Why you should build a differentiated startup, not a disruptive unicorn
By: Shanley Harruthoonyan
Tags: Social Enterprise, Startup Lessons, Startup, Entrepreneurship, Zebrasunite

Why you should build a differentiated startup, not a disruptive unicorn

It’s a smart time to be a flamingo.

Turn the extra room in your home into a hotel to pay your rent. Use your car as a side gig. Get to know millions of people you’ve never met — all on a single platform.

The digital age has been a golden era of disruption.

Here’s what we didn’t anticipate: societal disruption so massive it surprised even the disruptors themselves.

In 2020, we’ve learned what happens when the world outside becomes so prominently disrupted that we must return to home as haven, instead of income generator. We saw a platform meant to wholly democratize friendship disrupt the process of democracy. We witnessed when services fueling a gig economy were suddenly the only economy — and yet made it impossible to pay the rent on gigs alone.

Can it be that we have suddenly entered an age in which disruption as business has run its course?

According to Canadian ecologist Crawford Stanley Holling, the moment we find ourselves in isn’t just natural — it’s key to realizing the change disruption ignites. One of the conceptual founders of ecological economics, Holling offers disruption as a single phase in “Panarchy,” or the cycle of transformation.

Within this model, disruption is not an end goal, but part of a shift toward the next part of the transformational cycle: reorganization. And, with it, roles like activation, pathfinding, facilitation, enhancement and connection.

In a world in which proving to be socially and environmentally net positive has suddenly become necessary vs nice to have, a growing movement of startups are being built to carry out these generative roles. But that’s not all: they’re slowly, yet surely, usurping and outperforming those meant for quick, disruptive scale — giving investors reason for pause in their pursuit of disruptors alone.

To better understand their approaches, I studied dozens of organizations and startups with track records of driving reorganization.

Here’s four, strategic ways they’re modifying typical startup behavior in order to effectively build the new normal (and you can too!):

1. Replace win-lose scenarios with infinite games

Today’s tech giants maintain domination through disrupting the OODA Loop, or “observation-decision-action cycle” of their opponents. More maneuver warfare than market insight, this approach is rooted in war theory that says winning depends not on force, but the interruption of the enemy’s existing system.

“The way to win in a battle according to military science is to know the rhythms of the specific opponents, and use rhythms that your opponents do not expect,” Japanese samurai and philosopher Miyamoto Musash explains.

While it may seem like unicorns are masters of the OODA effect, their disruptive approach typically only focuses on disrupting the system of their competitive market. In the meantime, all of their success is predicated on preserving the patterns of another system: venture capital.

The fact that unicorns exist to sustain bigger, better rounds of capital, enormous amounts of equity, revenue over user-growth, accelerated timelines and significant spend makes them uniquely vulnerable when the scalability focused system they’re built to support is disrupted — say, for instance, by a massive global force that forces them to preserve users over massive profit.

To navigate change in multiple systems, consider multiple, or “nested” systems that affect one another — making success more about navigating complexity than a win-lose scenario, suggests Robert Ricigliano, a systems and complexity coach at The Omidyar Group.

Unlike the winner-takes-all Silicon Valley culture, Ricigliano suggests leaders think of success as the ability to learn and adapt in an infinite game, with progress being focused on small wins that align toward an ultimate, shared goal.

2. Seek tension vs singularity

It takes an infinite chain of trade-offs to achieve a unilateral goal. Take Uber, for example: a massively disruptive, but terrible, business.

In a world in desperate need of solutions to complex problems, unilateral value is no longer enough. Instead, solutions must integrate dogmatic and even opposing forces, viewpoints, needs or observations.

“A point of tension more often than not informs an insight,” explains Landor JPAC president Nick Foley.

Great, in theory. But what does it look like to practically engage with the kind of multifaceted political, social and economic tension we’re seeing today?

At IDEO CoLab, a platform built to drive collaborative impact, directors Holly Bybee and Lauren Yarmuth suggest four key strategies.

First, create space for tension by getting curious about it — ask “what is happening?” instead of immediately asking why.

Second, give it some kind of name, even if it’s just — “I’m feeling xyz tension.”

“Mapping out seemingly conflicting interests or goals is a great tool for synthesis and identifying opportunities for design,” the designers explain.

Third: begin. Collaborating or making in the midst of tension or unanswered questions creates room for unexpected outcomes.

Lastly, focus on opportunity for synthesis, versus what keeps elements apart.

3. Prioritize truth over time on sight

It wasn’t necessarily intentional that unicorns became a unilaterally focused business. But it wasn’t intentional that they did not, either. According to Dr. Astrid Scholz, co-founder of Zebras Unite, it’s the kind of thing that happens in a world where what exists is created by and for an exceedingly select breed of people.

“The evidence against toxic ‘unicorn’ company culture has only mounted,” says Scholz, whose organization supports a community of entrepreneurs, investors and allies dedicated to building companies that balance both profit and purpose. “Exposés on sexual harassment; damning studies revealing how funders ask biased questions and speak differently about male and female founders; lack of access to capital for anyone who isn’t white and male.”

It’s becoming increasingly obvious that investors are missing out. Companies with a female founder outperformed those with all-male founding teams by 63 percent. Similarly, the Small Business Administration found that investing in women-led businesses improved the performance of venture firms.

But it’s more than that. It’s a function of the very elements that inform the design of how we live and thus, inform how we behave.

“The current technology and venture capital structure is broken,” write Zebras Unite, a community of entrepreneurs, investors and allies dedicated to building companies that balance both profit and purpose. “It rewards quantity over quality, consumption over creation, quick exits over sustainable growth, and shareholder profit over shared prosperity. When VC firms prize time on site over truth, a lucky few may profit, but civil society suffers.”

The leaders of Zebras Unite further point out that when scaling disruption is the only priority — what we are actually creating is a path through which to scale disruptive behavior.

“When shareholder return trumps collective well-being, democracy itself is threatened. The reality is that business models breed behavior, and at scale, that behavior can lead to far-reaching, sometimes destructive outcomes.”

4. Look to regulation and responsibility vs rogue innovation

To create a more viable future, Doteveryone, a leading think tank advocating for responsible tech, suggests starting with the concerns of talent within the supply chain, versus focusing solely on entrepreneurial vision.

“Significant numbers of highly skilled people are voting with their feet and leaving jobs they feel could have negative consequences for people and society,” the report’s writers share. “This is heightening the UK’s tech talent crisis and running up employers’ recruitment and retention bills. Organisations and teams that can understand and meet their teams’ demands to work responsibly will have a new competitive advantage.”

Regulation and guidance kill innovation, according to Silicon Valley’s elite. But this research shows that regulation and guidance are actually essential ingredients for talent management, retention and motivation. In it, worker’s show an appetite for action in the following three areas:

guidance and skills to help navigate new dilemmas

to help navigate new dilemmas more responsible leadership

clear government regulation so they can innovate with awareness

To integrate talent as a key stakeholder, the report suggests that businesses take the steps:

Implement transparent processes for staff to raise ethical and moral concerns in a supportive environment

Invest in training and resources that help workers understand and anticipate the social impact of their work

Use industry-wide standards and support the responsible innovation standard being developed by the BSI — 78% of workers favour such a framework

Engage with the government to share best practice and support the development of technology literate policymaking and regulation

Rethink professional development, so workers in emerging fields can draw on a wider skills and knowledge base — not just their own ingenuity and resources

What these insights give us is a future of industry fit to truth. One that applauds the infinite nature of our small wins, engages a world in constant tension, moves toward inherent complexity and works with, instead of against, regulation and responsibility rooted in protecting talent.