There’s a lot of talk about big companies acting like startups. “We’re a billion dollar company that acts like a startup. Woohoo!”
While that might be a good headline, it’s hardly the best way to run a large business. Big companies should be great at being big but simultaneously leverage innovative approaches and create environments that cater to innovation. It’s in this space where large companies can learn from startups – and they do. We (at Prehype) work with major companies like Kaplan, Verizon and Coke – and while the big guys might not be as vocal about their innovation efforts like startups – they definitely have their eyes on using lean startup methodologies to boost their innovation efforts.
Last week we had 10 people from Verizon Wireless in our office to help them push innovative product development. The visit was part of an internal program called ‘Team Innovate’ that allows ‘intrapreneurs’ to suggest ideas and then give them a fast track process to make it happen. It’s lean startup methodology injected straight into the veins of a $90 billion corporation. Interestingly, Team Innovate is being managed by Tom Constabile who works in Wireless’ Business Development team, which is one of the main contact points between Verizon Wireless and the startup community. So it’s probably not a surprise that much of the innovation program is heavily inspired by best practices in the startup community. The week made me think of three myths about large companies that I often hear from startup entrepreneurs, but that I don’t think are true.
Staff at big companies lack the motivation to innovate
BJ Fogg, who runs the Persuasive Technology Lab at Stanford University, has created a great model for what causes behavior change. It illustrates that three elements must converge at the same moment for a behavior to occur: Motivation, Ability, and Trigger. When a behavior does not occur, at least one of those three elements is missing. It seems that most of the debate about corporate innovation makes the mistake to only focus on one of these areas, namely motivation. The conversation often centers around ‘getting our staff to think outside the box’ or hiring a speaker to get people to think more creatively. Based on our work with large companies like Verizon I find that motivation is almost never the problem. The people we have met from companies like Verizon are both highly motivated and have great ideas. Based on BJ Fogg’s model, we think the main issue then is that most large companies have not created a process that gives their staff the ‘ability’ to create radical innovation. What Verizon has established is a program that gives their staff just that. And they used a ‘challenge question’ from their CMO as an internal (and powerful) trigger. So if you are senior management at a big company I’ll bet you have a bunch of great intrapreneurs in your organization that are stuck on ‘brainstorm island‘. Stop thinking it’s a problem of them being motivated and start thinking about how you enable them to change behavior by giving them the ‘ability’ to innovate and by establishing an effective trigger. (for more ‘innovation architecture’ pre-order this book‘)
It’s somewhat ironic how many great companies are started by people who used to work in a big company. And it was not the walk across the street and down in the startup basement that suddenly made them creative and/or motivated.
Big companies can’t act lean, small or flexible.
Being lean, agile and ready-to-deploy are best practices du jour in startup land. It’s often an assumption that this is only doable inside a small startup and that corporations can’t act with the same flexibility. What people miss is that this methodology is only relevant for certain types of innovation projects. Most big companies have a core business that they are scaling effectively by having a number of departments whose main function is to keep that core business on track. Departments like the branding team, the legal department and the IT group are key to keeping the wheels turning on big machinery. However, they are counter productive for building new, adjacent business or radical innovation projects. So while structures are needed for large scale operations, most need a new approach for radical innovation that can allow them to go from concepting to testing their new initiatives quickly. The startup industry has invented smart methods to create what Vijay Govindarajan called Box 3 type of innovation quickly and cost effectively. Verizon has identified this and are applying lean startup methodologies to the areas of innovation where it’s most appropriate — the new stuff.
It’s either a billion dollar idea or a small feature
One of the practices that we apply in our Prehype model is to force corporations we work with to identify a big idea but also to figure out what the minimal viable product version of that idea is. This is to get companies away from ‘portal thinking’ and to train them to think both big and small at the same time. With Verizon we have established a 100 day limit on the incubation projects we’re exploring. That allows us to think big but simultaneously identify a core idea so that we can create a real life beta and test our underlying thesis with real users. The benefit of this practice for a large company is that it backloads the risk of a project, by testing the core thesis before overspending on it. Hunter Walk speaks brilliantly about this point in his recent post: “Is this a billion dollar business?:” The tension between market sizing and innovation. It’s nice to see a large organization like Verizon’s accepting that big ideas can start small.
In general, companies like Verizon are indeed increasingly embracing startup methodologies where they make sense and are doing what we think is the key to increasing innovation: namely that innovating your innovation process is more important than just shouting to your staff that they should be more innovative.
And just think of this, if a company like Verizon actually acted like a little startup all the time it’d be a total mess. I trust Verizon because they are big. I don’t want them to start having 20 year old kids flying by the seat of their pants. IBM, AMEX, GE, these companies are arguably more innovative and effective in what they do than most startups – and make more money too… :-). But they also need to embrace new models to keep up with the pace of radical innovation that new tools and the web is facilitating. Some of them have already begun.