups focus better way to do things
  • Spend time with team and customers (allocate time every week to stay close to the front line)
  • Keep pushing out of comfort zone
  • Make impact, make a difference
  • Leverage and invest significantly in technology
  • Have personal purpose
  • Self-direction and autonomous
  • They back themselves and dream big
  • Optimisation for speed and speed of learning

Corporates

  • Too short-term focused
  • Feature/product/project creep
  • Competing priorities
  • Inwardly focused
  • Comfort zone
  • Rigid structure
  • Values packed away in their draw
  • Focus on their closest competitors
  • Careful conversations and internal politics
  • Team recognition more a nice to have; not seen as intrinsic
  • Sense that organisations are lazy

Internal and external start-ups are not the same because different rules apply and they operate in a completely different environment, even though both are faced with risk, uncertainty and building a new business model from scratch. The internal venture has capital and resources beyond any external start-up but they have to navigate existing processes, a lack of support as not everybody gets on-board, a hierarchy and many other integrated components. Corporates could benefit a lot from the lean start-up methodology, obsessive focus on the customer and for a new venture separation in the early stages from existing businesses to truly give the venture every success