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Predicting the turn: A surprising look at startups and big business

Predicting the turn: A surprising look at startups and big business Dave Knox

The term "high stakes" is often associated with the game of poker, in particular poker games where a large amount of money is at play. Today, the largest companies in the world are finding themselves in the middle of a different type of high stakes game. It is a high stakes game of business between startup companies and the Fortune 500 where the bet is the very future of these big companies.

My new book, "Predicting the Turn," is about this high stakes game of business. As a brand marketer, venture investor, and startup advisor, I wrote the book to drive a conversation around the changing relationship between startups and Fortune 500 companies.

While competition has always been fierce in the business world, something is different this time around. The rise of digital over the last decade has not created just a new marketing channel. Instead, it has eroded the competition advantage offered through scale and being big in business. It has unlocked an entirely new way for smaller companies to compete on a level playing field. A new consumer packaged goods company no longer needs millions of dollars for a national television ad campaign. They no longer need to secure the limited shelf space in the aisles of Kroger or Walmart. Digital has given them a direct one-to-one channel to interact with their current and potential customers.

"Predicting the Turn" is the rule book for this new game of high-stakes business. With disruption and innovation at the top of every executive agenda, business leaders big and small need to develop a sense of how and when the future will happen. They need the ability to see the future of their industry before it happens. To do this, business leaders need to keep in mind these three things:

Venture capital is the new R&D

Historically, the most brilliant technical graduates from PhD programs would clamor for jobs at corporate-owned R&D programs like Bell Labs or Xerox PARC. Today, that same talent wants to become Elon Musk or Mark Zuckerberg. Instead of applying for jobs at the research and product development labs of the Fortune 500, these aspiring entrepreneurs are pitching venture capitalists for funding. The result is nearly $60 billion in venture capital investment in 2015, nearly equal to the $80 billion of non-defense R&D spending by the Fortune 500. Consider the case of Uber and Carnegie Mellon. In early 2015, the two organizations announced a partnership in which Carnegie Mellon would work closely with the ride-hailing service on the development driverless-car technology. However, only months after the announcement, word leaked that over 40 scientists and researchers had decided to leave the school to work full-time in R&D at the venture-backed startup.

Startups are the canary in the coal mine

In the past, coal miners would bring a canary in a cage down into the mines to warn them if dangerous gases were building up. Today, startups can serve as this same early warning for big brands on what changes might be on the way. While the impact of subscription commerce became apparent with the $1 billion acquisition of Dollar Shave Club by Unilever, the signs of subscription commerce were apparent more than five years ago. In 2011 and 2012, more than $300 million of venture capital funding went into 50 startups in subscription commerce. Just a few years later in 2014, subscription commerce companies generated more than $5 billion in revenue.

Focus on total available market, not market share

As entire categories are redefined, the focus needs to move away from the market share of a current industry. Instead, the focus needs to be on the potential of how an industry might evolve. Consider the car industry. When that technology was invented, the wrong approach would have been to say that automobiles would take X percent of the horse market. In 1920, there were 25 million horses in the United States and most of them were used for farm labor, not personal transportation. Today, there are 250 million automobiles in the U.S, for personal transportation and 4.5 million tractors. The total available market is far broader than the market share of horses in 1920.

"Predicting the Turn: The High Stakes Game of Business Between Startups and Blue Chips" is available in print or on your favorite e-reader.

Dave Knox is CMO for Rockfish, one of the fastest growing digital agencies in the country. Prior to his role at Rockfish, Knox was a seven-year veteran of Procter & Gamble, where he was instrumental in the digital turnaround that led to P&G...

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