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 (http://www.kotterinternational.com/our-principles/changesteps).
(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 (http://hbr.org/2013/06/transient-advantage/ar/2). 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 (http://www.rga.com/the-next-9-years/).
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 (http://www.youtube.com/watch?v=56GFhr9r36Y).
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 (http://www.pgconnectdevelop.com/home/pg_open_innovation.html).
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 (http://blogs.hbr.org/2013/12/this-is-what-it-looks-like-when-a-google-manager-gets-feedback/).
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 (http://blogs.hbr.org/2012/07/exploring-and-exploiting-growt/).
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 (http://www.inma.org/blogs/media-entrepreneur/post.cfm/finding-common-ground-with-digital-nerds-in-silicon-valley).
10. Simplicity pays
Annually for the last four years, the strategic branding
firm Siegel+Gale has ranked global brands for simplicity (http://simplicity.siegelgale.com/2013/).
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.
