Us Vs. Them — Beyond The Silicon

My observations following a two-week study inside the world’s most lucrative bubble.

Most people would say that the tech industry is currently setting the pace of disruption and exponential growth. In fact, a large number of these companies have adopted new ways of working to respond to the phenomenon of abundance. This article is an attempt to look beyond technology and to explore the organizational values and structures that breed innovation.

There is a common assumption that start-ups and tech giants in Silicon Valley operate in environments so far from reality that traditional corporations could not possibly hope to simulate these wide-ranging settings. For the most part, that may be true — extravagant meals prepared by in-house chefs and $15,000 coffee machines on every floor are certainly not the norm for the average business.

Yet when you visit their offices and talk to the people, it’s not the fancy aesthetics which set these workplaces apart. Instead, it is a clear mission and the ability to harness the collective genius of people that is inspirational.

As many of you already know, there is more than enough cash in this part of the world. The scarce resource is top talent — and in most cases, it is engineering talent. The difference between a good engineer and great engineer has been described as a “10X” in terms of quality of code and efficiency.

Engineers are known to be intelligent and pragmatic. Therefore, luxurious statements and big promises don’t seem to go a long way in their world. What often takes place is an expedient race to provide people with a sense of purpose and the opportunity to create global (and in some cases, extraterrestrial) impact.

It’s a well-known fact that more than ninety percent of start-ups fail. Nonetheless, global corporations have sniffed opportunities and are trying to emulate start-up environments. These days, you often hear terms casually thrown around such as “agile”, “design thinking” and “fail fast”. The problem is that most of these initiatives fail within the corporate environment since traditional workers rebuff the terms as nothing more than trendy buzz words — here today and gone tomorrow.

My intention was to unearth the core values that these new world companies have from inception through to post IPO/acquisition. And more importantly, the structures (or habits, as one founder called them) they needed to uphold these values. I wanted to understand more about what these organizations are doing so differently from us (established corporations outside the tech industry).

My study began with much reading, research and listening to the topic of start-up/scale-up culture and corporate innovation: my research encompassed over 200 articles and reports, books and over a hundred hours of listening to TED talks. Although the research introduced me to some new concepts, it was a 10-day trip to Silicon Valley where I spent time watching and listening to founders, leaders and practitioners in various start ups, scale-ups, tech giants and accelerators where I was able to understand the core attributes of such organizations.

This article is my attempt at distilling a few key patterns from companies that are committed to innovation. This includes both incremental innovation and disruptive innovation.

My findings should spur conversation between executives and practitioners. In no way is this written as the golden standard of truth. My goal is to drive a change in the mind-set that is necessary in order to transform established corporations. And here is the kicker, there is no us versus them. As William Gibson famously said, “the future is already here — it’s just not evenly distributed.”

The Traits of Innovative Organizations

Leadership

How you lead determines the culture — no one is more responsible for setting the culture than the founders themselves. Their behaviour will directly impact the culture. Not every organization still has a founder in their midst, but they all have a leader. And, their behaviour will categorically impact the culture.

Your mission is your war cry — the Singularity University refers to it as the “Massive Transformative Purpose.” It needs to be powerful enough for people to forego high paying salaries at other companies because they want to have a place within your powerful movement.

Leaders need to be powerful story tellers — the smart people you hired need to know more than just the current direction. They need to understand the reasons behind the strategy and that they have an active role in achieving it.

Culture

Why does it eat strategy for breakfast? Because your greatest asset is the amazing pool of people who are responsible for running (and reinventing) your organization. A bad culture leads to a lack of talent. And, a lack of talent means that there will be no one to implement the company strategy.

Culture requires conscious design — the truth about culture is that it is designed to create an environment where great work can be accomplished. Values are the result of the practices, habits and traditions you set within your organization.

Trust is non-negotiable — transparency, respect and accountability are important characteristics of today’s high performers. You can create as many open spaces as you want, but if your team doesn’t feel that you trust them and/or that they can trust you, you might as well put the cubicles back in place.

Failure is a by-product — create an environment where it is safe to take risks and recognize that failure is a by-product — you need to have company-wide meetings to discuss failures and share the lessons learned. Consider this: don’t be so quick to punish those willing to stick their necks out in order to do things better.

Share customer stories — at those same company-wide meetings, you need to convey actual stories of how your product (or service) has impacted individual customers — this is to light the fire of purpose and remind people of the benefits their work produces (two key reasons why talent chooses to join and stay in organizations).

Create serendipity — this is why start ups have such great facilities and fancy food — to increase the chance of fruitful conversations which lead to great ideas. Contrary to common belief, it is NOT to simply keep people in the office longer.

People

Hire the right people — don’t take any short cuts. And judge them against your values. No amount of technical skill should allow a toxic person to infiltrate your troop.

Look for optimistic problem solvers — always look for people that focus on the problems that could be solved by a solution more than issues surrounding a solution. Consider this whilst taking heed of what Astro Teller stated: “Enthusiastic skepticism is not the enemy of boundless optimism.”

Make it memorable from the start — ensure you have a structured on-boarding experience to give every new employee the feeling that they have made the right decision from day one.

Be diverse, but more importantly, create an environment of belonging — allow people to create communities, and fund those communities.

