Why Companies Are Not Startups – Startup Grind – Medium
an enterprise is:
A company is a permanent organization designed to execute a repeatable and scalable business model.
Once you understand that existing companies are designed to execute then you can see why they have a hard time with continuous and disruptive innovation.
Driven by Key Performance Indicators (KPI’s) and Processes
Once the business model is known, the company organizes around that goal and measures efforts to reach the goal, and seeks the most efficient ways to reach the goal.
Paradoxically, these very KPIs and processes, which make companies efficient, are the root cause of corporations’ inability to be agile, responsive innovators.
The goals for public companies are driven primarily by financial Key Performance Indicators (KPI’s).
A consequence of using these corporate finance metrics like RONA and IRR is that it‘s a lot easier to get these numbers to look great by:
Getting assets off the balance sheet.
Only investing in things that pay off fast.
The incentive system for a company focused on execution is driven by the goal of meeting and exceeding “the (quarterly/yearly) plan.”
What Does this Mean?
Every time another execution process is added, corporate innovation dies a little more.
Innovation is chaotic, messy and uncertain. It needs radically different tools for measurement and control. It needs the tools and processes pioneered in Lean Startups.
What to do
Because internal culture applies execution measures/performance indicators to the output of these incubators and allocates resources to them same way as to executing parts of company.
Corporations that want to build continuous innovation realize that innovation happens not by exception but as integral to all parts of the corporation.
To do so they will realize that a company needs innovation KPI’s, policies, processes and incentives. (Our Investment Readiness Level is just one of those metrics.)
- Innovation inside of an existing company is much harder than a startup
- KPI’s and processes are the root cause of corporations’ inability to be agile and responsive innovators
- Every time another execution process is added, corporate innovation dies a little more
- Intellectually companies understand innovation, they don’t have the tools to put it into practice
- Companies need different policies, procedures and incentives designed for innovation
- Currently the data we use for execution models the past
- Innovation metrics need to be predictive for the future
- These tools and practices are coming…