Startup secrets that big business needs to know

What UK plc could learn from entrepreneurs...

Big organisations might assume there's little that startups can teach them about business. Nothing could be further from the truth, says's Nick Heath.

How to get a startup off the ground was the topic of discussion at the recent Silicon Valley comes to the UK conference in Cambridge.

Serial entrepreneur and angel investor Reid Hoffman, co-founder of LinkedIn, shared his experience of how to set up a startup and keep it from crashing and burning during those difficult early years.

But Hoffman's tips have a relevance beyond startups, and there're plenty of lessons from his past that are just as useful to established companies as they are to budding entrepreneurs.

LinkedIn co-founder Reid Hoffman

LinkedIn co-founder Reid Hoffman: Established businesses get stuck in a rut of endless tinkering that gradually alienates customersCreative Commons: Adrian Kenyon

Innovation not iteration

Simply refining an existing product is not enough to make an impact in a market, said Hoffman. Businesses should instead aim for the big ideas, providing a product or service that leapfrogs the competition in features or design.

"People tend to think, I'm not going to go for this big idea. I'm going to go for something that is achievable," Hoffman said.

"If you don't go for the big idea then the likelihood that you are going to end up with a big success is very small."

Keeping products fresh should never stop being a priority for an organisation. Established businesses can all too easily see their market share eroded by a lack of imagination or ambition, getting stuck in a rut of endless tinkering with existing products that gradually alienates customers.

There are some great examples of the brands that have reaped the rewards of taking a risk by redesigning a product when the safer option would be to tweak their existing line-up.

Just look at Apple. In 2004, having scored a hit with its iPod Mini music player, it decided to scrap it - despite it being a hugely successful product at the time - and replace it with the iPod Nano. The move paid off and the Nano proved to be even more popular than its predecessor.

Prioritise, prioritise, prioritise

When building a company from scratch, Hoffman said there will be 100 issues competing for your attention, so knowing where to focus becomes important.

With LinkedIn, Hoffman decided to focus on building scale before revenue, because he realised that a social network only becomes valuable once it has a critical mass of users.

Keeping focused on the organisation's core business areas is just as important for a big business that wants to stay ahead of its competitors.

Apple is a perfect example of the importance of focus, no matter the size of its business. Today, the company makes relatively few products but still manages to command a premium price for them by focusing on making them easier to use, better looking and more functional than rival offerings.

But Apple's history also illustrates what can happen when a company loses sight of its core business. Under former CEO John Sculley in the 1990s, Apple reportedly blew $500m a year researching products, most of which never saw the light of day. It was that lack of focus that played a role in the company almost going bankrupt in 1997.

And there have been a number of major businesses that have made slim pickings from ill-advised forays into new territory - eBay failing to exploit its purchase of Skype or News Corporation buying Myspace only to sell it, reportedly at a loss, six years later.

If there's one lesson, it's that...