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12 Ways to Create a ‘Virtual Startup’ Within Your Large Organization

Mark Smith

Chief Innovation Officer, MedStar Health

In part 1, I discussed the three reasons why large organizations are in need of the nimbleness, energy and future focus of startups—the inertia inherent in their large size, the tyranny of the daily, and the today-tomorrow dilemma that traps them in today’s business model. Part 2 will discuss how an innovation center embedded within that large organization can provide “startup mojo” to its organizational parent by functioning as a “virtual startup.”

Innovation centers are the rising tide. After all, who can be against innovation? In fact, we’ve reached the point in health care that if a healthcare system does not count an “Innovation Institute” or “Center for Innovation” somewhere in its organizational landscape, it risks appearing to be behind the curve and to lack sufficient long-term focus.

What exactly does an innovation center within a healthcare system do?  Because these centers are relatively new, not all are cut from the same cloth. They perform many functions, alone, or in combination, such as:

  • Commercialization of new devices, software, diagnostics, and therapeutics created by employees;
  • Sponsoring and facilitating performance improvement innovation in the granular processes of care;
  • Piloting and incubating projects for new care delivery systems and new business models;
  • Catalyzing a culture and energy of innovation across the whole organization;
  • Serving as an entry portal for small startups to access and navigate the broader healthcare system;
  • Identifying, setting up and incubating new domains of endeavor for the organization;
  • Consulting to operational units within the organization to help them find new approaches to solving difficult problems.

One way to think about these innovation centers is see them as internal startups embedded within the larger organization, one that serves as an attractor (in the complex systems sense of the word) for the high-energy, future-focused and “change-the-world” optimism that pervades startup culture.

Based on my own experience as Director of the MedStar Institute for Innovation for the past five years, here are 12 insights that may be helpful to others who have been asked to navigate these relatively uncharted waters of creating an innovation center.

1. Organization chart position of eminence. In a large organization, the position of the innovation center on the organization chart speaks volumes as to how the center is valued within the organization. Ideally, the innovation center should report to the Chief Executive Officer. Such an organizational position provides an additional benefit: It enhances your ability to be nimble and leapfrog bureaucracy.

 2. Strong relational connection to operational leaders. The leader of the innovation center needs to be well connected with the decision makers and influencers throughout the organization in order to be able to enlist various parts of the organization to serve as pilot or partner for initiatives.

3. Tangible product fast. “Time to prototype” is a great measure of the innovativeness of the organization and, by proxy, the success of the innovation center (thanks to Change by Design by Tim Brown for this insight).

4. Think value. Comprehensively measuring the value of an innovation center to the larger organization remains an unsolved problem, since value metrics other than dollars are hard to quantify. One method is to identify aspects of the organization that would not exist were it not for something the innovation center did. Another way is to identify the “owned problems” that the leadership team wants solved, and make a run at them.

5. Emulate Pat Riley. This president of the NBA’s Miami Heat is known for deferring credit for success to others in the organization; do the same. Let your partners in the organization take all the credit for anything good that happens in your projects and stay in the background. You will invariably get their help and support going forward.

6. No surprises. Innovation involves taking risks, pushing the envelope and trying unconventional things, many of which fail. But make sure there are no surprises to the organization’s leadership: Put things on their radar early so when something bubbles up, they can say “Yup, I already knew about that.” (Although still be prepared to pull out the “ask for forgiveness” card every once in a while.)

7. Stay under the radar… initially.  Try a lot of things, but only showcase successes, at least initially. As initiatives gain traction they can go “up-periscope.”

8. Separate physical home. House the innovation center in a physical space that is separate and distinct from the rest of the organization. This makes it easier for the center to create its own culture (like a startup).  The separate space serves as a physical attractor for people from around the organization—a place where talent and ideas can incubate. To the outside world, it also serves as a portal or “way in” to the larger organization

9. Beware we/they.  Despite the need to establish a separate innovation center culture, remember that every member of the full organization should be able to feel like they can be part of what you’re building. Resentment will set in if their perception is, “These are the innovators while the rest of the organization toils in the fields.”

10. Budgetary discretion. Get maximum discretion in both operational and capital budgets. If time to prototype is one of the measures of innovativeness, a sure death knell to moving fast are the lengthy approval processes for even small capital equipment purchases that are typical in large organizations.

11. Get a free pass—or at least a wide berth. Get at least tacit permission to break (some of) the rules for getting things done. If you have to run through a standard chain of command, all it takes is one person who doesn’t get it to put the kibosh on an initiative – See HBR’s The Case for Corporate Disobedience.

12. Talent trumps all.  In the end, it’s all about—and only about—your people. Hire the best and screen out character pathology; you need a single coherent team. Let them do only that at which they excel, support them when needed, and stay out of their way otherwise.

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Mark Smith

Chief Innovation Officer, MedStar Health

Mark Smith, M.D is Chief Innovation Officer of MedStar Health and the Director of the MedStar Institute for Innovation, where he leads a system-wide initiative to catalyze and foster innovation.…