Don’t Innovate Like a Startup

Dear Corporates, please stop trying to innovate like startups. You are not startups. Act your age and size.

The difference between you and them is obviously not having ping-pong tables and beanbags — we tried that, it didn’t work. The difference is not in the crazy ideas and superficial freedom or hiring ex-googlers. It is not even in the Agile or the DevOps practices, even if it helps a bit.

The fundamental difference between a startup and a corporation is in the number of options they have — the number of bets they can place.

Let me tell you a funny story.

Many years ago I was living in a high-rise building with only one elevator. It was pure luck to get the elevator at your floor with room to squeeze in.

One day I was going to the elevator from my apartment and saw my neighbor hopping on one foot in the other direction. He had only one flip-flop on and he was jumping so he didn’t get dirt on his other foot.

His other flip-flop was stuck under the door of the elevator to hold it, while he hopped to fetch something from his apartment. No big deal.

So I held the door for him and few seconds later I heard him hopping back.

Funnily enough, he had switched the legs… Now he was jumping, sweating and panting on his bare foot, keeping the one with the flip-flop bent up.

The only reason for jumping was to keep his bare foot clean, yet he was hopping like a tired bunny along the hallway protecting his flip-flop. 
Wasting time energy because of constraints he put on himself.

So let’s get back to the corporate innovation and the options.

A startup has one option. One bet. Like a rocket flare, or a one man with a jet pack, it has one shot to do it. The startup may succeed, may push up the technology frontier, prove a new business model or become a Unicorn. But more often startups fail.

Startups are “forced” to make only one bet, that’s why their risk is rewarded by the investors.

On the other hand are Corporations. You have many options — millions of options. You can try five or ten things at the same time. Why do you want to be like a startup? Why to you want to do one foot hopping race like my neighbor, when you can run a sprint or a marathon? 
Hopping is not leaping. It is slow. It is high risk. It is reckless!

Who said that big companies are risk averse?

One internal project has the same puny chance to survive as any startup outside — around 10%. This is 90% risk to fail. Still, big companies would invest millions into it. Is this risk averse? Sure it is not! Neither it is smart.

By putting millions on one bet companies don’t decrease the risk. They increase the potential damage.

Use your options and diversify. If you have a cool internal project, start two more and invest in a startup with similar solution. 
Defer commitment. Measure. Learn. Pick later. It is faster, cheaper and safer.

There is one catch though!

You can’t bet on everything because you will not achieve anything.

You have to start form the goal — what do you want to achieve? What problem do you want to solve? How do you measure the progress?

Once you have this figured, look for every possible solution and diversify your bets.

It is important to repeat that having many dispersed goals with only one option to each of them is not the best way to diversify.

You better converge the goals and diverge the means.

You probably evaluate carefully all possible projects and start only the most promising one? Well, let’s be honest, you are not that good at picking the winning project based on their “pitching” slide decks. Even VCs with 20 years experience and hundred of startups can’t pick the winning project upfront. That’s why they diversify.

Be like them, not like my neighbor. Bet on several horses. Measure the progress. Play smart!

You don’t have to innovate like a startup to be successful. Innovate like an investor. Diversify the options — decrease the risk of failure and increase the speed and learning of the organization.

P.S.: OK, there are times when big companies can be bold and make big bets on one solution and win. Unfortunately most of the companies don’t meet the criteria to be that bold. So, better diversify.

Stefan Petzov

Stefan Petzov is an innovation manager leading the Technology and Innovation function in the Swisscom Outpost in Silicon Valley. Stefan Petzov has a long experience in agile product development of cloud-native enterprise solutions.

Leave a Reply

Close Menu