Get your mojo back – inculcate the startup mindset

As companies grow, they invariably become complex, bureaucratic, sluggish and dysfunctional, that would slowly start to kill the growth they pursue. They can trace back many of the reasons for the shortfalls and they would land on internal issues in the company. Very few companies are actually able to scale up their organization effectively and avoid the pitfalls along the way, and so end up in a stall. The executives of such stalled companies seek to recapture their original mojo that they had when they started their business. Many of them say they want to bring back their startup mindset. But they find it hard to put their finger on where to start to do so.

Startups:

The media and pop culture provide us with romanticized visions of dorm room ideas becoming billion dollar IPOs. And indeed, that does happen sometimes, but startups are more than rags to riches stories. In concise terms: startups are organizations dedicated to creating something new under conditions of extreme uncertainty. This sounds very much like how large companies find themselves, when under pressure to respond to disruptions. Not only are they trying to survive, but they’re also trying to transform their organizations into a viable products/service business for 21st century markets. Here are a few considerations from the startup mindset:

Startups are faced with constant change: It’s not about what’s-now but about what’s-next. Startups probe for new possibilities. They examine what else needs to be done and then launch a path for that destination. Thinking like a startup positions us to think aspirationally about change. It requires and rewards innovation and creativity. It causes us to constantly reevaluate our organization, purpose, and drive: not against what it is or what it has been, but against what it needs to become.

Startups are build not necessarily for profit. Obviously for businesses, financial validation is necessary for survival, but the incubation stage is more about trying to develop good ideas into working models. The film 'The Social Network' provides a dramatic representation of this situation. The co-founders of Facebook ponders its future. One of them wants to monetize it right away, while the other insists, “We don’t even know what it is yet.”

Startups provide us a framework for action. They give us a way to analyze what we do, why we do it, and how we might implement change. The lean startup methodology accelerates discovering possibilities, addressing needs, and proposing solutions. Whether launching new initiatives or addressing existing ones, the startup mindset challenges us to test and validate our assumptions.

Startup is a culture. It bonds us together. It connects us with our users. It forces us beyond satisfaction metrics and into the difficult but rewarding position of needs-based

businesses. Businesses invest a lot of time measuring how well we did, and hardly any time leap-frogging into what is going to be important in the future. Embracing startup culture is embracing a forward-thinking and future-oriented perspective that focuses on innovation, speed, customer-centricity and business value.

We have these four areas that we can adopt from startup mindset to avoid stall of an incumbent company:

Innovation:

Not just innovate for innovation sake, but innovate with bold ideas that challenge the market and industry on behalf of the customers. With growth, companies loose that boldness and external focus on the customer. You have to take on continuous innovation and lead disruption on behalf of you customer. It is this boldness in your mission that captures the high-energy and commitment of your employees, because they believe in the meaning and nobility of purpose. The leadership team goes beyond financial targets, to redefine the markets on behalf of the customer, instead of retreating behind their walls to protect their competitive position.

While companies adopt a bold mission, their leaders will have to feel liberated enough in the industries they compete in and they redefine those industries to move beyond them. Ruthless focus on the core business cannot be neglected, or they would fail to become the market leader. But, they will also constantly push against the boundaries of their business definition, while redefining the markets in which they compete and the industries they are part of. Failure is an enormously untapped resource and one of the most important keys to innovation, which gives leaders extremely valuable lessons -- but only if they welcome failures as opportunities. Leaders who learn to embrace and learn from mistakes can shift from a culture of “trial and terror” to “trial and error.”

Finally, the company should excel in innovation and capability around a few aspects. They wouldn’t want to be ‘jack of all trades and master of none.’ They would rather want to become ‘jack of all trades and master of a few.’ So depending on their strengths, they would push themselves to become uniquely qualified in a few aspects that will be richly rewarded by their customers.

Speed:

Speed and agility demands fast decision making the company. Fast decision making demands that all the issues be brought to the table and then make the right decision for the customers and for the company, with quality, speed, yield and action. The whole company should know that the issues will be dealt with effectively as they come up each time, so they raise any issues that are stopping them from taking action. It’s a social contract, and if done right, it ensures faster movement than competitors. There’s a focus on getting things done and making big things happen.

