The tools for efficiency that keep startups agile aren’t just for startups.
The growing popularity of the Lean Startup model is well-warranted. A lean startup operates on efficiency, embraces new ideas, and keeps its workflow agile so that the team is able to bend to a changing market and reach the entrepreneurial holy grail — product-market fit.
Trevor Owens, CEO and founder of Lean Startup Machine, guides businesses in embracing the processes that lead to startup-like innovation … no matter how big the company is. In a webinar with Business 2 Community, he covered strategies and principles that are key to bringing big innovation to enterprises with the dexterity of small companies.
Disruptive vs. Sustaining Innovation
The primary distinction between innovation in big companies and innovation in small companies is whether the impact is sustaining or disruptive. Small companies can afford to take bigger risks and take chances introducing a disruptive idea to their market, while bigger companies with more at stake, including more investors and a larger, more established audience, tend to stay safe by sustaining their company with new ideas that still color within the lines.
Owens says that the first step to disruptive innovation is to acknowledge this distinction. With these categories in mind, big businesses can begin to think outside the statistics and charts of what people want and instead think of new wants altogether and then strategize ways to get there.
How Startups Operate
To better understand the innovation that comes out of startups, it’s a good idea to look at the process of startups.
This is the Startup Curve created by Paul Graham, cofounder of Y-Combinator. From the initial idea, through the “trough of sorrow” and on to product-market fit, it tracks the happiness of an entrepreneur through the early years of her company. There is no part of this graph more trying on a person’s confidence, happiness, or motivation than the appropriately-capitalized trough of sorrow. It’s out of this stage of daily sad faces that Owens points out the lean principles startups build in order to start to rise from the trough. These are the principles that make a startup tough — scrappy even — and where the big wigs can learn a thing or two about staying nimble.
1. Minimum Viable Product
This is finding out what your customers want by doing the least amount of work possible, but don’t be mistaken — this does not mean you can be lazy. In fact, it’s the opposite. By really thinking through your best, most direct approach to customer response, you don’t waste time and energy in places before you even know if you’re wanted there. Owens suggests testing people’s desire for your product by doing something as simple as making an easy, straightforward landing page and putting up some Google ads just to see if people click.
Armed with information from potential users, don’t be afraid to go in a whole new direction dictated by their needs. Having a small company affords you the opportunity to pivot in an entirely new direction, even if the new direction wasn’t part of your initial business plan at all. For big businesses, this pivot can be more internal, but it’s important to understand how quickly these mind shifts can and should happen in order to keep up.
3. Early Adopters
As an intrapreneuer Owens said,
“You’re trying to predict the future of the market.”
This is where early adopters come in. They don’t care about a brand name, and they’re willing to try new products until they decide on one that they love and will hopefully advocate for.
Putting the Startup Back into Big Business
Now how do we really put all of that yummy startup insight into processes for big business? What can the principles that get startups out of the trough of sorrow teach us about how to strategize innovation within established brands? Glad you asked. Here are some tips you should know:
Disruptive Innovation Is Unpredictable
Owens says, “When it comes to disruptive innovation and changing an industry … you can’t predict how an industry is going to fundamentally change … if you’re used to the way that things are.”
Even some of the most revolutionary innovations didn’t have an obvious application at first. That means, you have to experiment more without a set idea of how your experiment will turn out, or even what you’re going to learn from it.
You can’t predict your product’s place before it even has a place in the market. (Hint, hint: This is where that pivoting skill comes in handy).
Small Teams Are Better
The fewer people who are on the team and making decisions, the faster you can change with markets. Also, the faster you can hear new ideas. When you start out with a small team or break your big team into smaller groups to solve a problem, innovation can build faster and more organically. Owens sights a rule of thumb from Jeff Bezos,
“If your team cannot be fed with two pizzas, it’s too big.”
A Thousand Failures for One Success
When it comes to piloting that disruptive innovation, you’ve got to put some skin in the game with a lot of investments because one big investment can sustain your entire stack. Owens says, “In the venture capital business, one investment pays for nine others.”
“If you look at Y-Combinator, they’ve made over 900 investments and this is also called the Power Law of Returns … [of their 900 investments] the most successful one is Dropbox. In fact, Dropbox is worth more than all the other investments that Y-Combinator has made combined … and so it’s really going to be one big winner that we’re looking for when it comes to disruptive innovation.”
Supporting Your Team
Owens cites some heavy-hitters like Instagram, Twitter and Pinterest that were all thought up by ex-Google employees who found that going out on their own was more conducive for building their brand than staying at Google. Judging by Google’s continued misses on the social front, it looks like these are losses they couldn’t afford, but they could have been prevented. No, not by adding more futuristic furniture or pool tables.
By fueling the entrepreneurial spirit in your team, this also means you have to fuel their acting on those ideas. Where employees most value security and recognition in their work, entrepreneurs most value power and control. These unequal views can leave the people in charge overlooking the goals and potential of their employees altogether. To remedy this problem, don’t throw money at it.
Owens says extrinsic rewards like a bonus only work when you’re asking someone to find their way to a pre-determined solution — when the goal is clear and the path to the goal is simple. But what you should really be asking of your employees in order to get that disruptive innovation is for them to find a new solution altogether.
As Owens puts it,
“If you’re asking me to go to the trough of sorrow and … figure out from weak signals what the answer is, that extrinsic reward is not going to be very useful.”
Instead, when you give people equity and thereby a stake in the outcome, their brains can function more effectively and actually bring a new solution to the table rather than just find out new ways to get to the old solutions. This is the basis of what Owens calls an Innovative Colony.
To build this Innovative Colony, you need to give people independence through resources, freedom, and outside expertise. With more independence, they’ll accrue more value for the company.
Make a Roadmap
With all of your directions in place, the only way to go is forward … with some guidance, of course. Relay the principles and strategies of small business to the teams within your big business through training so that everyone is approaching new solutions with the same mindset and momentum. This is a big part of making a change.
Owens concludes, “You have the smart people inside your company. You have the resources. All you need to do is change the mindset inside your company … Use the lean techniques to validate that people actually want to be innovative inside their company.”
You can watch Owen’s full presentation here.