Friday, January 31, 2014

Ten Lessons of Start-ups for Established Businesses

The Berlin School of Creative Leadership is traveling this month to the Bay Area in Northern California for the second week of the U.S. residency of its Executive MBA program.  Among the key topics orienting the week are innovation, agile leadership, and effective, entrepreneurial and ethical teamwork.  Overall, for already experienced leaders of creative communications firms, the week offers an opportunity for immersion in an atmosphere of entrepreneurship and innovative start-ups.  It consequently prompts a crucial question for many creative leaders, What are the lessons of start-ups and early-stage entrepreneurial businesses for more established firms?

An undeniable romance surrounds start-ups and entrepreneurship.  The prospect of building something entirely new, of developing an original idea and implementing it successfully in the market, is alluring.  Even viewed more prosaically, such an extended process of risk-taking in order to create new value and build a successful business, is exciting. Established firms are, by contrast, fraught with a host of messy, pre-existing practicalities. They already contain some version of all the elements, from products or services and strategy to talent, organizational structures and cultures, and leadership that many entrepreneurs dream of instituting anew.

Of course, the distinction is hardly so sharp. In Silicon Valley in 2014, amidst the continuing percolation of entrepreneurial energy and effort, part of what’s most fascinating to consider is how relatively recent start-ups have grown rapidly into large, established firms.  In only 10 or 15 years, in some cases, companies have become among the largest, best-known companies on the planet.  For example, Google, which the Berlin School will be visiting, was incorporated in 1997 and now has more than 46,000 employees.  Increasingly for these still relatively young firms grown, the challenge is how to sustain that early energy and avoid the loss of entrepreneurial spirit.

Older firms, too, have sought to embrace the principles and tools of start-ups as means to becoming more innovative. In a recent LinkedIn post, Beth Comstock, CMO of GE, discusses her experience at one of the world’s largest corporations. She opens by saying that she and her colleagues consider their efforts “to act small even if we’re big…as the biggest implementation of Lean Startup principles on earth.” Comstock then offers four key learnings from the company’s recent past:
·      Simplicity is the key
·      We have to work fast
·      We don’t have all the answers, but you might
·      Uncertainty is okay
The objective, shewrites, is to find constructive ways to be “constantly tinkering with our business models to get leaner and more agile and to get closer to our customers.”

Comstock’s reference is to the LeanStartup methodology developed by Eric Ries and among the most influential operating today.  Lean is, for Ries, a management process tailored for accelerated new product development and, especially, delivery to customers. “Startups exist not to make stuff, make money, or serve customers,” he has said.  “They exist to learn how to build a sustainable business. This learning can be validated scientifically, by running experiments that allow us to test each element of our vision.” Ries goes on to specify that,  “The unit of progress for Lean Startups is validated learning – a rigorous method for demonstrating progress when one is embedded in the soil of extreme uncertainty.”  Such priorities, as well as the following key principles of Lean, should resonate with leaders of established businesses seeking to prioritize learning, innovation and leadership at all levels of their firms:  
1.     Entrepreneurs are everywhere
2.     Entrepreneurship is management
3.     Validated Learning
4.     Innovation Accounting
5.     Build-Measure-Learn

Ries’ priorities indeed arguably dovetail with some of the major elements of other recent and current approaches to change and strategic management in existing firms.  For instance, his imperative to model, measure and specially learn faster in Lean parallels the urgency of John Kotter’s renowned change model ( (There’s a fascinating study waiting to be written more generally comparing Ries’ Lean methodology to Kotter’s 8-step change model.)  Likewise, the faster pace and greater uncertainty of business and markets, and as a result the demand for the greater speed of effective strategic leadership, underpins Rita Gunther McGrath’s paradigm-shifting argument for “transient advantage” in The End of Competitive Advantage

Exactly that kind of parallel, combined with successful examples of existing companies like GE, allows us to identify principles and practices that are central to building start-ups and also potentially valuable to established firms seeking to build new businesses and gain new advantage. 

