How CEOs Can Enable the Next Generation of Startups
Having to take the decision to downsize your company is one of the hardest tasks a CEO can face. No leader wants to exit their talent, especially when they know they are facing a market that will be in a deep global recession.
James Reed, the boss of the UK’s largest recruitment firm, has predicted the unemployment rate in the UK could reach 15% or five million people out of work. The International Labour Organisation found that one in six workers, aged 18 to 29, have lost their jobs during lockdown, which could amount to as much as 200 million workers across the globe.
In our recent report Crises calls for Innovation, not hibernation nearly a third (29%) of the 300 C-suite we spoke to said they were implementing cost-cutting measures, including redundancy, due to the pressures of COVID-19.
Many companies are looking to ease the transition of departing talent by offering outplacement services, yet with the job market in freefall, we need to offer alternative pathways for people, one in which they are able to create their own future by building a startup.
This process is tried and tested. Ten years ago, Nokia was faced with making over 40,000 job cuts. It opened centres in Europe, India and the US to help those faced with redundancy to find a new job, either inside or outside the company. It also formed ‘Bridge’, an entrepreneurial stream for employees that had an idea for a startup. Since its inception, Bridge has helped over 1000 startups get their beginning. The scheme is credited for fuelling the rise of the Finnish tech ecosystem, which includes success stories like Supercell and Rovio.
Many CEOs will be worried that the current economic climate is not conducive for startup success. They couldn’t be more wrong. It is no coincidence when you look back across history, some of the largest companies started during times of economic downturns. The recent examples of Uber and Airbnb are not the only ones – companies like Microsoft, Disney and IBM were all founded during deep recessions. The reason for this is because times of rapid disruption provide ample opportunities for startups to take advantage. COVID-19 is reshaping every industry, which lowers barriers to entry and provides huge opportunities for startups to address new consumer demands.
Companies like Microsoft, Disney and IBM were all founded during deep recessions.
For CEOs that want to pioneer this alternative pathway, there are a number of key factors to make this a success:
- Collaboration: The best startups are those founded with teams that have complementary skill sets – but in a corporate environment the chances are people who work in tech development don’t know sales colleagues, etc. because they work, for example, in different locations. This means you need to create a space where employees can meet, make connections and potentially form teams around common problems they want to solve. This can be done virtually during COVID-19, the key is just to ensure that people correctly identify their skill set and areas of interest.
- Involvement: You need to be clear on the degree of your involvement – are you prepared to offer access to unused IP, assets or data? Are you just offering the opportunity to develop the skills and mindset for ex-staff to create a startup, or are you willing to invest in ideas that could help solve your challenges? Nokia allocated a fund and its programme enabled ex-staff to pitch for seed capital of €25,000, with up to four ex-employees being able to band together in order to access a potential pool of €100,000. This requires having a system for clear governance and measurement, but it also means that the corporate can reap the reward for startup successes.
- Partnership: If you are investing in startups you need to make sure that the programme is supported with a partnership that will provide the best experience for your people to maximise success. Buying a course of Udemy or having an hour’s discussion with a startup coach from an outplacement firm isn’t really going to move the needle.
Those wanting to build new startups need access to the right training, coaching and mentoring to develop the right skill set and mindset as well as being given the right introductions where appropriate to early-stage VCs and Angel investors.
- Communicate: This is a great initiative and can be used to attract new talent, build stronger relations with the communities and customers. Therefore, you need to have a comms plan to share the impact of this scheme with key internal and external stakeholders, showing that you believe in your employees when they leave the company just as much as you did when they joined.
- Objective: Don’t forget, this is not about unicorn building, but empowering your people to create their future. From the Nokia programme, a third was focused on building high-growth startups but two-thirds used it to launch their freelance career or pivot into a new industry altogether.
They say the most important factor in success is timing, and whilst that might feel counter-intuitive right now, COVID-19 is providing the perfect timing. CEOs have the opportunity to play a leading role in reshaping this future, not only through the people the company retains but also in the people it has to let go.