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Iterate Norway

Vision/founders-fit — Part II

Iterate is a 60 heart tech company building our own innovation ecosystem. This series is about what we're learning. Also see Part I.

In systems thinking, we optimise work by looking at the entire value stream from customer need to solution delivered. Looking at parts in isolation is not only discouraged, it could lead to serious mistakes.

Back in the days, companies like Ford and GM were so focused on efficiency that the many defects propagating down the production line had to be fixed in a new, last stage: The repair of brand new automobiles. Imagine what they could have achieved if they had stopped the line the first time a defect was discovered, backtracked where it came from and fixed the root cause. Imagine they had empowered every worker to do so systematically, every day, all year round. When western automobile manufacturers heard this was in fact how the Japanese competition worked, they ignored it. Just the idea of stopping the production line on a whim must have seemed foreign, unexpected and downright annoying. In the absence of holistic thinking, they effectively went from serial production of automobiles to serial production of mistakes. They couldn’t see the waste for all their defects. And, needless to say, the Japanese won.

We could laugh about it, and say this would never happen in the world of startups and innovation. But would we be right? Know any great entrepreneurs with unique talent and killer aptitude who didn’t make it? Know any startups who built a product customers loved, but failed anyway? And not to mention: Know any winner-takes-all digital company in serious need of repair right now?

When you first learn about systems thinking, a common exercise is to map the value stream of your business. Most noobs (myself included when I first learned about it) make their biggest mistake in the beginning of the exercise: They fail to understand where their value stream starts. Coders think it’s when a story appears on their task board. Bizdevs think it’s when they’ve started a new initiative. Managers think it’s when the strategy is defined. And so on. Facilitator pro-tip: The starting point is never inside your own business.

Where is the starting point of the value stream of a startup ecosystem? It’s not investor deal-flow. It’s not the founding moment. It’s not the awesome idea someone had in the shower. It starts with the inhabitants of planet earth in need of something new. It ends with winner takes all products “everybody” use. Next exercise: Starting at the end, and going backwards upstream from winner takes all company, to crazy scale-up, to product/market-fit to early stage to idea to a world in need of something new — where would we find the biggest opportunities for improvement today?

We will for sure find better ways to explore product/market-fits, better ways to expand and better ways to extract value from established companies. But is the biggest waste to be found in these areas? (If you are in corporate innovation, the analysis - and the result - are very similar).

Over the last three years, my company has experimented on the fuzzy, intangible and erratic beginning. Our starting point was our realisation that there is a common denominator between corporate innovation and the startup world: Early on, it’s too hard to shut something down.

You don’t start a new corporate venture without broad internal support and big promises. You don’t start a startup without true commitment and sacrifice, like quitting a safe job and even ignoring your loved ones for a while. Once you’ve placed such bets, shutting down before you gave it everything you had, becomes almost impossible.

We wanted the exact opposite. Hence, our first design constraint was to take away the walls. Make it super easy to start things up, and just as easy to shut them down again, cheaply. From an organisational perspective, we solved this by simplifying: Our people receive full salary without any KPIs, bonuses or other incentives tied to their individual performance. Instead, we had them buy shares in the company, and thereby have a stake in all our innovation attempts — also the ones they’re not a part of themselves.

With this backdrop, we let our people spend time playing and tinkering without having to make any specific promises. It works, because of two reasons combined: First, our people are curious geeks. Second, we have a culture for learning and trust. Staying inside the building while wasting time on something you don’t really care about would in theory be possible, but it would not look good in your own yes, nor in the eyes of your peers. In short: You have to iterate, to be someone in Iterate.

Our internal founders build teams by attracting co-workers who want to join the mission. Besides leading to better ideas, more aligned teams, more satisfied employees and a leaner, less complex and less costly organisation to run, this approach has showed another interesting side-effect. Once the fit is there, the founding team pursue their mission with more stamina than they could get from any kind of big promise or circumstantial sense of urgency. People who find their true passion can deal with the wall, but they don't have to have their back against it.

The east-west manufacturing war of the last century revolved around two very different views on optimisation. In the west, waste was to be found in each and every sub-process. That's how they ended up optimising the repair of new cars, instead of eliminating the need to repair them in the first place. In the east, waste was to be found in the (lack of) end-to-end flow through the system. That's how they realised they should empower everyone to stop the line, because defects would only create impediments to flow further downstream the production line. This illustrates how the difference in fundamental beliefs led to very different measures, and very different results.

The hard, everyday work that goes on in innovation is about trying and failing, experiment by experiment. But if we go all in just to try something out, if we seek traction just to prove ourselves, if we validate to create commitment, then we set ourselves up for systemic losses.

Get are human beings. Creativity and passion will take us longer, but to make it work fully, we also have to develop ourselves. As human beings.

Part III (4 min read) discusses how personal growth through creativity, courage and openness is the last piece of the puzzle.

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Iterate er et teknologiselskap som bygger digitale produkter for seg selv og andre

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Anders Haugeto

Anders Haugeto

Founder of Iterate, Norway. A venture builder for platform and software companies.

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