Are startups disrupting the traditional business model?

The power of technology-driven startups to adversely impact traditional businesses is such that Uber and Airbnb have now become clichéd discussion points at innovation conferences the world over. But many are also coming to realise the same tools that make startups so nimble and disruptive are equally accessible to them – if they only learn how to use them.

The university sector is certainly one that is now facing disruption, due in part to the emergence of massive online open courses (MOOCS), which have torn down the barrier to foreign competition.

But for the chief marketing officer at WA’s Curtin University, Ty Hayes, the emergence of the latest generation of internet startups presents an opportunity to learn new processes that can accelerate the work of Curtin’s marketing function.

To date, Hayes has already had representatives from Uber speak to Curtin’s marketing team, and has organised a marketing hackathon for this month.

He has also adopted aspects of the rapid development and testing methodologies used by startups to redevelop Curtin’s campus Open Day app to include interaction with iBeacons.

“Marketing has changed a lot over the years and the old slow processes of briefing-in and producing something three to six months later needs to be changed,” Hayes said. “Curtin has a bit of an innovative feel to it and there are folks around that are keen to try new ways of doing things. The sector we’re in is being disrupted by digital, and our audience is younger and at the cutting edge, so there is an appetite for new ways of doing things.”

Hayes revealed he is fascinated by start-up processes, especially the concept of developing a minimum viable product (MVP), where a basic product or service is tested with real customers to gain feedback that is then fed into further rapid iterations of the product. This concept of build-measure-learn is something he is now working to ingrain in his team, and is part of his motivation in running the hackathon.

“The idea of a hackathon is ‘how do we use that start-up methodology and processes to rapidly test some ideas on our customers, generate break-through thinking, and hopefully come out of it with a new initiative and new idea that can be implemented’,” Hayes explained.

Participants in the hackathon include members of the university’s teaching and IT staff, as well as students from design, marketing and computer science courses, as well as some high school students, in addition to members’ of Hayes’ team.

“We think that blend of people from across the university with different backgrounds and skills will help us think of new ways of doing things,” he added.

The group will be broken into six member teams who will design and test their ideas before pitching them to a group of judges. Hayes is hopeful that some of the ideas will be suitable to be taken on by the university.

“Once we get the first one done and get some feedback and see some results I would like it to be an annual thing,” he said. “And it doesn’t have to be just tech – the concept is ‘either an innovative or remarkably better way to inspire future students to choose Curtin’.”

The Curtin hackathon is being organised by Perth-based startup studio Atomic Sky, whose cofounder Andy Lamb said there has been a marked increase in interest in startups from large organisations as they seek to understand the processes and methodologies they use. As a result, concepts such as hackathons are no longer a concept exclusive to the tech community.

“Now they are getting more and more airtime around what they can do,” Lamb said. “And it is not just about marketing – we are starting to see it across finance teams as well. Larger brands are also paying attention to the young talent that startups are engaging, and realising that they may need to offer similar working styles."

Startups forcing marketers to question traditional tactics

According to ADMA chief executive officer, Jodie Sangster, the interest in startups stems from traditional organisations asking themselves how they are going to evolve.

“It is about learning the start-up mentality, and this idea of being quick, adaptive, and looking for change and new ways of doing things,” Sangster said. “That is the business culture that we are all need to be in these days. And bigger organisations are not so good at it, because they have their processes and procedures in place. But bringing that thinking into organisations is critical these days if we are going to have the right mentality to evolve.”

Sangster said startups are also capturing the attention of many of the more innovative agencies, to accelerate their own pace of innovation by helping them develop new advertising products and services.

“It gives them some diversification,” Sangster added. “And that gives them new avenues and revenue streams that they don’t have at the moment.”

But by far the greatest interesting in startups has come from large marketing organisations, through engagements that start with touring startup accelerators and hosting hackathons, to partnering with startups to use or sell their services, right through to investing in them. Principle amongst these has been Australia’s banks, although interest has also come from media companies, FMCG businesses including Mondelez International, and some large member-based organisations, including NRMA, which has invested in the logistics startup Sendle.

Keep marketing strategies simple, lean and rapid, experts say

Managing partner with the business consultancy Disruptor’s Handbook, Joanne Jacobs, said the greatest lesson that enterprise-based marketers can learn from startups is they don't need a long lead time and countless meetings to generate innovative products and processes. Jacobs is a fan of the Lean Canvas methodology often used by startups, which focuses on rapidly prototyping MVPs rather than lengthy research programs. She said these narrow the scope of production and produce outputs which might still fail when launched.

“It's really a matter of testing something, rather than endlessly determining if you are asking the right questions,” Jacobs explained. “This can be challenging for marketers who have made their careers from their creative expertise in campaign development, and from their research into consumer behaviours. It means they have to let go of some of their control of messaging, and it may mean they have to measure success differently from past activities.

“But that shouldn't dissuade marketers from seizing the opportunity to shift their thinking. Their agencies may not like the shift, but it is far more likely to generate changes in consumer behaviour than old fashioned campaign initiatives.”

Jacobs highlighted the risk with Lean Canvas is that it is interpreted as a means saving costs.

“Lean Canvas won't necessarily reduce the cost of innovation for firms - it's more a case of productivity optimisation,” she claimed. “Budget normally allocated to outdated and ineffective advertising campaigns can be redirected to more useful and productive outcomes for firms.

“And if that means that firms need to rationalise their marketing teams to get rid of a few traditional creatives, and replace them with developers, designers and data scientists, then that is only going to benefit the organisation in the longer term.”

The startup engagement challenge

Not all marketers may respond quickly enough, however. Startup mentor Alan Jones has had significant dealings with large organisations thanks to his role as ‘chief growth hacker’ at the startup accelerator BlueChilli.

Jones said the processes built up by marketing departments over many decades can actively work against engagement with startups.

“In traditional marketing you only reach out to your customers and your audience via an agency, or a conga line of agencies,” Jones said. “And everything is set to run in campaigns. In a campaign-focused marketing strategy you first need to gear up a marketing strategy which can persuade your stakeholders. Everyone has to believe that the creative investment is going to result in shifting the needle.”

According to Jones, the reasons startups behave the way they do is that they have little choice. Limited budgets preclude them from largescale spending on creative campaigns, and restricts them to smaller online campaigns using cheaper formats. Hence the variables they can control are also small, but they have become very good at changing things quickly and measuring the response.

“In the ways start-ups go to market, but there is less campaign thinking and more continuous improvement thinking,” Jones added. “In the startup community, by iterating rapidly and making small changes that are directly measureable, they can achieve that same gain with far less creative spend.

“We have seen 15 per cent conversion rate to sign up by changing the colour of a button or its position on the page, or changing the one word that the button says.”

Despite their differences, Jones is adamant that large organisations need to engage with startups if for no other reason than to help ensure their own longevity – as Uber and Airbnb are demonstrating.

“Brands need to look to very early stage start-ups that might one day be a disruptor in their market and look for a way to engage with those companies,” he explained. “You can learn what is going on and engage that wave of disruption when its only inches high, and not a tsunami. Because when it is a tsunami you won’t be able to turn the boat around before it swamps you.”

It is therefore not surprising to see CMOs, such as Hayes, from an industry that is already knee deep in that wave, looking to learn from the startup world.

“It’s about the agility that startups have, and also how they put customers at the centre of what they do,” Hayes concluded. “That is an age old principle of marketing but it is never a true as it is with start-ups.”

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