The previously slow and often reluctant path to digitalization taken by established, mostly large companies suddenly had to be accelerated. Working from home became possible overnight, video conference meetings became commonplace, remote collaboration and the streamlining of some work processes were suddenly no longer a problem. The current pandemic is giving digitalization an extra boost, suddenly making companies more agile, spontaneous, and flexible. There is even a certain spirit of optimism. A startup atmosphere in the concert department? That may be the case, but in some places there are also obstacles and limitations where there is still an urgent need for change in established organizations or where resistance is building. According to common clichés, this would certainly not happen in a startup.

Every large, established company today was also a startup yesterday.

Every large, established company today started out as a startup. Bosch was founded as a workshop for precision mechanics and electrical engineering in a backyard. The retail company Aldi started in a corner shop. SAP began with an office in Mannheim, and entrepreneur Carl Zeiss started manufacturing his first microscopes in his precision mechanics and optics workshop.

As their businesses grew, their product ranges expanded, and their target groups and markets broadened, these companies also developed from startups into established companies, and in some cases into corporations. (Stefanie Peters and I describe how this can be achieved in this article (insert link to article here).

Whether a startup or an established company, these are basically two different stages of development in the life of a company. Nevertheless, at first glance, the two seem to be like cats and dogs. Why is that?

Startups and established companies are usually assigned different, almost opposite characteristics. Research on the topic reveals the following list, which is certainly not exhaustive:

Startups	Established companies/corporates
Innovative	Optimized
Dynamic	Sluggish
Agile	Slow
Young	Old, established
Capable of growth	Stable
Passion	Boredom
Flexible	Rigid, stuck in a rut
Committed	Passive Etc.

Table 1: Attributes attributed to startups vs. established companies (Source: Own research)

A closer look at the differences shows that startups are usually attributed more positive characteristics than existing established companies.

What actually distinguishes startups from established companies?

Startups are new or have only recently been founded. They are often associated with young founders and, above all, digitalization. KfW regularly examines the start-up scene in Germany and recently found that only a third of start-ups are internet-based or pursue digital business models. However, founders tend to be older, with an average age of around 38. The young garage founder is more of a myth that exists about start-ups. But start-ups differ fundamentally in terms of corporate culture. While established companies are often considered sluggish and not very dynamic, startups are characterized by an agile and flexible way of working. It is not uncommon for methods such as design thinking, business model canvas, or rapid prototyping to be used in the pre-startup phase and also in business model and product development. Together with agile methods in project organization, design thinking in particular revolves around the customer and their feedback on the intended product. The particular customer focus required by these models, coupled with the pressure to bring the product to market as quickly as possible, means that startups usually venture into the market with a minimum viable product (MVP).

Breaking the rules of the market, conventional thinking, and existing business models determines the approach. Startups are often credited with approaching a topic in an unconventional, even somewhat crazy way. Curiosity and a joy of thinking determine the work in the teams. The creativity of the founders and employees is an important factor for success.

Nevertheless, it is astonishing that more than 40% of startups cease their activities because there is no market demand (Zukunftsinstitut, 2019). It seems that a customer-centric approach is not yet widespread enough when it comes to starting a business.

Startups are generally characterized by a high tolerance for mistakes, even a special culture of error.

However, startups differ from established companies in particular in their culture of error. It is normal for more things to go wrong than right at the beginning of a startup. Failure is, so to speak, inherent in the system. Mistakes and failures serve as a source of knowledge. These experiences improve the product range, the processes within the company, and customer relations in the long term.

However, a positive culture of error is not particularly widespread in our society. Startups often strive for a particular openness to mistakes and encourage employees who are willing to try new things and, of course, fail in the process. Many helpful and valuable products that we use today as a matter of course have their origins in failure, be it rubber tires, Post-its, or penicillin. Something had to go wrong first, a lapse had to occur, something had to be forgotten, before the beneficial result of the inevitable mistake could emerge.

In established companies, the focus is on optimization and efficiency.

