Change is hard. It’s especially hard if what you’re already doing has been even marginally rewarding and successful. This is why corporate leaders sometimes give us a little side-eye when we insist that they start thinking like venture capitalists. After all, money is being made, stockholders are mostly happy, nothing is technically broken. Are radical changes really necessary?
They are. They absolutely are. To capitalize on the startup ecosystem, you have to embrace all aspects of it, not just the ones that feel easy or comfortable. (Not that any of them are cakewalks.) And that includes training managers and leaders to support New to Big efforts by focusing on customer problems, celebrating productive failure, and relentlessly pursuing the commercial truth.
Let us share an example of this fundamental about-face: meet George Oliver.
In September 2017 George R. Oliver was appointed chairman and CEO of multinational conglomerate Johnson Controls. Prior to the 2016 merger of Johnson Controls and fire protection and security company Tyco International, Oliver had spent ten years at Tyco, including the last six as CEO. And before leading Tyco, Oliver had a twenty-year career with GE, where he served in operational roles of increasing responsibility across several divisions. To say Oliver is a phenomenal operator is as much of an understatement as saying Simone Biles is good at somersaults.
Bionic started working with Tyco in 2015 when Oliver and his team were searching for new ways to grow their business footprint. As they mapped out their strategy for the future they wanted to know what they could learn from Silicon Valley—to understand what made some startups so successful.
“We had a hundred years of success developing products for the fire and security industry, developing solutions, and then ultimately completing the traditional service on those installed systems, but we weren’t thinking beyond,” according to Oliver.
By now, you should be able to diagnose that situation easily enough: they were thinking TAM, not TAP. But, as it turns out, the root cause was one level deeper than that: Tyco was locked into a classic Big to Bigger mind-set.
“Let’s face it, when you’re a strong operator, you think you have all the answers, because you’ve lived through all the problems,” Oliver continued. “So you’re quick to provide the answer. We realized very quickly that a lot of that behavior was getting in the way of growth.”
Since leaders become leaders by spending decades learning and observing and analyzing and achieving, they have a wealth of institutional knowledge and business acumen. Often, they also have a tough time accepting that, in order to install and deploy a growth operating system, they need to chuck much of that hard-won wisdom in favor of a handful of radical mind-set shifts.
“The challenge is that you’re working with extremely intelligent people who’ve been highly successful by doing things in a certain way,” agrees Debby Hopkins, the former chief innovation officer of Citi. “That’s hard, because now you’re saying it’s not good enough anymore.”
In the twentieth century, success meant becoming a global leader. But to be an enterprise CXO in the twenty-first century, you’ll need to become a growth leader. What does that mean?
“Leadership today has got to be multidimensional. You’ve got to have strong operating skills. You’ve got to build strong teams. But you’ve also got to have a growth acumen that is ultimately the catalyst to long-term success,” Oliver insists.
To foster New to Big growth you must learn how to become an operator and a creator. You have to become ambidextrous. Having worked with, interviewed, employed, and actually been new business creators ourselves, we’ve identified ten key mind-sets that transform operators into creators:
Turn Outside In
Focus on Do vs. Say
Embrace Productive Failure
Expire Your Data
End Your Addiction to Being Right
Lead Bullets Only
Don’t Love Things to Death
Build Ladders to the Moon
No Success Theater
Become an Ambidextrous Leader
Let’s go through them one at a time.
Most enterprises overvalue their own knowledge, expertise, and insight and undervalue the experiences, trends, and secrets that exist outside their walls. Yet the majority of startup success stories are driven by forces outside the entrepreneurs’ control. VCs understand this.
We regularly ask VCs what percentage of their successes are due to market timing, luck, fate, whatever you want to call it. Their answers are always sky-high. “I think that being in the right place at the right time is sort of 99 percent of everything,” says Albert Wenger, managing partner at Union Square Ventures. Right, and on time. We couldn’t agree more.
VCs know that the real drivers behind their huge wins are external—changing regulations, the diminishing cost of a technology, consumer trends. It’s not about them; it’s about something outside of them, something happening on its own timeline and out of their control. Which means looking at the world from the inside out is a terrible strategy for creating something new. You have to Turn Outside In.
Starting with an R&D technology and searching for a customer to sell it to? That’s inside out. Buying a company because they’re threatening your market share? Inside out. Searching for a new channel for your existing widgets? Inside out. (And incremental.)