The danger in growth companies is that, over time, the emphasis shifts to protecting the systems in the company, the processes, the institutional “ways of working.” People who sometimes fight against these systems are seen not as heroes, but as troublemakers. This is a big risk, because only bureaucrats want to work in a company where systems rule absolutely. Bureaucracies bring order and predictability, but are sometimes indifferent to the right and wrong of the efficiency they create. The leader’s job is to risk the unhappiness of these bureaucrats by seeking out and celebrating the actions of those who fight against systems and procedures to do the right thing for customers.

Incorporate accelerators - hackathons, co-create sessions, alliances, partnerships, incubators, etc., - to ensure a steady pipeline of timely and relevant ideas come to the forefront. In a 'disrupt or be disrupted' world, one can't afford to wait for serendipitous innovation to surface.

Customer-centricity:

Companies give their people the authority and resources they need to do what it takes to serve customers better. This leads to relentless experimentation—hundreds of experiments by customer-focused, empowered employees continually innovating and working with their customers to devise new solutions, better service and better products.

Many CEOs contend that to be customer focused, you actually have to put your employees first—by which they mean that unless the people you hold accountable to serve your customers feel they have all the tools and resources to do this, there is no point in putting the customer first. But the notion of front-line empowerment is far more profound—it signals the basic orientation of the firm. Do leaders, the voice of the front line, hold themselves accountable for doing what it takes internally to ensure the kings and queens have what they need to support customers? Do the functional heads view their role to be supporting the front line, or do they—as happens all too often—think that the front line is there to execute on central tasks? Does the company reward the “doers” who make it happen every day for customers and treat those people as the heroes? Or does it reward the “thinkers” and allow execution to become devalued over time? The focus on the customer starts at the top but cascades immediately to the front line, who receive training and resources to do what it takes to support customers. Finally, those responsible for helping customers are given the time to learn from each other, to improve, to experiment, to adapt. And the leadership team doesn’t stop with a declaration that the customer is important—it engages deeply to help manage the inevitable trade-offs this commitment will create. And part of this customer focus, is actually to put the front-line first.

Value focus:

Leaders of startups are obsessed with cash, but more precisely with their business’s nanoeconomics (which is, realized price vs. costs). They focus on unit volume growth, recognizing that this kickstarts operating efficiencies. They push for continual cost improvement—for them, this is the primary benefit of achieving greater scale and produces more money that they can reinvest in the business. The decision to reinvest in the business (instead of paying off the existing creditors and investors who are always waiting at the door) is a massive decision to invest in the future capabilities of the firm. It is a bet on growth. They do so by “zero-basing” and then reallocating the funds they liberate to those areas where it will produce the greatest return. They don’t allow resources to become trapped in siloes. We describe this is as using SG&A as capability currency. When leaders of insurgents invest money in the SG&A line of their companies, it is a massive symbol: with each dollar they are investing in future capabilities to create new areas of future growth.

Lean startup – a framework

Innovation is hard work – harder than most people realize. Lean Startup was the result of an early attempt by Eric Ries at merging customer development, Agile software development methodology, and Lean manufacturing practices to develop products and businesses quickly and efficiently. One of Lean Startup’s core concepts is build – measure – learn, the process by which you do everything, from establishing a vision to building product features to developing channels and marketing strategies, as shown below:

The cycle is a good reality check. Building a minimum product necessary is part of what Eric calls innovation accounting, which helps you objectively measure how you’re doing. It can be used to measure your innovation, getting you closer and closer to a continuous reality check.

The reason why Lean Startup had gained traction was because of the fundamental shift in how companies are built. It doesn’t take much anymore to slap together a first version of something. Clouds are free. Social media is free. Competitive research is free. Even billing and transactions are free in the digital world that we live in today. That means one can build something, measure its effects, and learn from it to build something better the next time. You can iterate quickly, deciding early on if you should double down on your idea or fold and move on to the next one.

This iterative cycle to refine your product / solution should be done in conjunction with the further refinement of value proposition to the targeted customers and the business model to support it.

Making things change quickly is hard, and if you are going to do it, you need authority commensurate with responsibility. If you’re trying to disrupt from within, you have a lot of work to do. Many of the lessons learned from the startup world do apply, but they need to be tweeked, merged with other frameworks, and rolled out with a small scope first, to survive and scale up on success, in a corporate setting.