1. Speed
The essential argument of McGrath’s The End of Competitive Advantage, as just noted, is that a new, faster-paced marketplace places different demands upon individual businesses for success.  Her idea of “transient advantage” directly recognizes how the most competitive leadership and strategic response to these new conditions is speed (  One of McGrath’s favorite examples is Milliken & Co., which transformed itself, through continuous strategic reassessment and reprioritization, from a company that “had been largely focused on textiles and chemicals through the 1960s, and advanced materials and flameproof products through the 1990s, had become a leader in specialty materials and high-IP specialty chemicals by the 2000s.”

2. Adaptability
R/GA, the legendary creative agency (which the Berlin School EMBA group will be visiting in New York the week before hitting the Bay Area), has re-invented itself every nine years since its founding in the mid-1970s.  This has meant ranging, always successfully, from computer-assisted filmmaking (1977-1985) to an integrated digital studio (2005-2012).  The regular willingness to reassess its place in the marketing universe demonstrates an extraordinary adaptability to rapidly changing environmental conditions and internal capabilities alike (    

3. Customer-centrism
Amazon’s commitment to service is renowned, from founder Jeff Bezos’s keeping an “empty chair” at board meetings as a reminder of the customer being in charge to the required annual call-center training required of all employees to maintain their humility and empathy ( Such priorities of start-ups as gathering and working with customer feedback (increasingly data, as well) and getting products in customers’ hands faster and more easily should also be objectives for both existing and potential new businesses of established firms.

4. New business opportunities
Since its founding in 1997, Netflix has continually reinvented itself by exploring new business opportunities in the rapidly changing media and entertainment sector.  Such exploration has been driven both by competitive necessity and new technological and market possibilities.  Seeking to “revolutionize the way people watch TV shows and movies,” the company has repeatedly revised its business model to offer multiple services, often combining distinct offerings like streaming with DVD home delivery, and recently, with original programming in an effort to be “the world’s leading Internet television network”

5. New structures
Of the many changes needing to be made within existing businesses to become more entrepreneurial, organizational re-structuring and resource sharing are among the easiest to attempt and also the most difficult to get right.  These crucial changes need to be tied, as P&G’s Connect + Develop program has been, to core tenets of the organization’s culture and identity.  In building an open innovation platform and structuring a Global Business Development team around its complex global operations, P&G met its initial goal, in only four years, of having half its innovations fueled by external partnerships (

6. New metrics and testing – particularly of existing talent
Most firms recognize the imperative to create aggressive and appropriate metrics for testing new product or service offerings – and, as the Lean Startup methodology would have it, embrace “validated learning.”  More challenging is the inclusion of existing talent in the process, particularly in ways that allow their skills to be re-directed to new projects.  In the December issue of Harvard Business Review, Professor David Garvin details “How Google Sold Its Engineers on Management” by making the company’s management assessment and talent development more systematic while retaining its humanity and eary-stage spirit of innovation ( 

7. Uncertainty is okay
“Navigating uncertainty is what defines entrepreneurship,” writes Beth Comstock.  At GE, she goes on, in the aforementioned LinkedIn post, “we’ve made it a point to protect some ideas from the pressures of developed operations. We have a class of internal start ups that need to be nurtured, like GE's Durathon battery, a green backup power source for cell phone towers in Africa that started life as a hybrid locomotive battery.”  Enabling those start ups with space, time and resources to develop, without any certainty of positive results, is crucial today.