People’s past performance are a good indicator of their future performance — but the environment plays a huge role — Consider the case of acquahires (hires via acquisition) — those employees may not have the right environment to do as well as they once did (this is especially the case if the sense of purpose and ability to create impact has been hampered).

Avoid the middle management crisis (get rid of bad managers) — good managers are important, they make it easy for the specialists to do their jobs. Nonetheless, harbouring bad managers that are politically driven and don’t empower his/her team properly will result in a steady stream of rare talent leaving your organization.

Talent attracts talent and it also goes the other way — smart people prefer to work with other smart people, and they are acutely aware of the best and worst places to work (see the point above).

People will join your organization for different reasons, at different stages — some join because they want to build, and others join because they want to maintain — make it okay for people to leave — no hard feelings!

Structures (habits and symbols)

Let the data do the talking — the company should have a clear set of measures which connect strategic goals to what teams and individuals are working on (Objective Key Results or OKR’s is the standard measure used by all companies I interviewed).

Make it easy to access information to drive better solutions — information should not be held by a select few (especially those that use it to protect their own positions). It should be common practice to share important decision documents which impact the overall strategy and direction.

Invest in technologies to improve the flow of information — reduce the need for meetings by investing in technology to make sure information gets to the right people at the right time. Automation and AI are going to make this space very interesting.

One important meeting every company should have — most of the organizations I’ve met with have an all-hands meeting at least once a month. The difference between these and traditional town halls seem to be the audience-generated content. Anonymous upvoted questions from the crowd, unique customer stories and open discussions about lessons learned from failures are three areas which stood out to be quite different from the “normal” company meetings where leaders dispersed information which they think is important.

Help employees improve their skill sets — whether it is structured learning programs or opportunities for employees to organize workshops to train each other. Foster an environment which encourages curiosity and learning.

Ask for feedback and then, do something about it — a majority of the companies I met with stated that more than ninety percent of employees voluntarily completed the annual employee engagement surveys. The number one reason was that the company acted on their feedback and made changes based on their top priorities. Internal NPS is a good measure to track consistently!

Two Types of Innovation

Incremental innovation occurs when organizations drive enhancements to current products or services. Whereas disruptive innovation is where organizations are exploring new markets and alternate business models. They are distinctly different and should not be classed as one.

Incremental innovation

Product-market fit is the Holy Grail for any business — the market should essentially want the product/service you are offering. Long-standing companies have achieved this. Most start-ups never will.

Status quo is there for a reason — once product-market fit has been achieved, companies are right to defend what they have built (investors will demand it). Certain types of people have been hired to do this, and you can’t expect them to suddenly develop a disruptive mindset.

Focusing on optimizing the status quo leads to incremental innovation — a smoother online experience, reduced operational costs — these demands for digitalization will help you maintain or grow your current position by single-digit growth

Incremental innovation is not enough — focusing on short-term gains and shareholder value may help you stay one step ahead of your current competitors. The problem is that disruption comes from younger companies — those that don’t have much to lose and are relentlessly chasing scale using technology you haven’t fully exploited.

Disruptive innovation

Disruptive innovation is your long-term bet(s) — it is an indication to your internal and external stakeholders that you are taking measures to be around in the future. Tech companies are comfortable with disruption — e.g. Google understood that mobile could destroy Search and invested in Android.

The level of success is strongly correlated to how much the CEO believes in it — leadership needs to believe that there is a real threat and/or opportunity and act on it as if their business depended on it.

Disruptive innovation is not a pet project — It cannot report to Marketing, IT or any other function. It needs to be at the table with direct backing from the CEO (along with a serious allocation of budget and resources).

Don’t bundle incremental and disruptive innovation together — you need different types of people. Technology, and its applications, are occurring at an exponential rate — this requires a different speed of operation (and it requires a team of people that have the skills, passion and ambition to execute accordingly).

No pain, no gain — people in start-ups often talk about the “constant state of pain” and the need to put out fires. They often have limited resources and time (which, is usually the opposite in corporate settings). Although, it can be difficult to emulate in a corporate setting, it is important to create these types of fast-paced environments.

Empower entrepreneurs — one way to create the “no pain, no gain” feeling is to facilitate autonomous units that manage themselves (make it easy for teams to be born, reshaped, etc…).

Facilitate dynamic strategies instead of stable plans — teams operating in disruptive innovation will work at a different pace relative to the rest of the organization. It is imperative to allow organic patterns to turn into processes (and not the other way around).

Think in terms of platforms — you are essentially trading control for scale and innovation.

The truth is that the natural forces of scale are going to challenge innovation. It’s important to ensure that the foundation is right (leadership, culture, people and structures). In order to move beyond just incremental innovation, organizations must make a commitment to disruption and foster a dedicated environment where this can occur.

Arosha Brouwer is an independent consultant based in The Netherlands. She has spent the majority of her career working for large corporations (driving digitalization and incremental innovation). She is currently investigating disruptive innovation, new business models and what needs to change in the modus operandi of large corporations. She does this by being curious, staying pragmatic and speaking with people smarter than her.

Connect with Arosha (Arosha@knack.online)

A big thank you to various leaders and practitioners from the following organizations: Airbnb, Ancestry, BloomReach, Google, Gusto, LinkedIn, Magoosh, PayPal, Pennybox, People Tech Partners, RocketSpace, Singularity University, Third Man Labs, Thumbtack and Twitter.