What is the startup way?
Innovation has been a big topic for centuries. Creating new products and services, improving processes and other things in a company are all important. Today, because change and disruption are speeding up, the importance of innovation is different. Startups are popping up all over the world. Entrepreneurs seek problems in the market and set out to solve them by inventing new products and services that didn’t exist before. Technology enables these entrepreneurs to build new products faster, cheaper and easier than ever before. And the bigger companies are often left behind when startups suddenly disrupt their traditional business models. There are the obvious examples like airbnb, gojek, uber, facebook. But this happens everywhere in all industries today.
There are thousands of books and theories about innovation. Companies have built R&D labs, innovation labs, innovation programs for decades. In ‘the startup way’, big enterprises try to adopt the mechanisms used by startups. The startup way is a phrase coined by Eric Ries. In similar style, Dan Toma and friends wrote ‘the corporate startup’. They describe how corporates can run innovation ‘like a startup’.
Now the important thing to note here is that an enterprise can not ‘become’ a startup. A large company employs thousands of people. It has accrued habits, culture, regulations, hierarchies. A startup is still very agile and everything can be changed overnight. The incumbent structures in a big company can’t be changed overnight. But the central idea here is to see what CAN be changed. HOW can an enterprise step by step change those structures, learning from what works in startups.
In his book, Eric describes a set of principles. Those are good starting points for an enterprise to learn what can be changed, to define the direction innovation can take in a modern company.
Continuous innovation that repeatedly finds new breakthroughs.’
This principle relates to the culture we have within our enterprise. A traditional company has lots of people who like ‘status quo’ and stick to ‘how things have always been done here’. They accept how things (don’t) work. They accept that their current business is x and not y. In a modern, innovative company, people are continuously (stimulated to) looking for improvement and innovation. The company runs programs and events to stimulate ideation everywhere (not only in a ‘lab’). It provides support and resources for people to execute those ideas. It educates people continuously on the modern tools of innovation.
The startup as an atomic unit of work.
Traditionally, innovation happened in ‘labs’ or a special department. In the startup way, we see the ‘startup team inside the corporate’ as the entity ‘running’ their innovation. We gather a group of people in a team (a startup). Those people are all employed by the enterprise, but they are ‘allowed’ to work on their startup idea. The structure of the company is such that this startup has the freedom to pursue their startup idea similar to an outside startup. They get mentoring, funding, access to customers, access to existing tools and frameworks, access to talent, education. All the support structures are there to empower the startup team and help them towards success.
Entrepreneurship as the missing function in the organization.
Without entrepreneurship, innovation will not take place. We need entrepreneurs at different levels in the enterprise, both at the (top) leadership level as well as on the execution level. We need to make ‘entrepreneur’ or ‘intrapreneur’ an accepted role in the company. There are three levels of leadership in modern, innovative companies.
An enterprise needs to create the right environment in order to identify and keep entrepreneurial talent. Most entrepreneurs will jump at an opportunity. But if the enterprise doesn’t allow them to work on their ideas (independently), they will leave the company to do it on their own. The key is to create entrepreneurship as a ‘normal function’ in an enterprise, so we keep this talent and support them to launch their ideas
The entrepreneurial function also supports other functions in the organization in doing their work more effectively. Traditional management tools are focused on planning and forecasting. Identifying and managing entrepreneurs requires a new style of leadership. It is particularly important to realize that ‘entrepreneurship’ is not some special quality possessed only by a few people. In fact, you never know who the entrepreneurs are going to be; and even the non-entrepreneurs will benefit from this new way of working.
To take advantage of its latent pool of entrepreneurial talent, the organization has to make the entire employee base aware of the possibilities of entrepreneurship as a career path. This means meeting a series of challenges:
- Creating space for experiments but with liability constraints.
- Learning to make investments on the basis of evidence, experimentation, and vision, not just ROI forecasts.
- Creating milestones that can work even when there’s no accurate forecast.
- Providing professional development and coaching to help people get better at being entrepreneurs.
- Provide internal and external networks so that people know what it means to say, “I’m and entrepreneur.”
- Recognizing that high risk and uncertain projects need a separate and rational way to attract talent.
- Creating new incentive and advancement systems.
Unleashing entrepreneurship as a kind of second founding.
The second founding is essentially ‘reinventing the organization’. We transform everything in order to embed the entrepreneurial function and continuous innovation. We must look at what Ekipa calls the 5 building blocks of innovation:
In ‘the first founding’, a company comes to life. As it grows, it establishes patterns, culture, structure, governance. The bigger the company gets, the more ingrained all of this becomes. In the second founding we ‘start all over again’. We imagine our enterprise to recreate the way we fund projects and products. We recreate our culture, in alignment with the values of an innovative, modern enterprise. We re-create hierarchical structures and the according leadership structure. Governance is ‘broken down’ and we shape the way we measure success of any innovation project. And we create a new ecosystem in which we operate, opening the doors of our company and collaborating with startups and intrapreneurs ‘out there’.
Continuous transformation that rewrites the company’s DNA.
This last principle relates to the idea that transformation doesn’t have a beginning and an end. If we want to unleash innovation and entrepreneurship, we must keep reinventing everything we do. We should keep transforming, because the market and world are not static today. Everything keeps changing, disruption will come from any direction all the time. And so our enterprise needs to keep moving along.
The goal of all these tools and techniques is to move the organization from a state of continuous innovation to one of continuous transformations; an ongoing cycle of change that transforms not just a project or a team but the structure of the enterprise itself.
Every organization should have an active program of experimentation in new organizational forms and methods, peopled by those who will become the founders of the next company-wide transformation. These people will need a skill set similar to what is needed to build a new startup from scratch. They need career paths, accountability, and a rigorous training system. This engine of continuous transformation should be seen as a permanent organizational capability, one with responsibility for the entrepreneurship function.’ Youexec.
The 5 building blocks above show the main things that must change. It’s not sufficient to re-invent the organization once. We should see our enterprise structure and the 5 building blocks as an evolving structure. The things we change are to be changed in a never ending cycle of ‘build-measure-learn’. We keep looking at what needs improvement. We define a simple new version of that improvement. We launch that, learn what is really needed and iterate until it works. And we keep doing that for everything in our enterprise (people, process, technology, structure, policies, etc). Never ending, continuous transformation.
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