Why do startups exist? – by “Daniel A”

Technology startups can be broadly characterized as small, resource-constrained organizations of people attempting to find scalable operating/business models. As Robert Scoble notes in his article on why Google can’t build Instagram, the combination of resource constraints and lack of constraints on operational flexibility (no strategic partners to please, public shareholders to answer to) gives startups a unique ability to build elegant technological solutions to problems.

However, something that Scoble doesn’t note in his article is why large companies appear to have done/be doing very little to drive the kind of employee engagement that leads to startup-like outcomes. Although plenty of companies are great at organizing small teams (Scoble recognizes this as a primary pillar of startup success) what they’re not as good at doing is building the same kinds of incentives that are present in early stage startups: namely the ability to operate with little oversight/change ideas and direction very quickly and the potential to participate in financial gains from their product.

Oddly, building ways to incorporate these same incentives into the work that employees do at large companies seems to be an obvious way to create more entrepreneurially-minded companies and encourage the kind of innovation that happens in small startups. In recent years, companies like Google and Facebook have been more open about pursuing acquisitions solely for the purpose of acquiring teams/innovative ability, and have seen some success with this strategy, but companies still struggle with creating the same kinds of incentives/innovation that happens in startups. In the future, companies that are able to solve this problem will likely be able to produce more innovation internally which could render the startup itself obsolete.

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