What can big companies learn about innovation from start-ups?
What GE and Others Taught Me About Innovation: Don’t Act Like A Dinosaur!
Put on the spot, most hip “I want to be a change agent/innovator” types tell you that working at a Fortune 500 or 1000 company is like working for a lumbering dinosaur.
The dinosaurs are doomed to extinction: True…or false?
Everyone who thinks, talks or worries about innovation (or the lack of it) repeats the conventional wisdom. That is: big incumbent companies are at a distinct disadvantage against the start-ups.
Today’s supercharged, a-new-product-or-service-every-nanosecond world is tough on big companies. They’re too slow, too bureaucratic, maybe even (gasp!) too dumb to compete.
Hearing statements like that makes me cringe, especially when I think of all the hot potential recruits who voted with their feet. They either left big companies for greener pastures as entrepreneurs or never joined a big company in the first place.
Is this the end game for all the corporate dinosaurs out there? Or is there another way?
Put another way, what does a big company – and the people inside it – do if they want to change this equation?
Sounds Like the Definition of Insanity Flash forward to today, yesterday, or last week. Looking back on my first year of consulting to big companies like the ones I used to work for, here’s what stands out. I can’t tell you how many times I’ve found myself recalling the popular definition of insanity.
This definition of insanity, widely distributed on the Web, is often misattributed to Albert Einstein, Mark Twain and Benjamin Franklin. Instead, its actual origin is a pamphlet published by Alcoholics Anonymous.
“The definition of insanity is doing the same thing over and over again while expecting a different result.”
Avoiding The Trap of Mutually Assured Frustration You can probably guess why that phrase comes to mind so frequently when I work with smart, talented and motivated people desperately seeking to “jump-start” or “drive” (take your pick of the buzzwords) innovation at big bulky companies.
One of the toughest obstacles, I’ve found, to just getting started is summed up by the following complaint. I keep hearing this problem from nearly everyone when I begin a new engagement.
Whether they sit in the C-Suite, in middle management, or on project teams carrying out the technical and development work, I keep hearing the same thing:
“They just don’t get it.”
Sometimes “they” refers to certain senior managers. Other times, “they” refers to certain middle managers, who are seen as completely clueless by senior management or project teams. At still other times, when talking to senior managers, “they” refers to middle managers and project teams who “just don’t get it.”
“We tell them to innovate,” goes the typical senior manager’s lament. “We give them the resources and incentives to do it. But somehow, it just doesn’t happen. At the end of the day, we’re still getting our butts kicked by two guys in a garage with a dog.”
Obviously something is deeply, dramatically wrong with this picture.
How can so many people believe everyone else does not get it? While believing at the same time that they themselves do get it?
Here’s how.
This deeply entrenched and unfortunately self-sustaining state of affairs, which I call “mutually assured frustration,” is nobody’s fault. Rather, it’s the inevitable byproduct of the particular ways large-scale organizations are set up.
Big companies organize themselves to be managed and function effectively. And command-and-control-based bureaucracies, hierarchies and silos work like a charm – when their primary issues and concerns are strictly operational. That’s because operational issues can be handled by following rules and procedures.
But innovation is different.
Take, for example, a CFO who is conscientiously patrolling the R&D budget. He informs middle managers that he or she will absolutely refuse to allocate any more scarce financial and human capital to any idea, no matter how promising, without a certain guarantee.
If middle managers aren’t willing to guarantee (by signing in blood on the dotted line) that the idea will generate many millions in revenues in its first year, with a corresponding bump in profits for several quarters, then the capital tap will be shut off. Middle managers dutifully cascade the CFO’s mandate down to their project teams.
What’s the virtually inevitable result of the CFO’s perfectly valid and reasonable attempt to instill rigor and keep costs down? What’s achieved by strictly limiting the associated risks of “uncontrolled” and/or “undisciplined” R & D spending on blue-sky pipe dreams? Here’s the most common result:
Under the weight of financial “discipline,” innovation grinds to a halt.
Why?
The professional price likely to be paid by the people who conceived the idea and were hoping to develop it to fruition is simply too high. Few believe it worthwhile to risk their jobs for the possible gain that might accrue if – and this is always a Big If – they end up hitting the ball out of the park on the first pitch.
What Start-Ups Do Differently In contrast, let’s look at your typical start-up. On a comparatively tiny team, everyone is 110% focused on seizing the market opportunity.
The team holds the one single, simple weapon they’ve got in their arsenal: the “disruptive” new idea. It’s a product or service they categorically own, which no one else has thought of. And they are absolutely, totally, hopelessly convinced it is going to be the ground-breaking, paradigm-shifting, era-defining, fortune-making iconic new concept of its time.
So what if it doesn’t turn out to be all it was cracked up to be?
They crash and burn, flame out and fail fast, in Silicon Valley parlance. What happens next in a start-up culture is that they pick themselves up, brush themselves off, and learn what they can from the teachable experience of failure. Before you know it, they’re off and running, starting something different this time around.
That is, by the way, precisely the opposite of the definition of insanity: doing the same thing over and over again and expecting a different result.
This is total sanity, because they do different things again and again, expecting different results.
Meanwhile, back at your Fortune 500 Company, there are constant conflicts, turmoil, turf battles and power struggles going on. These are based on the wildly varied incentives, positions, resources, and points of view distributed among the various silos.
All share the same lofty aim of “innovating or dying” – or at least pay lip service to it. But, in fact, they’re constrained by their own expertise and position from doing anything that might put their personal and professional standing in jeopardy.
I call this the “unintended consequences of success.”
The Parable of the 6 Blindfolded Men and the Elephant The depth and breadth of this serious challenge is best illustrated in an old Indian parable. A king whose kingdom is being threatened by a herd of rampaging elephants summons his 6 top advisors to his palace for a strategy conference.
There, the advisors are led into a darkened room, where they find (but can’t see) the king standing in front of a captured elephant. He awaits their inspections and subsequent reports as to the salient characteristics of this specimen.
The first advisor, holding the elephant’s tail, reports back to the group that an elephant is shaped like a snake.
A second advisor, clutching the trunk, insists that an elephant is shaped like the branch of a tree.
A third, feeling the ear, states for the record that an elephant is shaped like a fan.
A forth, holding a leg, tells the king that an elephant is very much like one of the pillars on his porch.
A fifth, grasping a tusk, says an elephant is like a pipe.
And a sixth, sagely pressing one palm against the hard belly, solemnly asserts to the group that this elephant is built like a brick wall.
After the king turns on all the lights, he states for the record that all of the advisors were right, in the sense that all elephants do in fact posses the features and characteristics described.
Yet he sternly admonishes them for giving him worthless advice as to the nature of the challenge they’re up against. The advice is worthless because no actual elephant in any way can be said to resemble a snake, a pipe, a branch, a fan, a pillar or a wall.
Here’s what I’ve found and learned over the past heady and hectic year. When you’re trying to tackle the “Two Guys in a Garage Problem,” first you need to confront a different problem that’s deeply and often invisibly embedded inside it. That’s the “Six Guys in the Dark Room Trying to Size up an Elephant Problem.”
Twelve years ago, Louis V. Gerstner, then recently retired as CEO of IBM, wrote a best-selling book about bringing Big Blue back from the brink. It was a remarkable turnaround he pulled off brilliantly. He got a company once defined by innovation that seriously lost its way to start competing again by innovating.
Before the buzzer goes off, can you name the title of that book?
Who Says Elephants Can’t Dance?
Of course.
Until next time, I’m Steve Liguori.
And for the record, I like and admire elephants for two reasons:
1.) They’re awfully smart and even wise.
2.) More often than not, they end up living a very long time.