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The art of being flat and mad

Incubators

What can the corporate world and startups learn from each other? More than a dozen company representatives from century old multis to garage-stage newbies tried to answer that question at the Budapest Business Journal’s conference on business innovation. Entitled ‘Master And Pupil’, held in the Gerbeaud House and backed by Telekom and Deloitte, the event attracted more than 100 participants from different business sectors.

GPS for startups

Péter Balogh, founder and CEO of NNG (one of the most successful Hungarian startups, originally called Nav N Go, which gained world fame for its iGo primo navigation software) sees a huge competitive advantage in the mathematical and engineering skills in Hungary, which is why we have had six big startup successes in software business recently, he says, but zero in football.

NNG’s goals weren’t grandiose. “All we wanted was to have mom and dad drive in peace, arrive at wherever it was they were going on time, without fighting over where to turn.” That said, to “navigate the world” was quite a big target, though it doesn’t seems so remote now that NNG's products are in more than 100 countries. Success, Balogh noted, was based on some basic ideas. “In this business, nothing is impossible or rather: the exponential technological development described by ‘Moore’s law’ means that anything that previously seemed impossible can always be solved.”

Balogh identified three main challenges NNG faced as a startup: a lack of infrastructure, team and management. They didn’t have sufficient electric power, for instance, but they had an equally hard time to a round up a big and capable team – now they work with 12 headhunter companies. When you grow to become a multi-garage company, you face another problem: not enough leaders. So you need to grow upwards as well as downwards, while trying to keep your hierarchy as flat as possible. Another challenge is the size itself: “When you have a crew of up to 20, everybody knows everything. Above that number it doesn’t work, information gets lost; you need to structure your communications. When your team reaches 80, you get factions, which can develop into little empires – parties with conflicting interests – by the time your staff grows to 250. That’s where work structuring becomes a real challenge. With 600-700 employees, you face independent business units, which is when you have to introduce standards to maintain quality and to avoid wasting money.”

One thing is for sure: all startups will get a slap in the face after a while, and if it’s not lethal, they may go on to become a corporation. “We got one, we survived it, but still maintained our startup culture.”

 

Size matters

Levente Balogh, CEO of the Szentkirályi mineral water company presented another example of success in a totally different field. It started with a coincidence. “On one side there was a friend who produced 0.2 liter bottles, which he couldn’t sell, on the other side there was Lufthansa, looking for a mineral water bottle provider from our region. It turned out this specific bottle was the only type that would fit in the trays on their flights.

And I filled them with Szentkirályi.” Balogh also sees the company’s success partly as a result of breaking some basic rules. “Early revenues were not spent on machinery, or office buildings. Instead, I spent the money on marketing.” Thus they generated a huge demand for mineral water, so much so they could not keep up with demand. When revenues enabled developments, he bought the most expensive machinery, but by the time he sealed the deal, even that wasn’t enough, so he bought even more hardware, and then found there was not enough room left to store the water. Now Szentkirályi owns a complete logistic center, storing five million liters of water daily, serving the domestic market (not so little considering eight liters of mineral water are consumed every second), and 45 other countries to date.

 

Let there be light

Ottó Gecser, president of Personal Branding Institute, former CEO of Brokernet and AXA, advises all companies, not only to startups, to “be hungry, be mad.” One of the anecdotes Gecser shared was about Fotexnet, which bought the former Hungarian household shop chain (the only one in the socialist era), selling a wide range of household commodities, from paintbrush to detergents. After renaming it Azur, they made two major innovations, both involving the CEO’s personal intervention: the first was washing the shop windows every morning, instead of every month, the second was changing the light bulbs inside the display windows. “The boss checked every shop window every night, and if he saw even a single bulb was not working, he would instruct the managers personally.” The point is you need to be there personally, you need to be ‘flat’, or you’ll become the sort of corporation of your nightmares.

 


Don’t panic

The world’s third largest company is not a big corporation – so what is Google then? Definitely not a startup, though it still behaves like one, says Szabolcs Szelei, marketing director of Google Hungary. He says the average age of the world’s top 500 companies is now18 years, compared with 62 in the 1960s, and this is predicted to decrease to 15 years by 2025. This means that Google will be pulling up the average within a few years, so it is definitely not a young startup anymore.

