Thinking Inside the Box: Creating Startups Within Large Organizations
Every now and then we hear the story of the entrepreneur who left his or her steady job at a large company to follow their dreams and create a startup, but we aren’t all as daring and brave to quit steady work, especially in a time of economic uncertainty. If you have the entrepreneurial itch but aren’t in a situation that would allow you to sacrifice your day job, there are still ways you can scratch said itch and bring innovation to a «startup» within a larger company.
This morning I talked with Eric Ries, the driving force behind the «lean startup» movement, which encourages high efficiency and meticulous metrics tracking within entrepreneurial ventures. Ries, who is often asked to speak on the subject, says he noticed a trend among some of the people attending his talks. Many managers from large companies were coming to his sessions to learn what they could, because, as Ries discovered, the principals of lean startups can exist within larger corporations that are attempting to innovate.
«A startup is a human institution designed to create something new under conditions of extreme uncertainty,» Ries told ReadWriteWeb. «There is nothing in there about the size of the company, or what industry you’re in, or whether you’re the manager of a division or if you’re two guys in a garage, its just about the conditions in which you operate.»
As he points out, there are times in larger corporations when divisions are created to work on a new project, and similar rules and guidelines for managing that project which come from startups can be used here as well. Ries says that managers, like entrepreneurs, are taking risks on new ideas, and when they create a new division, they are essentially investing the company’s time and money as a VC would invest funds in a startup.
«The more I started to work with those managers […] I started to notice that they were having very familiar sounding arguments,» Ries says. «The arguments between a venture-backed entrepreneur and a venture capitalist are almost exactly the same word for word as between these ‘intrepreneurs’ and their CFOs because the same issues come up.»
One of the ways larger corporations can implement entrepreneurial innovation into their businesses is to allow for what Ries calls «innovation inside the box,» or a fenced off sandbox for experimentation with new products. By creating a place where employees with ideas can test a tweak to a feature, or where new ideas can be built within certain constraints, companies can greatly increase their potential for innovation.
«The real value is [this] starts to catalyze change because by changing the way you work you start to accelerate that feedback loop […] and that can become the basis for making other changes,» Ries says.
Unfortunately, most larger corporations aren’t allowing for this open sandbox of innovation within their companies, and choose to buy up technology and talent from startups. Ries agrees that many entrepreneurs get frustrated working inside a larger company, but he says the combination of these entrepreneurs with a walled off innovation playground could provide for some amazing innovations.
Companies could also benefit from the addition of a sandbox by inspiring their existing employees to be innovative, instead of wrangling up entrepreneurs from a startup, which would save them money in the end.
«They have this idea that a certain alchemy will happen that ‘if I bring these special people into my organization, they will teach my regular people how to be special,’ and that’s just a formula for breeding resentment,» Ries told ReadWriteWeb. «If the people doing the acquiring had more of a theory about how entrepreneurship is supposed to work […] they could start to think of better ways to plug an acquired company into the larger organization, taking advantage of what they’re good at without destroying it.»
If you’re a budding entrepreneur or a manager at a large company, there is an excellent chance to hear from Ries and others on these concepts and others this Friday at the Startup Lessons Learned conference in San Francisco. If you can’t make it to the Bay Area, there are simulcasts occurring Friday in nearly 50 cities worldwide, many of which are free or very inexpensive, so RSVP and bask in the lean startup goodness.