Outside In means asking, “What outside forces are happening to us? How is the landscape changing? What new enablers allow us to solve this customer problem exponentially better than it’s being solved now? And how can we leverage our organization’s unique capabilities, our ‘proprietary gifts,’ to capture and leverage this force?” As leaders, we need to be keenly aware of new and emerging market forces so that we can develop extraordinary ideas internally, and release them at the ideal moment. We need to see potential, and position ourselves to pounce when the time comes.
Here’s an example of Outside In thinking in practice:
Unmanned aerial vehicles (more commonly known as drones) are a fantastic example of a technology that has gained traction on an unpredictable timeline. They were first used in combat in the early 1970s, but it took another forty years for them to become a regular tool of warfare. Once the technology was cheaper and more widely available, corporations began to consider how they might leverage it. However, early attempts at commercial drone use in 2012 by taco delivery startup Tacoraptor were quickly shut down by the Federal Aviation Agency (FAA), which didn’t bode well for broader adoption. Two years later, the FAA issued guidelines that outlawed all commercial use of drones—seemingly a public rebuttal to rumors that Amazon was developing a drone delivery network—yet granted gas company British Petroleum (BP) permission to use drones to inspect their infrastructure in remote parts of Alaska. The latter ruling created an opening for commercial drone use to become acceptable eventually. While regulators initially took a conservative approach, it’s only a matter of time before the wave sweeps through.1
So when we started working with a large energy company in 2015, we weren’t surprised to learn that they were paying close attention to commercial drones as they looked Outside In. Over the next two years, we helped them seed an OA with solution concepts that leveraged drones, plus one very valuable proprietary gift to solve a huge customer problem. (Sorry, we can’t tell you what it is.) The question they continue to ask as they run experiments to validate those solutions is When? When will the regulations shift and unleash widespread adoption of this technology? They know the time is coming, they’re just waiting for it to arrive.
By turning Outside In, that energy company has created a portfolio of bets to ensure they are right and on time when it comes to drones.
Believe the potential success of a new product or business is wholly under their control.
Have solidly established views of “how the market works.”
Look at competitive startups and think, “They’re too niche.”
Believe being “on time” is when a customer starts asking for a solution, rather than demonstrating they need it through new behavior.
Embrace the philosophy that they must be right, and on time, which means riding an outside force that is out of their control.
Build a personal “advisory board” to keep them up to speed on relevant trends and technologies.
Assemble a team to work on potential white spaces that leverage nascent technologies or trends that could reach a tipping point in three to seven years.
Focus on how technology is growing or changing a market, or enabling a new customer behavior, remembering that the current market size might look different in a year.
Experienced marketers know that customers frequently have no idea what they want until it’s placed in front of them. There’s a legendary (though factually dubious) quotation from Henry Ford that is often trotted out at this point: “If I had asked people what they wanted, they would have said faster horses.”
But venture capital investor Eric Paley insists that this attitude points to a level of arrogance and dismissiveness toward your consumer. “Good product managers don’t ask their customers what they would like. It’s not the customer’s job to know. Instead product managers ask, ‘Why would you like a faster horse? What do you want from a faster horse? Would you prefer your horse needed to eat less often, to stop less often? Would you prefer if it couldn’t throw a shoe?’ ” The insight from this tall tale is that you actually need to ask the questions that uncover the root of the customer need.
Of course, back in the day, the alternative to polling customers was risky and expensive: to set up a factory, build a car, and hope people would both want it and buy it. You had to be a visionary, be right, be on time, and have gobs of capital to fund your experiment. Today, Ford could take a much cheaper and faster approach: do customer interviews as Paley demonstrates; size the TAP to ensure the opportunity is big enough; build a landing page featuring a prototype Model T, demo video, and sign-up forms; buy some ads on Facebook and Google; and test consumer demand for a few thousand dollars and in the space of a couple of days.
In fact, this very model for gauging customer appetite is employed by Tesla. The company set up online preorders for its Model 3 car multiple years in advance of delivery. People were actually signing up to buy (and putting down a $1,000 deposit!) before Tesla had a functioning prototype.2 That is powerful evidence of customer intent, of a target market saying, “Not only can I actively voice my desire to own this product, I’m willing to back up that desire with cold, hard cash.”
