Startups are built to learn, large companies are built to execute

How large companies innovate is an increasingly hot topic these days, and Steve Blank penned some thoughts on the subject yesterday. This piece I found particularly interesting:

A startup is a temporary organization designed to search for a repeatable and scalable business model.

A company is a permanent organization designed to execute a repeatable and scalable business model.

In other words, large companies find innovation difficult because they are set up to execute, not to innovate. That was fine from the industrial revolution until the last five to ten years, but now the pace of change is so fast large companies have to innovate as well as execute. The problem is that there are no good models of how to do that.

The first answer for many was M&A, and that remains a good route, but is very expensive.

Those in search of cheaper solutions tried skunkworks projects but found they usually get killed off by the mothership. They are now turning to partnering with the startup community, sponsoring accelerator programmes and making acqui-hires.

I don’t think we’ve found the final answer yet, but I suspect it will lie in taking best practices from the startup world and adapting them for larger companies, which are, for example, less resource constrained. It will also require large company executives develop some new modes of thinking about experimentation, and failure and success.

  • conradpoulson

    An interesting and hot topic as you say and I definitely agree that we haven’t found the answer yet. I’ve found another useful lens to understand the differences between these two worlds is to look at attitude to risk. (Most) corporate entities have processes that are optimised to reduce risk and often this runs all the way from the top level strategy through to individual employee incentives. On the other hand, startups (the good ones) embrace and accept risk as part of their journey. One of the approaches to manage risk is to “fail fast” thereby ensuring that you learn from experience as quickly and efficiently as possible. I’d suggest it’s this attitude corporates need to understand how to incorporate alongside their day to day business, with the challenge being that this often implies substantial structural change.

  • One thing missing from large corporations is passion. Startup founders are usually very passionate about solving problems, while huge corporations is all about the bottom line. There is definitely flexibility problems with large corporations since they have a different set of rules and governed by many people.

  • Thanks Jerome. Passion is a great point – that’s what gets founders up at 6am worrying about their companies and keeps them going when times are tough – both crucial for success.

  • Indeed. Although I’m not sure how easy it will be for corporates to change their fear of failure cultures.