Why Startups Are More Efficient at Product Development than Large Corporations
Manufacturers have a tough job. They need to conceptualize a product, engineer it, test it, and finally create it. Historically, this process has taken many years.
In the rapidly evolving technology marketplace, companies need to be faster than ever to hit the market. Often when a new product is announced, competitors have designed and developed a competing product before the original even hits store shelves. Often, we are seeing young startups launching products even more efficiently than huge corporations like Microsoft and Apple. How is this high-speed design possible? Let's take a look.
Size: The Key to Business Efficiency
Startups are generally composed of just a few key employees. These employees can sit down with each other, discuss their plans, and get to work right away. This is often not possible to a large corporation. When you have several huge departments, each responsible for key aspects of product design, communication can take a long time.
Look at it this way. Imagine that you work in a department that designs the case for your company's product. You'll need to know what the size of the circuit board will be in order to design the small details of the case. If you work for a small company, you can simply sit down and have a chat with whoever is responsible for developing the circuit board.
In a large corporation, this is not possible. There might be ten or even 100 experts working together to build the new board. Before they can determine the size, they each need to finish their own individual parts of the project and submit it to their manager. The manager has to compile the information, review the plan, and finally submit the drawings. Instead of having a quick chat with a single engineer, you might have to wait days or even weeks to get the answer.
Economies of Scale
You might look at this example and think that large corporations are simply wasteful. However, this is not really the case. Large companies are dealing with incredibly high volumes. When Apple designed the iPhone 6S, they knew they were going to sell millions. Their phones would be used all over the world. They had to engineer it to handle every usage scenario in a variety of conditions.
Startups, on the other hand, tend to create simple products that solve a problem. On the one hand, this means that a simple device can be highly useful. But even the most successful Kickstarter campaigns do not have anywhere near the reach of the products released by multinational corporations. However, this allows small companies to be incredibly efficient. A million dollars in revenue can pay the wages of every employee at a startup. Meanwhile, large corporations would lose money launching a product that only had an earning potential of a few million dollars.
Open Source Devices
Modern startups have access to technological infrastructure that simply wasn't available a few years ago. Android, for example, allows startups to purchase an inexpensive and complete hardware and software package that already runs tons of software. This means that if their concept will run on android, prototyping could take as little as a few months. Never before has such a quick turnaround been possible.
Access to Crowdfunding
Historically, when a company wanted to develop a product they had to spend tons of time researching and holding focus groups to determine if consumers like the idea or not. If the business was small, they'd have to pitch their idea to a venture capital firm and try to raise funds.
Thanks to crowdfunding, this is a thing of the past. Because products can be conceptualized and prototyped rapidly and inexpensively, all that is left to do is raise funds for manufacturing. Crowdfunding provides a way to do this with zero risks.
If a company tries to crowdfund their product and it fails, they are only out the development cost which is usually minimal. But if it is successful, they can launch their product with minimal personal investment.
Overall, modern business has come a long way from what it once was. We are finally living in an age where the everyman can compete with multinational corporations. As you can clearly tell from the prevalence of startup culture, the consumer marketplace is responding positively to these responsive and efficient business models.