In established companies, on the other hand, the focus is usually on optimizing existing products and increasing efficiency. Making mistakes here usually costs the company a lot of money and thus profits. Therefore, mistakes are often avoided in established companies, or communicated much less openly when they do occur. Mistakes are primarily seen not as an opportunity for improvement, but as a threat to earnings. This view often leads to limited communication between departments and with customers. The result can be secrecy or, in the worst case, a cover-up.

Nevertheless, established companies also do a lot of things right, especially when it comes to satisfying known and short-term customer needs. In this area, startups can certainly learn something from established companies. When it comes to the systematic development of structures and processes, established companies have a big advantage over startups. They are experienced in designing efficient production processes, sales procedures, and management structures, for example. Startups often lack this know-how, which has usually been acquired over many years. Established companies also often have a very good understanding of how a market works, what major and minor developments have already taken place, and how to deal with these developments. They often have robust networks, which in turn make established companies interesting for startups. Because established companies usually have many employees, they also have a wealth of expertise in the area of employee leadership and management.

It therefore stands to reason that the skills and working methods of both sides can benefit from each other. Startups can become more professional by learning from established companies. In turn, established companies can learn from the culture of error, dynamism, and customer focus of startups. But how can this be achieved?

Can a startup culture even take hold in established companies?

The concept of ambidexterity, i.e., the ability of organizations to be as flexible as a startup and as efficient as an established company at the same time, offers an impetus. What sounds like a paradox can, however, be developed.

Ambidexterity integrates both short-term and long-term entrepreneurial action. This is referred to as exploratory and exploitative behavior. The overview table shows the key differences:

	Exploration Exploring the new	Exploitation Exploiting the existing
Company phase	Start-up	Established company
Goal	Learning and innovation to meet long-term customer needs	Exploitation and efficiency to meet short-term customer needs
Fields of action	Creative and adaptable development of new products, services, and business models	Efficient and effective handling of existing products, services, and business models
Type of innovation	Radical innovation	Incremental innovation
Benchmarks	Innovation, growth, milestones	Costs, profit, Margins, Productivity
Organizational Structures	Adaptable, Agile, Non-Routine, Organic	Formal, Routine, Mechanical
Culture and Behavior	Risk-Taking, Speed, Flexibility, Experimentation	Efficiency, Low Risk, Stability, High Quality
Leadership Style	Visionary, Involving	Authoritarian, Top-Down
Employee Type	Entrepreneurs, Generalists	Implementers, Specialists

Table 2: Ambidexterity: Comparison of exploration and exploitation (source: Wikipedia, 2021, and own additions)

What may seem incompatible at first glance can, however, be combined in business practice.

Three opportunities for an established company to also be a startup.

As mentioned above, companies also go through a life cycle that begins with an exploratory phase as a startup. In this phase, even companies that are now established were once agile, innovative, visionary, and flexible. Over time, this phase can repeat itself. This happens especially in the event of sudden market changes, the emergence of new competitors, or in crises such as the current pandemic. Suddenly, established organizations can become agile and flexible in order to cope with the suddenly changing conditions and still maintain operations. Production lines are converted to manufacture protective clothing and respirators, or brick-and-mortar retailers open online shops or introduce video consulting or click & collect as a service.

Another option is to integrate both forms of ambidexterity, combining the exploration of the new with the exploitation of the existing. In this case, the search for innovation is incorporated into the everyday work of employees. For example, Google employees are encouraged to spend 20% of their working time on topics that are not part of their work routine.

This approach places a lot of responsibility on management. It requires a self-critical attitude toward one’s own company, which does not gloss over anything when it comes to future viability and innovative strength, but also does not speak ill of anything. Managers must be able to withstand the tension between exploration and exploitation, plan freedom for themselves and their employees, and find an optimal balance between the two forms. At Henkel, the creativity technique “Kill a stupid rule” is used to break out of existing frameworks and find new ways forward. Unconventional locations are used for this purpose. Other companies also set up innovative free spaces in the truest sense of the word and have, for example, creative spaces.

