You’re Fired? Start a Company! It Could Be a Win-Win!
I just saw a news clip in Danish television in which we were introduced to five former Nokia employees. They were laid off when Nokia recently shut down a big R&D facility in Denmark and they got kudos for starting their own company (Acorn – making training solutions for endurance sports athletes).
I guesstimate that only 1 in a 1,000 startups really strike it big as in the founders becoming multi-millionaries. The founders of Acorn might settle for less, but what struck me as I saw the clip was that they are in a win-win situation.
First, I should state that it is very difficult getting a good job (within R&D / innovation) in Denmark today and the alternative is often a quite reasonable unemployment compensation. This sounds ok, but if you can afford to take a chance and have the guts to do so, you will be much better off giving it a try as an entrepreneur – even if the venture fails.
The reason is that in a year or two, we will see a huge demand for people, who can make innovation happen in big companies. These guys from Acorn learn new skills, they develop a “better” mindset and they simply get sharper. This will be highly valuable for big companies.
I acknowledge that not everyone is in a position to start a company when they are laid off. Nor should everyone, but they at least owe it to themselves as well as to the society in general to give it some thought. As with the founders of Acorn, it could become a win-win for everyone.
Hi Stefan: Your premise has good merit. Perhaps the most difficult decision for those who have been displaced, is whether or not to pursue an entrepreneurial endeavor. Interestingly, many folks after firing, don't just leap into an entrepreneurial pursuit. Many hedge their bets and do some freelance consulting while they explore corporate job opportunities. This time period can potentially be lengthy, depending upon severance provisions, one's financial requirements and circumstances, and one's area of professional interest and expertise.
Once one decides definitively to pursue a consultancy, it can take a good 2-3 years before a consultancy develops a sufficiently strong following for the owner to develop confidence that their business can be judged to be viable (one must grow their practice, and this can often take time…some faster, some slower). Depending upon its duration, this can potentially be a challenging time period to weather from a financial standpoint, but most certainly much can be learned during the time…including pivoting the business, if necessary (as I successfully did during the early days of my practice). If the new business is capital intensive or has more challenging and or costly exit implications, exit is not a trivial consideration.
All of the above said, I agree with your core premise that the learning attained from an entrepreneurial endeavor can potentially be leveraged in the job market even if the entrepreneurial venture doesn't achieve success.
Hi Michael, I have given the intersection of starting consultancy and starting a "real" company some thought myself over the years. In some cases, it makes sense to start out as a consultant to get a feel for the market, but then you often end up in a situation where this is what you do and you never get to really develop a product or technology.
Maybe it is better to focus outright on a product or technology and then see where this can take you? Of course, this is can be much more capital-intensive and more demanding than "just" starting a one-person consultancy. Also, not everyone have the right idea for a "real" startup. Here the concept of the lean startup and the idea of starting with a minimum viable product can help some.
Well, this could be a longer discussion. I might do a blog post related to this.
Hi Michael,
I agree 100% with your comments about capital intensive business.
To overcome this challenge one good recommendation may be: "start small", "start with your means" and "set affordeable loss=> evaluate opportunities based on on whether the down side is acceptable."
The book Effectual Entrepreneurship, from Sturat Read (IMD Professor), Saras Sarasvathy, Nick Dew, Robert Wiltbank and Anne-Valèrie Ohlsson is a good source of learning for new entrepreneurs.
Hi everybody,The duscussion is definetely intetesting and very real for many people. Of course one version of the story is that you lose your job, another is that you are already an enterpreneur or more precisely a 1-2 people company and your market suddenly goes dead. I am talking about a whole industry. The big guys might have some more options but what about the micro players do they stick around hoping for better days or do they attempt to merge together into bigger entities where they may have better resources and chances of success? I mean what would be the implications of such an option – direction, strategy ..agreement!!
I'm currently using this strategy – consulting – and have done so in the past when laid off. I recently participated in a 'career transition' bootcamp during which time I decided to put 90% of my effort into reviving my consulting business, and 10% to job searches. My success rate in obtaining interviews has increased noticeably since following this strategy. I attribute it to the fact that, as a business owner, one needs to be crystal clear about the benefits of the offering and one's strengths, and that there is a confidence that comes with being a business owner/leader. This has given me the courage to represent myself more genuinely to recruiters – I discovered that I have a sense of humor and communication style that has opened more doors for me than before. I have since advised the owner of the transition business to encourage everyone who could possibly be in a position to consult (it doesn't matter on what) to do so, as it will give them the confidence and improved skills to give them an edge in the competitive jobs market. BTW, this is relevant where there is a fairly strong job market; I appreciate that it may be less relevant in, e.g. Denmark, where there may be fewer 'formal' jobs. Having said this, the benefit of a small business is that it can fill small gaps relatively easily, thus giving it a competitive edge, and so those that become small business owners can absolutely benefit from confidence and skills development in the same way.
Sometimed TV provides great inspiration
It is probably relevant to the Nokia case to mention that Nokia established an ambitious entrepreneurship programme following the closedown of their activities in Denmark. This provided a much stronger basis for former employees to become succesful founders than seen elsewhere. On top of that, it was even conducted by a very skilled fellow, who now have established a very accredited accelerator programme.
Besides that, I agree that huge companies will increasingly ask for innovation capabilities, which most likely will have quite different approaches spanning both shortterm and longterm innovation, ranging from topline expansion (revenue increase) to bottomline awareness (cost reduction /waste).
Open Innovation capabilities might be one of them. Another one will most likely be internal proces innovation (TQM, Lean, 6sigma) that creates continous improvements.. Then there is alwas demand for general selfpropelled and creative intraprenuers and cultural changeagents.
Finally it seems that Corporate Incubation emerges as a trend that creates closer connection between startups and corporations. Not surprisingly, tech companies like Google, Microsoft, Qualcomm have sponsored startups for several years, but recently two things seems to happen:
1) they move from explorative sponsorships to creating accelrator programmes and seed funding. This also includes Disney, PayPal, Nike, Vodafone, Deutche Telecom and many others.
2. This trend also emerges amongst less techoriented corporations in sectors that also faces threatening competitive forces – New Yprk Times, Turner Broadcasting (Time-Warner) and Axel Springer Group.
Although innovative skills and mindset is a precondition, all of the above mentioned innovation approaches, companies may have a future need for, calls for quite different capabilities (and personal networks). Managers might have a hard time finding their way through it all. Nevertheless, global competition forces them to…
Think it calls for a good discussion. Perhaps a coffee soon, Stefan?
cheers
Johan
As a non-R&D innovator, who competed in a company-sponsored innovation competition and–out of 30+ submissions–had my innovation ranked among the top five submitted; I relate to the topic of this blog post.
After being laid off as part of a larger downsizing, I received a letter from the senior IP attorney for Company “X” asking me to review the enclosed patent application for my innovation idea, and notify him if there were any errors or corrections. The letter had a post script: “Your prompt attention to this request is appreciated.”
I am now working with a software programmer in an effort to develop a working prototype for a business process management enterprise software product that we can use as the genesis to launch our new company. As I contemplate both the exhilaration and uncertainty of this venture, I’m reminded of something I wrote in undergraduate school, when facing earlier struggles: Behold the tightrope walker, for he only gets nervous when he looks down.
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The thing is, you yourself said that the chances of a startup being successful are pretty bleak. You should have all the right people and processes in place to have any decent chance.
Fantastic allocation about starting a company and here mentioned idea will be handy for me to create a new company. Thanks