8. Balancing new and existing, inventing and improving
In management terms, “ambidexterity” is the ability of firms to exploit existing, often mature markets and to explore new, often emerging ones simultaneously.  At the heart of established firms’ efforts to spur innovation, the challenge is how to allocate resources to strike an appropriate balance between these two often conflicting strategic directions.  Harvard’s Michael Tushman has incisively analyzed the more than decade-long successful efforts at IBM to grow new businesses like Pervasive Computing, which allows mobile workers greater access to data and supports M(mobile)-commerce (

9. Top leadership buy-in
In March 2013, one of the world’s successful media companies, Axel Springer, sent its top executives (flying economy-class and then sharing rooms in a two-star hotel) to Silicon Valley to learn the language of digital entrepreneurship.  The results included their setting up their own garage for innovation (!) and, more substantively, returning to Germany where they became roles models and drivers of change within their company (

10. Simplicity pays
Annually for the last four years, the strategic branding firm Siegel+Gale has ranked global brands for simplicity ( The European-based discount supermarket brand, ALDI, ranked as the #1 global brand in 2013. Despite being far-flung with more than 9,000 stores worldwide and a brand that “focuses on the essentials, no matter what city,” ALDI’s good-value-for-the-money reputation has adapted to thrive before, during and since the economic crisis.  Beyond serving customers, however, Siegel+Gale’s research shows how innovation within a firm like ALDI is served by the greater clarity of shared purpose and goals accompanying brand simplicity.

All these lessons should inform the decisions and behaviors of two central actors in any established firm wanting to be more entrepreneurial and act more like a start-up.  The first actor is existing talent.  While unavoidable that organizational transformations often require the hard, if hopefully mutual, realization that formerly valuable talent no longer fit in new priorities and plans, the participation of current workers in any entrepreneurial venture is vital for its success.  Some talent will obviously be more directly involved in such efforts than others, but all need to recognize the shared purpose. 

The other actors, of course, are leaders.  Some of the lessons here, like adaptability or uncertainty or senior leadership buy-in, explicitly reference the demands (and opportunities) of leadership.  Yet several key principles and practices of start-ups, like Ries’ “entrepreneurship is everywhere” and “entrepreneurship is management” accord well with the more generally valuable precept that leaders, in existing firms, especially, are defined by what they do rather than by where they sit or the titles they hold.  In the end, at the heart of established firms should be leaders seeking, like their counterparts in start-ups, to grow business faster, serve customers better, transform existing markets and make inroads into new ones, and creatively sustain the elusive spirit of ongoing innovation.

Thursday, January 16, 2014

The Stories We Tell

My first reaction upon viewing Martin Scorsese’s new film, The Wolf of Wall Street, was how closely it resembled Goodfellas, the director’s masterful account of mob informant Henry Hill’s life in organized crime.  Like that historical snapshot of the American Dream colorfully run off the rails, the new film tracks the wanton greed and excessive personal behaviors of Jordan Belfort (played by Leonardo DiCaprio) during the 1990s.  Belfort made tens of millions of dollars selling “penny stocks” and manipulating the stock market through his firm, Stratton Oakmont, before being convicted of securities fraud and money laundering.

While the Goodfellas parallel, in particular, urges Scorsese’s current production to be viewed as a cautionary tale of unbridled Capitalism, what else the film says about “Wall Street” or contemporary business and markets – what more specific stories it may be telling about them – is less clearcut.  In a characteristically incisive New York Times column, Joe Nocera asks exactly that question about the film’s larger message regarding business.  Commenting on Scorsese’s relentless preoccupation with his protagonists’ sexual obsessions and drug use (rather than, say, the specifics of Belfort’s fraudulent trading activities), Nocera concludes that, “to use Stratton Oakmont to represent Wall Street doesn’t begin to get at Wall Street’s sins.”    

Yet Nocera’s question touches on the more fundamental matter of how we tell meaningful stories either about specific businesses or business activities.  Typically, of course, as in the film’s preoccupation with the dissipated indulgences of DiCaprio’s Belfort, we tend to focus on individual leaders and their actions.  Consider a few of the prevailing narratives of business today: the visionary entrepreneur, the rapacious exploiter, or the small businessman at the heart of the economy.  Some corporations do acquire a collective identity that shapes their stories – Enron as the hubristic “smartest guys in the room” or Goldman Sachs as a “great vampire squid” – but they are exceptions. 