A third option is to create areas or departments within a corporate structure that deal with innovation. These areas can also be spin-offs that may later be reintegrated into the parent company or more closely networked. The hope is that this will lead to mutual learning and a spillover effect from the internal start-up to the parent company. The mail order company Otto took this approach to complete its transformation from a catalog mail order company to an online retailer. The particular challenge of this approach for the company’s management is to create enough distance between the two units without separating them completely. It is necessary to create sufficient opportunities for interaction and communication between the areas and to actively promote exchange.

The supreme discipline: the fluid company

It is particularly challenging when companies that practice ambidexterity want to develop further into fluid companies. Fluid companies are the high art of agile and flexible corporate culture. They represent the model of an agile organization with autonomous teams. There are small, autonomous, and loosely coupled units that, in turn, consistently align themselves with the market and its needs. In this way, there are not only exploratory teams that develop innovations, but also exploitative teams that take care of existing business. Issues such as hierarchy, central control, fixed procedures, and rigid management take a back seat. The focus is on clearly formulated visions and strategies that provide the necessary guidance and commitment.

What characterizes a fluid organization? Basically, as its name suggests, it is a fluid, flexible organization with few fixed structures, but a great deal of agility and project-based work. At first glance, it sounds like leaderless chaos and confusion. However, even in fluid companies, there is leadership and management, but with a special approach.

In fluid, agile organizations, everyone has a clear picture of the company’s goal, a clearly communicated description of its raison d’être. This is strongly customer-oriented, focused on the customer’s needs. Employees are organized into changing teams that take on a wide variety of tasks within the framework of projects. These organizations have a strong culture of error and feedback. This serves to continuously adjust processes, which are designed to be iterative. The corporate culture means a constant shift between stability and instability with a permanent focus on the goal and the benefits the company wants to create. The culture is characterized by transparency and trust. It almost goes without saying that this attitude requires employee-centered leadership. The personal development of employees is at the heart of leadership, because fluid companies require a certain number of mature and reflective personalities as employees. Managers are therefore more like moderators, enablers, coaches, or pacemakers than managers or announcers.

The network-like, changing structure that emerges in fluid companies requires few, but clear, basic structures and interfaces. The various project teams operate within this framework.

The following overview once again shows the key differences between types of organizations, which can also occur in a wide variety of ways in companies:

	Organization through fixed responsibilities	Organization through active engagement	Organization through networks
Examples	Administrations, Chamber of Industry and Commerce	Cooperatives, associations	Xing, LinkedIn, Enable2Grow
Management principle	Hierarchical	Centralized	Communicative
Organizing principle	Department	Team	Project group
Belonging through	Natural membership	Active participation or membership	Joint meeting
Image for a location	Lecture hall	Congress center	Barcamp
Workplace	Single or double office with closed doors	Open-plan office or single or double office with glass walls and/or open doors	Co-working space, Home office
Management by	Assignment, procedure	Target agreements	Feedback culture

Table 3: Types of organization (Source: Own compilation)

A fluid organization within a company takes advantage of the benefits of agility, which does not mean that everything is done haphazardly and spontaneously, but rather that it is possible to react quickly and unconventionally to something new, a market change, or a change in the general conditions. This possibility, which goes beyond departmental and silo thinking, requires employees who take responsibility on their own initiative and voluntarily, and who also organize themselves. Open communication is necessary on all sides, both from employees and managers, i.e., providing and obtaining information transparently and actively across hierarchies.

Summary

In order to reap the benefits of start-ups even as an established company, a company should become fluid, at least in part, and take advantage of opportunities for ambidexterity. This requires management to open up the company to fluid forms of organization and possibly change its understanding of leadership. Major changes are necessary. However, several promising corporate examples show that this can be achieved. A gradual opening up and change, already designed to be iterative, can be helpful in this regard.

Literature:

KfW Bankengruppe: KfW-Gründungsmonitor ; Bonn, 2020; (accessed on 26 January 2021)

Zukunftsinstitut: Warum Startups scheitern , accessed on 26 February 2021

Wikipedia; Organizational ambidexterity , accessed on February 26, 2021

Häusling, André: The six dimensions of a fluid organization, 2016 , accessed on January 26, 2021

Euler, Thomas: Rethinking leadership: Design premises of fluid leadership systems, 2016 , accessed on February 4,