Across the nation, executives in boardrooms are thinking, worrying and talking about the new factor that's changing everything in their world-the growth, innovation, and market power of small and start-up companies. In a recent survey of 250 executives at both large and small firms, about 40 percent said their industries were being disrupted by start-ups. Most respondents believed that small companies have significant marketplace advantages over their larger counterparts, such as a greater willingness to take risks and more flexibility.
At the same time, 57 percent said that large companies make things harder on themselves by being resistant to change. But that resistance may be lessening as large corporations see their world being transformed by the innovative technologies, products, and business models start-ups are constantly creating. In short, large corporations are focusing their attention on small and start-up companies as never before. "There's a slice of the corporate population that sees these new contenders as disrupting the market," reports Donovan Neale-May, executive director of BPI Network, an organization for executives involved with innovation, which conducted the survey.
If you're an entrepreneur, what does this increased attention mean for your business? What should you expect from the larger players in your industry? There are many different answers to that question, Neale-May says. Here are some of them:
1. They may become more effective competition.
"In some cases, there is a danger for smaller companies because larger organizations have the resources, the reputation, and the place in the market," Neale-May observes. What's held them back so far is that they've been slower to try new things and introduce new products than smaller companies are. But as large companies become more innovative, they may become formidable competitors.
2. They could become your customers.
Increased competition between big companies and small ones is just one scenario, Neale-May notes. Another is that large companies may be more willing than ever to do business with smaller companies as customers or partners. There was a time when large corporations avoided doing business with small start-ups, fearing the risk that the start-up might close down or have a technical failure.
With dependable cloud-based infrastructure now available to small companies, that's no longer a concern, he explains. "Small companies' inability to scale-which was always the question-is now overcome."
3. They may provide mentors.
"We're seeing great growth in mentoring," Neale-May says, adding that senior executives at large companies are more willing to share their wisdom with entrepreneurs than ever before. There are now virtual environments or companies where start-up founders and mentors from larger companies can connect, he notes.
4. They might invest in your company.
"In some cases, larger companies are setting up investment arms willing to invest in new companies as potential adjuncts to their business or serve their customers in new ways," Neale-May says. In essence, this amounts to "outsourcing innovation" for the larger firms, which can then benefit from new products or approaches that start-ups come up with instead of having to come up with them on their own. So look for large companies that might align with your business model-they just might be the funding source you've been looking for.
5. They probably want to acquire you.
If your new venture is successful or brings a useful new concept to the industry, the chances are high that a large company in that industry will be interested in acquiring your company. In part this is because many large companies are behind smaller ones when it comes to newer channels for marketing and delivery such as social media. That may mean buying a smaller start-up is more appealing than competing with it, Neale-May says. If an acquisition is what you want, it could be a great opportunity.