In Hollywood and, arguably, the wider popular imagination alike, there’s a further need to simplify and dramatize the activities of business like stock trading.  At one point in The Wolf of Wall Street’s occasional voiceover, in fact, DiCaprio’s Belfort begins to describe the specifics of his trading activities only to acknowledge they don’t really matter to the audience and stops.  Moreover, any connection in the film between Stratton Oakmont’s actual dealings in the 1990’s and the ethics of big Wall Street firms’ early trafficking of Collateralized Debt Obligations (CDOs) becomes speculative, at best, as the film’s story increasingly dwells on Belfort’s own spiraling out of control.  The complexity of such activities and any ethical or legal claims to be made about them, much like the operations of other financial entities like hedge funds or private equity firms, make them difficult if not impossible to render meaningfully in dramatic stories.  It should give us pause in thinking about how we characterize the activities, and differentiators, of our own businesses in the stories we tell of them.

Formal business education regularly addresses the challenge of telling business stories.  The case method thus often requires that firms, their constituent units and leaders, be analyzed closely.  Cases can obviously be structured in different ways, but the most typical approaches rely on carefully drawn narratives: decision-making cases confront the protagonist (and students) with a decision freighted with the complexity of preceding events, for example, while best practice cases present the emergence of those practices through a particular sequence of decisions and events.  Harvard Business cases often go so far as to intentionally scramble the elements of business narratives in order for students to have to make sense of them.  Dexterous re-construction of the full story becomes the touchstone for analysis and learning – while also modeling the valuable skill of producing coherent stories from the disparate facts and other pieces of information found in everyday life.

More broadly, the stories of business organizations that circulate externally cannot but help shape the wider understanding of those organizations (regardless of their accuracy).  Marketers in this way rely on narratives to construct and differentiate the status of company (or its constituent product) brands.  As media and entertainment mogul Peter Guber makes clear in his bestselling Tell to Win, the value of stories is the “emotional transportation” they offer customers or clients.  That “transportation” may lead to very different ends, of escape or transformation or even-self discovery, but it is ultimately borne on the wings of compelling stories that touch our hearts as customers, partners, or collaborators.

Internal to businesses, narratives, what some call “organizational scripts,” can spell out the distinctive and locally appropriate behaviors to be performed in various situations.  Some of these are “origin stories,” of founders’ decisions or critical events, while others capture the defining ways the business organizations manage change, solve problems or otherwise collectively behave.  Still other stories are aspirational and define the organization according to the future it envisions (for example, in Google’s case, having all the world’s information organized).  In fact, the most influential organizational stories are often those that describe where individual workers want to go together and how they aim to get there. 

At the center of such scripting and storytelling are leaders.  In their Animal Spirits, which argues that humans are hard-wired to organize information and experience into narratives, Nobel Laureates George Akerlof and Robert J. Shiller noted that, “Great leaders are foremost creators of stories.”  Creators, yes, but also evangelists, translators, exemplars and finally guardians of the organizational DNA organized into and relayed through stories.

Like all genetic influences, however, the core elements of given stories of organizations and business activities only go so far in shaping their eventual impact.  Ever-changing environmental dynamics, say, of shifting markets, require that stories be continually refined.  In his conclusion to The Leader’s Guide to Storytelling, Stephen Denning makes the crucial point that narrative elements and techniques should ultimately serve as the basis of connection and communication with employees and customers.  Rather than being self-contained and complete, in other words, stories should convey essential truths about the business they describe while still having rough edges and opening out to continuing interaction.  Although that doesn’t necessarily work in Hollywood’s scripts and productions, such openness and adaptability in meaningful storytelling about organizations and business activities are among the paramount responsibilities – and most powerful opportunities – of real leadership.