The Problem with Lean Corporate Startup Strategy

Bang! You’re gone ...

In 1999 (yep, that long ago) Gary Hamel wrote Bringing Silicon Valley Inside which was published in the Harvard Business Review, and it still rings true today. He writes:

“Face it: Out there in some garage, an entrepreneur is forging a bullet with your company’s name on it. Once that bullet leaves the barrel, you won’t be able to dodge it. You’ve got one option: you have to shoot first. You have to out-innovate the innovators, out-entrepreneur the entrepreneurs. Sound impossible for a decades-old incumbent? It is. Unless you’re willing to challenge just about every assumption you have about how to drive innovation and wealth creation in your company.”

Keeping your gun holstered

It has taken many large Australian companies a long time to figure this out, but now that they have they are jumping on board the startup freight train as they seek out innovation and look to protect themselves from inevitable disruption.

In fact there is a lot happening in this space with many different strategies at play. Some examples include:

• Corporate Venture Capital (Westpac’s ReInventure, NAB, AMP)
• Corporate Accelerators - ‘hands on’ (Telstra’s Muru-D)
• Corporate Accelerators - ‘hands off’ (NRMA Motoring & Services partnership with Slingshot)
• Virtual Accelerators - (Citibank mobile challenge)
• Sponsored startup events, co-working spaces and hackathons

While these are good strategies and a great way to embrace innovation and disruption from outsiders there is a massive opportunity that is being missed by most companies.

Shoot to kill

There’s also the acquisition path, which might work well, but Steve Blank provided an interesting insight into this strategy when asked if buying startups helps big companies bridge the innovation gap:

“... if you’re a Silicon Valley startup and a large company has bought your competitor, one might think you’d cower in terror, but it turns out we all celebrate. The reason is there’s a 95 percent chance the large company is going to kill that startup. The founders will leave the large company after their stock vests. Then the innovation disappears.”

You guessed it ... innovation from the outside yet again.

Hitting the target

What about the insiders? The employees who have unique insights into the business and in many cases are also consumers of the company’s products and services. If anyone understands problems within a business, and how to make things better for the company’s customer, these are the people to listen to.

Internally many large companies have skunkworks, idea labs, R&D departments and/or an intrapreneur department. Surely that means the startup spirit is being embraced from within? It isn’t and here’s why:

1. The majority of employees aren’t given a voice
2. Those that have a voice, like the intrapreneurs, are frustrated by the corporate machine and the inability to be lean

But, do employees want to be innovators? Do they have the entrepreneurial spirit? Intuit seems to think so:

“We are a 30 year old 8,000 employee startup. All 8,000 employees are entrepreneurs and they’re innovators. It’s everybody’s job to create, to invent, and to look for new and better ways to improve our customers lives.”

And younger employees want more.

The Deloitte Millennial Survey released in January 2014 found that 70% of millennials see themselves working independently at some point rather than being employed within a traditional organizational structure. A big reason for that is that millennials want things companies aren’t currently giving them: autonomy, creativity, and meaning. But if companies give their talent something to focus on, projects to own, they will stay and help their company move forward.

James Canton, a futurist, puts the figure even higher.

At least 90% of millennials say they would rather work at a startup than a corporate giant

Shoot with both barrels (and fire long range missiles)

The ‘outsider’ strategies are good, but more needs to be done when it comes to internal innovation. Employees need to be included. Intrapreneurs need to be given the freedom to work like a startup and use lean methodology.

It sounds straightforward but there are many reasons why it is so difficult for these established monoliths. These range from established and decades old corporate culture within big businesses, the fact that employees still need to do their ‘day jobs’, the idea that failure will taint an employee’s job prospects and resume, lack of autonomy, corporate red tape, slow decision making, slow delivery, short term focus, risk aversion, innovation by committee, process, fear and the list goes on.

It’s an uphill battle for big companies to embrace the collective entrepreneurial spirit that lurks within their own walls but there has to be a solution and big companies need to start implementing strategies quickly to change the way they work.

The race is on to find the right strategy and environment to nurture innovation and adopt lean startup methodology.

Those that don’t will surely go the way of the dinosaurs. Those that do will drive innovation, have engaged employees and most importantly generate superior shareholder returns.

“If the rate of change outside exceeds the rate of change inside, the end is near.”