Why corporate entrepreneurs are extraordinary – the rebel alliance

I’ve spent this year working with corporations and government agencies that are adopting and adapting Lean Methodologies. The biggest surprise for me was getting schooled on how extremely difficult it is to be an innovator inside a company of executors.

I’ve been working with Richard, a mid-level executive in a large federal agency facing increasing external disruption (technology shifts, new competitors, asymmetric warfare, etc.). Several pockets of innovation in his agency have begun to look to startups and have tried to adopt lean methods. Richard has been trying to get his organization to recognize that change needs to happen. Relentless and effective, he exudes enthusiasm and radiates optimism. He’s attracted a following, and, when we started working together, he had just been tapped to lead innovation in his division.

He’s working to get his agency to adopt Lean and the Horizon 1, 2, and 3 innovation language (Horizon 1 executes current business models, Horizon 2 extends current business models and Horizon 3 searches for new business models) and was now building a Lean innovation pipeline created out of my I-Corps/Lean LaunchPad classes.

Yet today at dinner, his frustration just spilled out.

“Most of the time our attempts at innovation result in “innovation theater” – lots of motion (memos from our CEO, posters in the cafeteria, corporate incubators), but no real change. We were once a scrappy, agile, and feared organization with a “can-do” attitude. Now most people here don’t want to rock the boat and simply want do their job 9 to 5. Mid-level bureaucrats kill everything by studying it to death or saying it’s too risky. Everything innovative I’ve accomplished has taken years of political battles, calling in favors, and building alliances.” He thought for a minute and said, “Boy, I wish I had a manual to tell me the best way to make this place better.”

“Innovation is something startups do as part of their daily activities – it’s in their DNA,” he said. “Why is that?”

While I understood conceptually that adopting new ideas was harder in larger companies, hearing it first-hand from a successful change agent made me realize both how extraordinary Richard was and how extraordinarily difficult it is to bring change to large organizations. His two questions – 1) Was there a manual on “how to be a successful corporate rebel”? and 2) Why are startups innovative by design but companies are innovative by exception? – left me searching for answers.

Why Startups are Innovative by Design

If you come from the startup world, you take for granted that on day one startups are filled with rebels. Everyone around you is focused on a single goal: Disrupt incumbents and deliver something innovative to the market.

In a (well-run) startup, the founder has a vision (at first a series of untested hypotheses) and rallies employees and investors around that singular idea. The founders get out of building and rapidly turn the hypotheses into facts by developing a series of incremental and iterative minimal viable products they test in front of customers in search of product-market fit.

While there might be arguments internally about technology and the right markets, no one is confused about the company’s goal – find a sustainable business model and get enough revenue, users, etc. before you run out of money.

Every obstacle Richard described in his agency simply does not exist in the early days of a startup. For the first year or so, startups actually accumulate technical and organizational debt as they take people and process shortcuts to just get the first orders, the first 100,000 users, or whatever they need to build the business. All that matters is survival. Process, procedures, KPIs, org charts, forms, and bureaucracy are impediments to survival as a new company struggles to search for and find a repeatable business model. Founding CEOs hate process and actually beat it out of an organization when it appears too early.

In the technology world, companies that grow large take one of two paths. Most common, when startups do find a repeatable and scaleable business model, is that they hire people to execute the successful business model. And these hires turn the startup into a company – a Horizon 1 or 2 execution organization focused on executing and extending the current business model – with the leadership incented for repeatability and scale. (See here for explanations of the three Horizons of Innovation.)

But often, as the company/agency scales, the early innovators feel disfranchised and leave. Subsequently, when a technology and/or platform shift occurs, the company becomes a victim to disruption and, unable to innovate, usually stagnates and dies.

Alternatively, a company/agency scales but continues to be run by innovators. The large companies that survive rapid technology and/or platform shifts are often run by founders (Jeff Bezos at Amazon, Steve Jobs at Apple, Larry Page at Google, Larry Ellison at Oracle), are faced with an existential crisis and forced to change (Satya Nadella at Microsoft), or somehow have miraculously retained an innovation culture through multiple generations of leadership like W.L. Gore.

I offered that perhaps Richard’s top-level management would embrace Three Horizons of Innovation from the top down. Richard replied, “In a perfect world that would be great, but in most agencies (and companies), the CEO or board is not a visionary. Even when our CEO has acknowledged the need for Horizon 3 innovation, the problem isn’t solved because entrepreneurs run into either “a culture of no” or, worse yet, the intransigent middle management.

Richard explained, “In a Horizon 1-dominated culture, where everyone is focused on Horizon 1 execution, you can’t grow enough Horizon 3 managers. Instead we’ve found that support for innovation has to come from rare leaders embedded in the Horizon 1 organizations who “get it.” We’ve always had to hide/couch Horizon 3 style change in Horizon 1 and Horizon 2 language, which is maddening, but I do what works. In Silicon Valley, the operative word in any pitch is “disrupt.” In Horizon 1 organizations, uttering the word ‘disrupt’ is the death of an idea.”

That really brought home the stark difference between our two worlds.

(Lean Innovation management now offers Horizon 1 executives a set of tools that allow them to feel comfortable with Horizon 2/3 initiatives. Investment Readiness Levels are the Key Performance Indicators for Horizon 1 execs to measure progress.)

What about a manual of “how to be a successful corporate rebel”? Serendipitously, after I gave my Innovation @ 50x presentation, someone gave me a book saying “thanks for the strategy, but here are the tactics.” This book, entitled Rebels@Work, had some answers to Richard’s question.

Rebels at Work

If you’re a mid-level manager in a company or government agency trying to figure out how to get your ideas adopted, you must read Rebels@Work – it will save your sanity. The book, which was written by successful corporate innovators, offers real practical, tactical advice about how to push corporate innovation.

One of the handy tables explains the difference between being a “bad rebel” and being a “good rebel.” The chapters march you through a series of “how-to’s”: how to gain credibility, navigate the organizational landscape, communicate your ideas, manage conflict, deal with fear, uncertainty, and doubt, etc. It illustrates all of this with real-life vignettes from the authors’ decades-long experience trying to make corporate innovation happen.

The Innovation at 50x presentation gives corporate rebels the roadmap, common language, and lean tools to develop a Lean innovation strategy, but Rebels@Work gives them the tools to be a positive force for leading change from within.

After I read it, I bought 10 copies for Richard and his team.

Lessons Learned

• In a startup, we are by definition all born as rebels
• Companies are not larger versions of startups
• Canonical startup advice fails when applied in large companies
• The Three Horizons offer a way to describe innovation strategy across a company/agency
• Lean Innovation Management allows startup speed inside of companies
• However:
  • Horizon 1 managers run the company and are not rebels
  • Horizon 3 ideas might have to be couched in Horizon 1 and 2 language
• Rebels@Work offers practical advice on how to move corporate innovation forward.

Steve Blank is a retired serial entrepreneur-turned-educator who has changed how startups are built and how entrepreneurship is taught. He created the Customer Development methodology that launched the lean startup movement, and wrote about the process in his first book, The Four Steps to the Epiphany. His second book, The Startup Owner’s Manual, is a step-by-step guide to building a successful company. Blank teaches the Customer Development methodology in his Lean LaunchPad classes at Stanford University, U.C. Berkeley, Columbia University, UCSF, NYU, the National Science Foundation and the I-Corps @NIH. He writes regularly about entrepreneurship at www.steveblank.com.