Wednesday, March 25, 2015

Why Big Companies Fail at Acting Like Start-Ups

How to Save Top Corporations from Themselves

By Marc Dresner, IIR

It’s well known that the average lifespan of major corporations has been declining at an alarming rate.

In fact, in 2012, Innosight—the innovation consultancy co-founded by Clay Christensen—published a report estimating that at the current rate of churn, 75% of the S&P 500 just over a decade from now will be companies we’ve probably never heard of.

Little wonder, then, that many of the world’s biggest and oldest companies have been scrambling to emulate the start-ups potentially poised to supplant them.

Steve Blank
Anecdotally, we also know that most such efforts aren’t meeting expectations, primarily because these big, successful corporations can’t seem to get out of their own way.

That’s according to Steve Blank—Silicon Valley serial entrepreneur and co-author of “The Startup Owner’s Manual”—who says what has made great corporations great may today be their greatest liability.

“The ‘Jack Welch rules’ no longer work.”

“The ‘Jack Welch rules’ no longer work in the 21st Century,” Blank told me in an interview.

“Everything we knew about corporate innovation has been disrupted,” he added. “The challenge of innovation in the 21st Century has a whole set of issues that the old business school books or even the current ones don’t even begin to describe.”

“Companies dealing with continuous disruption need continuous innovation. Not innovation by exception, but innovation by design.”

“Companies dealing with continuous disruption need continuous innovation,” Blank emphasized. “Not innovation by exception, but innovation by design.”

“The good news is that we are just beginning to understand how. The bad news is that we are just beginning to understand how,” he noted.

Blank—whose Customer Development Methodology is credited with igniting the Lean Start-Up movement popularized by his most famous pupil, Eric Ries—says the problem is that the competencies necessary to behave like a start-up run counter to the cultures of most large, successful corporations.

“Large companies are masters of pristine execution with efficiency,” said Blank. “But innovation requires very different processes and procedures and incentives than execution.”

“Cultural issues around execution really make it easy to strangle innovation.”

“Cultural issues around execution really make it easy to strangle innovation on day one via the existing processes,” he said.

Big companies have somewhat embraced this idea, hence the proliferation of skunkworks and other initiatives designed to run independent from and parallel to their existing operations.

So why do these efforts continue to fall flat?

In this podcast for Forward Focus—FEI’s special interview series—Steve Blank discusses why so many attempts to act like start-ups fail and what companies need to do differently to achieve a state of continuous innovation in an era of continuous disruption.



Editor’s note: Steve Blank will be delivering the keynote, “Dealing with Disruptive Innovation,” at the 13th Annual Front End of Innovation taking place May 18-20 in Boston.

For more information or to register for FEI 2015, please visit www.frontendofinnovation.com

Ps. REGISTER TODAY with code FEI15BL and SAVE $100!


ABOUT THE AUTHOR
Marc Dresner is IIR USA’s sr. editor and special communication project lead. He is the former executive editor of Research Business Report, a publication for market research and consumer insights professionals. He may be reached at mdresner@iirusa.com. Follow him @mdrezz.

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