How a healthy start-up ecosystem benefits all

28 Nov 2019
Joe Abi Akl - Acting Chief Corporate Development Officer, Majid Al Futtaim - Holding;
Plants and a tree
Joe Abi Akl, Acting Chief Corporate Development Officer, Majid Al Futtaim talks about why start-ups will find more success in the region

There is a reason that governments, the UAE among them, are offering incentives to attract start-ups.

Amid rising fears of a global downturn, start-ups have come to be viewed as the new engines of economic growth, changing how we work and do business. They boost economies and drive innovation. They are nimble and quick to market, rapidly bringing about change and shaking up the status quo. Their contribution to job creation is widely documented.

Large corporates dedicate a lot of time and money to building structures to emulate them – aiming to think and act like start-ups to adapt more flexibly to ever changing market needs. But the impact of start-ups on business and society is much wider than that.

Shaking up the market – and customer expectations

Start-ups often succeed in creating a more competitive dynamic in a marketplace by solving customer grievances – whether it’s lower prices or sheer convenience. 

Uber took on the taxi establishment by providing users with a seamless experience from the moment they order a cab to when they get dropped off. No need to hail a taxi in the street, negotiate routes with the driver, or fumble around for cash or a card to pay. Dubai-based start-up Careem created a similar service for the entire Middle East and Northern Africa region, and has since been bought by Uber for $3bn in the region’s largest tech buyout.

A positive side effect of service innovation is that it pushes up the expectations of customers when they deal with other companies. 

Start-ups raise the bar for the entire ecosystem, and both existing and future competitors must lift it even higher to succeed. It’s a relentless cycle – but one that customers and the community at large stand to benefit from, whether it’s through greater value, better services or improved standards of living.

Payment and banking innovators such as Revolut or Africa’s M-Pesa have simplified payments and boosted commerce, while healthcare start-ups like Dubai’s Altibbi provide easier access to medical services and information. The same applies to raising sustainability within the community. Take UAE start-up RecycloBekia, which recycles electronic waste, or Fenbits, which offers smart solutions for clean water.


Embracing risk

Attitude to risk varies widely between established organisations and start-ups. For a large organisation, there is a tendency to be cautious, waiting for ideas, technologies and new markets to prove their mettle before they act on the opportunity.

Start-ups on the other hand are adept at sensing and seizing opportunities, often taking new paths that their larger competitors thought either too risky or even impossible.

When Tesla began its journey in 2003, its ambition to conquer the market for fully electric vehicles was widely dismissed. Few believed at the time that electric cars could provide a real alternative to gas-powered vehicles.Fast forward to 2019 and car makers are scrambling to offer electric vehicles – driven by ever lower emission targets and growing customer demand. Tesla’s market capitalisation now puts it among the top ten global car manufacturers.


Start small and fail fast

At the same time, start-ups have to be thrifty with their finances, meeting the tremendous risks and challenges they face with very few resources.But what may seem a disadvantage can be turned into an opportunity. By being forced to manage on very little money, they have to rethink their approach to every aspect of their operation.

Airbnb sold cornflakes, Amazon used doors as tables, and California’s Lyft put large pink moustaches on the grills of their cars to catch people’s attention when they couldn’t afford to advertise. Being cash-strapped makes you creative. As organisations get bigger, they risk losing some of this way of thinking. It’s important to hang on to it, though.

Amazon, for example, continues to have the start-up mindset both financially and in the way it approaches innovation. It creates small teams with little funding – referred to as ‘two pizza teams’ to define their size - to work on new ideas, rather than invest prodigious sums into product development.

And this mentality can also be instilled into a large organisation, as the case of 3M Corporation shows. It has created effective structures for in-house innovation. These include technology forums for its scientists, seed funding for promising ideas, and enabling inventors to form their own teams to develop a new product.  Scotch Tape and Post-It Notes are among the best-known products to have come out of this process.

A long list of innovations is proof that the approach continues to work, a fact acknowledged by Fast Company when it named 3M as one of the most innovative companies in 2019. Failure is a fundamental part of this culture, too: if a product development fails, everyone on the development team is guaranteed their previous jobs back, minimising the risk associated with innovation.


Retaining the start-up spirit

Those who learn to embrace the start-up ethos will be better positioned to out-innovate their competition.  It does not matter about the size of the organisation and whether you are privately-owned or a public body. It’s all about vision and action.

For us, the balance of ‘performance’ and ‘health’ play a key role in ensuring we retain the start-up ethos. Performance is what McKinsey’s Scott Keller and Bill Schaninger describe as the things organisations do to improve financial results, while health is about creating an environment where people work together to achieve common goals.

If we want to get back to the start-up spirit, we must champion healthy collaboration, fast failure and visionary leadership, while being able to keep the performance train on the right track.

Instilling – or simply reconnecting with - a start-up mentality can be the foundation for creating a more agile, open-minded culture and work environment, which in turn can transform your offering to customers.

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