One of the main challenges ‘old’ companies face these days is the digital revolution, he added. By 2025, more than seven billion people will be online via 50 billion devices, which will drastically reshape the business landscape. Every company will have to redefine itself in the digital space. Naturally that is much easier for a new, innovative company than a 180-year-old company.

As for startup success recipes, Szelei thinks one of the main obstacles is the lack of financial models, lack of a good management skills and of exit experiences. Also he sees a danger in startups’ anti-corporate attitude. “We need to find the ideal balance between big corporation’s experience channeled to startups, which instead have an immense momentum.” Another piece of advice – taken from Google X-Lab’s Astro Teller – is that you don’t need to fear failures, instead you need to reward then. If you don't, no one will dare to take risks, thus you eradicate innovation.

 

There is no recipe

“We always look for the ultimate theory or recipe, but it doesn’t exist. Every company is unique, has it’s own DNA.” Introduced as the pope of Hungarian startups, Peter Záboji, president of European Entrepreneurship Foundation considers only one factor: entrepreneurial language and culture. Take the word startup: it’s sexy, it’s trendy, and it has helped renew the “worn” word entrepreneur. In the past 100 years the definition has changed a lot. First it meant inventor, then market-creator, then mass-producer and so on.

Company structures have also developed and become more fragmented; in the 20th century workers were relegated to screws in the system, and weren’t expected to use their minds. The peak was the invention of HR, Záboji said with irony. But if you own your company, you have a totally different approach, he added, reflecting on the ‘flat’ theme. You start to think more about what to spend on, you have different priorities to someone with a traditional big corporation career. Záboji adds that an idea is worth nothing on it’s own, without a capable team, but you also need management experience, parental guiding, something which even Google got at the start, when they looked for someone who actually knew how to build up a company.

 

The art of failing

Anton Kovach, ShiwaForce CEO also believes in team spirit, or rather mini team spirit. If you put 6-8 people in a group, they will take responsibility and start to think and act like entrepreneurs. The company chief said it was vital to have the flexibility to learn from the ‘grown-ups’. What he sees as a problem in Hungarian startup field is the fear of failure. “Everyone’s educated to become perfect, instead of learning through failure. ShiwaForce’s big deals always started with something going horribly wrong. It’s not the failure that matters; it’s how you react to failure. Hungarian companies should be more agile, adaptable, and open or they will never make it.

 

Take it and go

Be you a startup or a multi, the main question is whether you can maintain the entrepreneur mentality or not. Vilmos Beskid, R&D director of Ericcson Hungary, said the 137-year-old giant had survived three technological revolutions where most of its old rivals had not, and the new ones are younger then 10 years. The reason Ericsson is still on the market is its ability for continuous, systematic innovation. Beskid sees Ericcson as a huge corporations able to learn from startups: “We try to bring startup culture to our company, we let our teams loose in the sense of motivating them, let them feel the company is their own, take two weeks off and work on their ideas, in other words: take it and go”.

 

Awarding the fittest

The conference participants were also given an opportunity to get acquainted with the conference sponsors’ startup competitions. Telekom’s kickstarter business app tender calls for participants to send a short video describing how their cloud-based app would help the everyday work of SMEs. The videos will appear on a ‘Business Wall of Fame’ and the video which receives most votes, may be awarded prizes including an advertising campaign worth HUF 10 million provided by Telekom: The tender is being run across six countries in the region, with the overall winner set to receives €80,000 for bringing its product to the market provided by the Krakow-based business incubator hub:raum.

Similarly, Deloitte’s ‘Technology Fast 50 in Central Europe’ competition is part of a global initiative to rank the fastest growing technology enterprises worldwide, and is open to technology companies from 17 countries in the region that develop or own proprietary technology that contributes to a significant portion of the company’s operating revenues; or manufactures a technology-related product; or devotes a high percentage of effort to the research and development of technology. The winners will be selected by Deloitte’s M&A Advisors, who are responsible for raising funds and finding strategic partners for emerging companies and working as advisors to private equity and venture capital funds.

-- This is an article from Budapest Business Journal print.

(photos were taken by Mariann Sárközy)

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