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Running Head: STARTUPS

Startups vs. Corporations:

Factors of Production of Innovative Products

Siddhi Parikh

Stony Brook University, CSE/ISE 300

Running Head: STARTUPS

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Thesis Statement

Examining the products from successful startup technological companies that move
forward beyond hundreds of failed companies, it is apparent that these companies have more
innovative products compared to corporations that can be derived to be due to the inherent
structural differences between large corporations and emerging companies.

Running Head: STARTUPS

There are quite a few aspects that differentiate small startups from major corporations. As
the size and wealth of a corporation grows higher, the fewer the amount of corporations there
are. The same goes for small startups in the opposite direction, where multitudes of small
technological startups are competing for their consumers. According to Harper and Vestal, over
6 million new companies are sprung every year, but only a few make it past their initial stage
(2015, 10.) The companies that do hold certain capabilities that allow them to break into the
market. Essentially these startups should have a strong entrepreneur leading them, ability to work
against extreme uncertainties and risks, and the ability to accept failure over and over to reach
better products. These are all factors that lead to more creativity and innovation in comparison to
large corporations. Another important factor to consider is the effect of a smaller chain of
command, and the ability to overturn ideas faster.
Eric Ries has been involved with a multitude of startups, companies that vary in size, and
is considered on the top experts when discussing the dynamics of successful startups in
comparison to corporations. In his interview with James Euchner, he was able to go in depth on
the importance of failure in the startup system (Euchner 2013, 12.) In particular, he talks about
the innovation accounting in relation to the way that successful startups operate. In corporations
in order to judge the profitability of products, forecasts on sales are created that show what the
returning investment should look like. Products are quickly judged based on initial test sales,
where if a product did not reach the forecast, which is interpreted to reflect poorly on the
company themselves. Within a startup, the approach is to take in feedback on an initial test sale,
good or bad, and continuously go back and forth creating better products for test sales. The
employees would be rated based on their progress, and not their initial run which drives people
to work harder. (Euchner 2013, 12 15.)

Running Head: STARTUPS

Another aspect of failure that startups often end up going through, which turns out more
innovative products, is the ability to completely turnaround and create a whole other product
when faced with failure of a project. With a small company, there is more freedom to completely
pivot and cut out a failed business into a new one by using the same staff. There is no concern
about the major consequences of dropping a product like in corporations where whole production
lines, marketing, etc are based on an already established brand that is hard to evolve. Wortham
2012 writes about Ben Horowitz who went through a pivot of his company Loudcloud, a cloud
service for music to a creating the successful Fab.com (3.) A corporation would simply take a
failed product, and try to do something to slightly change it, but often will not create a whole
new idea from scratch which startups often push towards.
A major difference between a startup and a major corporation is of course the size. The
sheer size of corporations can be upwards of 10,000 different workers. This of course means a
more standardized company format for everyones positions. Within a startup, there is a much
smaller work force that pushes each member to work long hours to work towards their goal. As
Halsey 2013 writes, in startup land, the HR manager is likely to be the CEO, CFO, lead product
designer and manager (2.) Multiple workers will hold a variety of hats per say, and will be
working much more closely with the product then they would have within a corporate setting
within a set position. This smaller chain of command also allows for faster turnover of what are
deemed to be bad products, new ideas, executive decisions, etc. There is less of a delay time that
Eric Ries touches upon within his interview when he discusses the lengthy amounts of
paperwork that needs to be processed to move a project from one stage to the next in a
corporation like having to create a 1,000 page specification design document for engineers to

Running Head: STARTUPS

create the product (Euchner 2013, 16.) Startups will have a much easier time just shifting these
responsibilities around staff.
Many publications refer to the real heart of a startup to its main entrepreneur.
Entrepreneurs need to be all encompassing as a leader, needing to have that instinct of when to
change the product, the leading networking person and most of the time its leading spokesperson.
Harper and Vestal 2015, describe the entrepreneur as so: There is a big difference between
people who start a business and true entrepreneurs true entrepreneurs bring something new to
the marketplace. Innovation is an integral part of entrepreneurship (2015, 12.) Going back to the
small workforce, the entrepreneur is able to be much more hands on with the product than a CEO
of a large corporation would ever be. There is much more responsibility of the product upon the
entrepreneur guiding the project, and it is unbelievably risky to take on which makes them take
more chances on innovative designs. Within the New York Times article by Nathaniel Rich
2013, there are multiple accounts of successful entrepreneurs that have been able to transform
their startup into a multimillion dollar company. Investors play a key part in startup companies,
and the entrepreneurs who are able to give the best pitch often are the ones who are able to
relay their personal charisma and passion onto their product. Famous examples of course include
Steve Jobs, and an example that the article provides is Michelle Crosby promoting Wevorce, a
startup handling divorces.
Many startups are not successful, and that is important to remember. Successful startups
are the ones that have created an innovative product that the public will enjoy, and will want to
purchase. They integrate long hours of work, successful networking and proper paperwork and
issues to get to their position. Corporations are the way they are in their own right, and have been

Running Head: STARTUPS

systematically functioning well for years, but should look to startups to find systems and
possibilities within their own company of creating their own fast track innovation.
References:
Euchner, James. 2013. "What Large Companies Can Learn from Start-ups." Research
Technology Management 56, no. 4: 12-16. Business Source Complete,
EBSCOhost (accessed November 10, 2015).
Halsey, Anne. 2013. "Getting Started at a Startup." Young Lawyer17, no. 4: 7-8. Academic
Search Complete, EBSCOhost(accessed November 10, 2015).
Harper, Stephen C., and Alex Vestal. 2015. "What established firms can learn from
startups." Industrial Management 57, no. 6: 10-15. Business Source Complete,
EBSCOhost (accessed November 10, 2015).
Rich, Nathaniel. "Silicon Valleys Start-Up Machine." The New York Times. May 4, 2013.
Accessed November 10, 2015. http://www.nytimes.com/2013/05/05/magazine/ycombinator-silicon-valleys-start-up-machine.html?pagewanted=all.
Wortham, Jenna. "In Tech, Starting Up by Failing." The New York Times. January 17, 2012.
Accessed November 10, 2015. http://www.nytimes.com/2012/01/18/business/for-someinternet-start-ups-a-failure-is-just-the-beginning.html.

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