Why Big Corps Can’t ‘Act like Startups’

By Julia Austin |  February 7, 2014

“Just act more like a startup. Foster an entrepreneurial culture. Break the rules!” Maybe you’ve heard this kind of advice before? Sounds energizing and exciting, but for me, far easier said than done. Startups and mature companies are just different creatures — I’ve worked for both — and asking one to simply behave more like the other is like asking a hippo to balance on a telephone wire.

Creating a sense of urgency around innovation when your company is mature is really hard – especially when a lot is riding on the solid delivery of your current products and keeping your existing customers happy. One key is to understand the fundamental ways that startups and big companies differ (see my chart below) and when possible, creating environments within large organizations that borrow some of the characteristics of startups.

Doing that requires five things that are extremely difficult for big companies to do:

  1. Suspending some of the existing rules or creating new processes, in order to allow innovation teams to work faster. Rather than tossing a potential IP filing over to legal and waiting 14 days (or often much longer!) for an approval for instance, you might assign a lawyer to the innovation team for some key stage of its work.
  2. A willingness to take risks and be experimental. When I headed innovation at VMware, we would release experimental software — what we called Flings — with the caveat that it was not fully baked and far from perfect. A fair amount of Flings wound up as part of our “real” products, and being involved with Flings was a real motivator for our engineers.
  3. Humility. Big companies have a tough time with this. Cockiness is natural when you’re worth billions of dollars. But if you want to innovate, you have to acknowledge that anyone can come from nowhere and kick your ass any day. The drive to keep that edge and being a little paranoid will foster urgency to innovate. And the urgency should not be a reaction to a crisis – it has to be an inherent part of the company’s culture.
  4. Innovators inside a big company need to know it will be a huge deal — and that they’ll be rewarded — if their project succeeds. The reward/incentive structure may be different from a startup, but employees in a big company need to be motivated in some way to put in the extra hours and sweat that startup folks don’t think twice about. While bonuses and stock awards are big incentives to innovate, rewards are not always about big payoffs. Often, the big reward comes simply from being given broad recognition – say, by the CEO at a company all-hands – for taking a chance and working hard. Knowing you are appreciated for embodying an entrepreneurial spirit is a huge motivator.
  5. Learn from failures, and refuse to sweep them under the rug. Innovative spirits can be easily crushed and risk takers demotivated if the culture of a large company frowns upon wasted time for experimentation – especially when an experiment fails. Leaders and “bean counters” need to stop seeing time invested in research as a waste of valuable resources. When a project fails, it means you tried, learned and now know a path not to follow. For every dozen or so failures, there is a success. Each failure to get to the winner, is just as important as the winner itself!

These five challenges defy easy solutions. The best companies will approach them in ways that take their culture into account. But one thing you absolutely need are leaders who not only want to develop a steady stream of new ideas, but are willing to make the commitment to be disruptive. And that requires that your leaders can tolerate some short-term pain, which could be an impact on quarterly earnings, or letting your best people devote significant amounts of time to innovation projects.

And understanding the very real “genetic” differences between mature companies and startups is a crucial part of trying to infuse some startup energy into your team or project group inside a large company — rather than just telling everyone to “act” more entrepreneurial.

(Click here to download the chart in PDF form.)

Have you observed other differences between startups and mature companies that have helped or hindered innovation? Share your experiences in the comments…