3 Reasons Why Big Companies Need Startup Mojo
This is the first of two-part series. Part I will outline why big companies need startup mojo. Part II of this blog will discuss one way to go about getting it.
The world spins faster and faster. Big companies have a difficult time keeping up with the future—much less creating and inventing it. There are three, distinct reasons why this is so: organizational dynamics inherent in any large system; personal dynamics of the individuals who comprise the system; and the financial dynamics that drive margin, which is the prerequisite to mission.
1. Organizational Dynamics: The status quo is a strong attractor.
The status quo is stubborn. If you try to move an organization away from its usual and customary way of doing things, strong forces pull that organization back to status quo ante. To borrow from the terminology of complex systems theory, the status quo acts as a strong attractor, the place where you always end up no matter where you start. In other words, it’s the notion that all roads lead (back) to Rome.
One component of this strong attractor is the resistance-to-change inertia inherent in any large system—and the larger the system, the greater the inertia. It requires less energy for an organization to keep doing what it has been doing than for it to break out and do something different. The familiarity of the known outweighs the potential benefit of the unknown almost every time.
Conversely, errors of commission are more visible than are errors of omission, so leaders avoid the former and tacitly accept the latter.
And lastly, the internal process controls required in any large organization always favor the status quo. It takes just one person in a long chain of necessary approvers to say, “No,” to stop all forward progress; it requires everyone to say, “Yes,” for something new to move forward.
The startup, by definition, has no status quo. So if a big company can somehow find startup mojo, it may be able to create sufficient velocity to escape the attractor of the status quo
2. Personal Dynamics: The tyranny of the daily trumps the pursuit of the remarkable.
For most of our workday, almost all of us operate in Covey’s urgent/unimportant left lower quadrant—urgent (and not so urgent) emails to write, reports to compose, committee meetings to attend, phone calls to return, personnel crises to resolve, budget issues to manage—they fill up our mindspace and timespace, and leave us virtually no white space.
Since those most productive and competent among us are always the ones asked to do more, the very same people most likely to come up with the bold new idea or the critical reframing are stretched to their absolute maximum in just getting through their day-to-day. The result is a huge opportunity cost—unseen and unmeasured—of great creative work lost forever.
Startup mojo, either liberally sprinkled or focally concentrated, can help energize big company employees to pursue the remarkable.
3. Financial Dynamics:The today / tomorrow business model dilemma
How can an organization succeed in the world of today, so it has a tomorrow, but also succeed in that world of tomorrow where the governing business model might be dramatically different from the model of today? Consider health care, in which the current revenue model is a volume driven fee-for-service (“pay-per-view”) paradigm, in which the financial incentive aligns with doing more and more for patients, even when less costly and equally effective alternatives exist.
The health care model of tomorrow likely will be a subscription-based platform model in which the provider assumes the financial risk, and where the financial incentive for the healthcare provider is to help the patient stay healthy and well—i.e. for the patient to require less care, fewer tests and fewer procedures, not more. With current operating margins for hospitals and health care systems in the very low single digits, and clinical providers still generally being paid in a fee-for-service model, it is at the providers’ financial peril that they abandon current tactics.
Would you voluntarily give up a business model that is profitable to try one that may not be? Possibly not, especially if you’re a large corporation. Large corporations have a lot to lose—especially those that are highly successful now—and that constrains their willingness to take chances. The solution to the today/tomorrow dilemma is to figure out a “both/and” as opposed to an “either/or” strategy—find things that are of value today and will be of value tomorrow.
How can big organizational entities—be they for profit companies, not-for-profit institutions (e.g. in education and healthcare), or government agencies—incorporate, internalize and channel the creative energy of startups? The first chapter of Clayton Christensen’s The Innovator’s Prescription, a terrific book about innovation in healthcare, provides an excellent summary of how disruptive business models invent tomorrow. If big companies can somehow internalize startup mojo, they may be able to invent or at least deploy new business models that will put today’s cash cow out to pasture.