Why enterprises MUST launch internal startups
Imagine that you scout, train, and manage Olympians. You come on board once the athlete has done most of her growing and training, and you transform her into an unbeatable, world-class competitor. You know how to predict the results you’ll get based on the effort you invest, and you know how to measure your success. You take something big, and make it bigger.
Now let’s say a trusted colleague comes to you with a gifted 8-year-old and says, “Make this kid into an Olympian.” You’re completely out of your depth. You have no clue how to motivate someone this young, even if he’s off-the-charts talented. And even if you were able to measure how fast he could run or how high he could jump right now, those metrics would be meaningless in a few short months. But your colleague has set you to a task, and you want to help. So what do you do?
You call on early childhood experts, teachers, and loving parents. You say, “Teach him and nurture him and call me when he’s graduated from high school.” You are simply not equipped to deal with the work that we call “New to Big.” You can take something Big and make it Bigger like a champ, but this? Not your department.
This is the challenge many large, established corporations face. When you work in an enterprise setting, you’re far too busy training Olympians to nurture gifted up-and-comers. You’re focused entirely on Big-to-Bigger work because your entire organization is built on it. Exploring disruptive opportunities and business models sounds like a fantastic idea, but you just don’t have the infrastructure.
That can change. And it doesn’t need to change in the wildly expensive, tumultuous, deeply painful way you’re envisioning. It can change in small and scrappy—yet transformational—ways.
Old School, meet New School
Startups know how to identify, address, and fulfill customer needs. Startup origin stories nearly always involve entrepreneurs’ recognizing a point of friction and thinking, “There must be a better way!” By starting with the customer pain point, entrepreneurs give themselves boundless flexibility to dream up and tinker with solutions. Startups keep their options wide open, experimenting and pivoting until they land on a solution that meets customer needs in a radically new way. Instead of battling with competitors over market share, they simply create new markets.
Enterprises, on the other hand, know how to grow market share, increase profits, and refine existing systems. They have the customer base, distribution, and supply chain to ensure their products and services reach customers reliably and with a high level of quality control. They may be old school, but they’re damned good at being old school. As a result, they see no reason to ponder ideas that fall outside their comfort zones. When it comes to brainstorming new products, they typically start with their own pain points, like: “We’re losing market share; our margins are shrinking; we have a new technology, now let’s go find a customer for it.”
Yet this thinking doesn’t exist in a vacuum. Legacy companies operate this way because they’re hardwired to do so! With pressure from Wall Street to meet quarterly projections, the mere thought of investing in customer problems with unforeseeable results makes them uncomfortable. They’re running a low-variation, incremental machine designed to manage risk, and leadership and shareholders are telling them to keep that machine humming along at all costs.
But creating a product and then scrambling to determine whether anyone wants it is inside-out thinking. Modern success stories all stem from outside-in thinking: identifying the massive, global problems that a company’s unique gifts can solve. And it’s time for the rest of us to get on board with that problem-solving mindset.
The answer: Embedded startups
Contrary to what many pundits say, enterprises are not inherently inferior to startups. They’re simply not structured for the quick, cheap experimentation and radical thinking necessary for innovation. The challenge is embedding a mini-startup inside your enterprise.
What you need is a dedicated team that functions like a smaller, New-to-Big machine running in tandem alongside the Big-to-Bigger machine. This embedded startup feeds or complements the primary enterprise, but doesn’t replace it. It leverages the mindsets, mechanics, and tools of the startup ecosystem to ignite growth revolutions inside enterprises. It discovers, validates, and grows new ideas into big businesses. It fosters the gifted 8-year-old athletes through their awkward years, then proudly hands them off when they’re eager young adults brimming with Olympic potential. It allows us to look beyond what we’ve already done and to imagine freely what we can do.
At Bionic, we work with large companies to create these tiny, scrappy internal startups. We equip leadership to think like VCs and to invest in fast, iterative experiments. We train the entire startup team to consider the sizing, timing, and fit of each opportunity and give them the tools and methodologies to validate their hypotheses about customer problems and needs. We even partner with HR to discover the secret entrepreneurs inside the enterprise who can drive these embedded startups.
And we’ve seen incredible success. Unlike half-hearted innovation initiatives and one-off hackathons, these dedicated startup teams are given the space and resources to thrive … all while the established business continues to grow and earn. An embedded startup takes the agility and creativity of startups and grafts it carefully onto the expertise and clout of corporate scale.
Big enterprise already knows how to grow from Big to Bigger. With embedded internal startups, these big businesses can learn how to foster New to Big.