Risky Business
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Risky Business

What Dungeons & Dragons Taught Me About Innovation

Create order from chaos

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“Alignment” is an important concept in business dealings between corporations and startups. The word refers to managing incentives so that all parties work together toward common goals. When there is misalignment, stakeholders find themselves fighting or working toward divergent goals. Structuring deals to create alignment was one of the initial lessons I was taught by Steve Clearman, my first boss in venture capital.

However, I encountered the term alignment before my first job in venture capital, when playing Dungeons & Dragons (“D&D”) as a teenager. In D&D, “alignment” refers to a character’s ethical makeup. To facilitate role-playing in the fantasy world of D&D, each character selects an alignment that prescribes behavioral choices when facing the uncertainties of a fictional adventure. In most D&D campaigns, the “party” of characters represent a diversity of ethical archetypes who respond differently to the same situation, just like in real life.

There are two main dimensions of alignment: good vs. evil, and lawful vs. chaotic. Players can also choose to be “neutral” on each of these axes, which creates a 3x3 matrix with nine alignment options. You may have seen memes assigning your favorite fictional characters to D&D alignments, like these for Harry Potter or Star Wars.

Nine alignment options in Dungeons & Dragons

While good and evil are self-explanatory, the third edition D&D rules define law and chaos:

“Law implies honor, trustworthiness, obedience to authority, and reliability. On the downside, lawfulness can include closed-mindedness, reactionary adherence to tradition, judgmentalness, and a lack of adaptability. Those who consciously promote lawfulness say that only lawful behavior creates a society in which people can depend on each other and make the right decisions in full confidence that others will act as they should.

Chaos implies freedom, adaptability, and flexibility. On the downside, chaos can include recklessness, resentment toward legitimate authority, arbitrary actions, and irresponsibility. Those who promote chaotic behavior say that only unfettered personal freedom allows people to express themselves fully and lets society benefit from the potential that its individuals have within them.”

These descriptions have obvious relevance to behavioral norms in large corporations and startups. Law is a clear substitute for “order,” which is the comfort zone of corporate environments. Chaos is a synonym for “disruption,” which perfectly describes how many startups approach the world. By distinguishing the law and chaos axis from good and evil, the rule-makers of D&D are telling us that neither of these positions is necessarily better than the other — they are just different preferences. Law vs. chaos is about process and predictability on the one hand, and acceptance of change on the other.

Naturally, these personality preferences can create conflicts. Adherents of order are unhappy when “chaos agents” don’t respect buttoned down corporate approaches: for example, when startups miss product development deadlines or budget targets, frustration abounds. One friend in corporate development for a Fortune 500 company puts it this way: “We engineer everything to the nines here. We don’t put a number in a document if we aren’t sure we can hit the mark.” Most of the friction I have observed between corporations and startups occurs at the seed stage, when product development is incomplete and innovation efforts are mostly unreliable.

Similarly, startup CEOs chafe at the stodgy and deliberate pace of big company incrementalism, which ignores the speed and urgency that are hallmarks of startup culture. Despite the fact that nearly all large corporations managed to grow aggressively to become what they are, most incumbents fail to grasp the chaotic reality of startup culture. As Geoff Moore, the author of Crossing the Chasm, notes, “Being a public company is about predictability and stability, and rapid growth is awkward.”

Large companies must become more comfortable with change to keep pace with the rate of disruption in the modern world. Spending time with startups can help large company executives be less rigid and obsessive. The creativity of a startup can be infectious, when approached with an open mind and a willingness to adapt. As the poet William Blake wrote, “The man who never alters his opinions is like standing water, and breeds reptiles of the mind.”

However, ultimately it is startups that must become more like large corporations than the other way around. The end state of a startup is (a) to transform into a big company, (b) to be absorbed into a big company, (c) to remain small and of limited impact, or (d) to die. For any ambitious startup raising capital, (a) and (b) are the success narratives. So the startup journey is from generative chaos to scaled, predictable lawfulness. Growing a startup requires a transition from experimentation toward structure, process, and repetition. It is for this reason that creative founders often leave to become “serial entrepreneurs” and start something new once the business is steady.

As startups and big companies struggle to understand each other, corporate innovation professionals can help bridge the divide. The practice of venture capital is especially focused on creating order from chaos, as startups are shepherded from fledgling proto-companies to mature businesses. Corporate venture capitalists also translate between the bureaucracy of their parent corporations and the anarchy of startups. The diplomatic skills required to intermediate between these extremes can help limit misunderstandings and craft productive commercial relationships.

Managing external innovation — including venture capital investments, acquisitions, and business development deals — requires the collection and synthesis of unstructured, dynamic information about changes in the market, technology, and business models. Effective programs can make sense of these changes to facilitate informed decision-making for large corporations.

Making order out of the chaos of entrepreneurship is the underlying skill that big companies require to work successfully with external innovators. When selecting your own “party” of innovation adventurers, it would be prudent to include archetypes who can translate between these two worlds.

This article originally appeared on Forbes in 2020.

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Scott Lenet is President of Touchdown Ventures, a Registered Investment Adviser that provides “Venture Capital as a Service” to help corporations launch and manage their investment programs.

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Scott Lenet

Scott Lenet


Founder of Touchdown Ventures & DFJ Frontier, USC & UCLA adjunct professor, father of twins, Philly sports Phan, Forbes & TechCrunch contributor