Do vs. Say is a mind-set that emphasizes customer behavior, which reveals far more commercial truth than Voice of Customer (VOC) research. It’s not just that customers may not know what they want; it’s also that in VOC research, customers have nothing at stake. Experiments need to be designed in such a way that they cost customers something, proving out the respondent’s true level of interest and commitment. Consider these two hypothetical research scenarios:
SCENE 1: Does this widget solve your problem, X? Yes. Great! Do you think you would buy the widget? Sure. Which one would you be most likely to buy? The blue one. How much would you be willing to pay for the blue one? Probably $25 to $30. And how likely would you be to buy this when it hits stores? Oh, I’ll probably buy it. It really is a great product.
Research finding: Probable purchase of blue widget at price point of $25 to $30.
SCENE 2: Does this widget solve your problem, X? Yes. Great! Would you like to preorder this product right now? It costs $29.99, with free shipping. You can enter your credit card and shipping information right here, and you won’t be charged until it ships. Um, I mean, it’s great, but I’m not sure I would order one right now. Okay! No problem. Would you like to sign up for our mailing list so you can be the first to know when it is available? The mailing list will get first dibs when we launch. Well, that sounds awesome, really it does, but I get so many emails, you know? I’d just rather not give you my email address today.
Experiment result: Stated interest, but no conversion at $29.99 price point and no email signup. Value proposition not validated.
Two approaches to value proposition testing that yield two very different results.
Leaders need to model the Do vs. Say mind-set by urging their teams to design experiments that require an exchange of value, rather than rely on any research that is based on surface-level customer responses. When teams say that “we know” something, leaders must push them on how they know it. What experiments have they run to demonstrate that truth?
Lean hard on traditional research methods, such as Voice of Customer.
Assume that consumers know what they want and that they can articulate it.
Spend money on any and all projects that traditional customer research data predicts will succeed.
Let VOC research drive product design.
Validate or invalidate solutions based on customer actions.
Design every experiment with an “ask.” (There must be an exchange of value or it’s research pretending to be an experiment.)
Solicit feedback from customers in a way that allows them to answer in a completely unbiased manner. (Customers often tell you what they think you want to hear if they think they’re being judged.)
Create a testing environment with a range of experiment designs in order to use the right tool at the right time.
More often than not, after one of my keynote speeches for an enterprise leadership team, a CEO will follow me backstage and, in a quiet voice, admit one of their deepest fears: that their company leaders don’t tell them the truth. In those rare moments of vulnerability I will look them in the eye, take a breath, and with radical candor confirm, “They don’t.”
CEOs are shielded from the truth because their employees have been trained to live in fear of making mistakes, betting on the wrong horse, championing a concept that flops. Established companies aren’t set up for failure, and executives aren’t positioned to understand its value. So people tiptoe around leadership, or spout best-case scenarios about improbable outcomes rather than fess up to misfires and wrong turns.
Of course, the failure we’re talking about isn’t an irreversible blunder that leads to bankruptcies, legal action, catastrophic job losses, or putting people in harm’s way. That, friends, is straight-up bad. No, what we’re talking about are the cases when the dream doesn’t line up with reality.
Like when everyone’s sold on the dream that A will be the future of the company. The team already procured resources and mapped out a five-year road map for A, and they’re eighteen months into the journey. Then they run experiments and learn that although customers don’t want A, they’re actually pretty psyched about B. From the outside, the obvious choice would be to update the vision, pivot to B, and get cranking on a new direction. But in an enterprise where unselling the dream is fraught with judgment, politics, and more, the cost of learning is too high. It’s your entire career. So the whole company tacitly agrees to ignore the commercial truth and continue on with a project they all know will fail. We call those projects “zombies.” They are the walking dead, and everyone knows it, but they suck up talent and resources because no one will kill them.
Embracing Productive Failure means lowering the cost and increasing the speed of learning. It means small, fast, and cheap failures that ultimately point you in the right direction rather than morphing into big, painful, and expensive failures (ahem, New Coke). It means leaders who create an environment that can kill zombies, freeing up resources and attention for opportunities that are still alive. It means welcoming the commercial truth even when it is counterintuitive, even when it requires a sharp pivot.
We may not always see it, but the legacy of productive failure is all around us: WD-40, the famed lubricant that silences squeaks and loosens stuck parts, got its name from the 40 tries it took to perfect the formulation.3 Bubble Wrap was originally invented in an attempt to make trendy, textured wallpaper (an obvious failure); it only became an “overnight success” years later when IBM wrapped computer parts in it for transport. The first synthetic fabric dye was actually a failed attempt at making an artificial version of quinine, an antimalarial drug. The chemistry experiments created an oily sludge, which was terrible as a drug but turned silk a beautiful shade of purple.
At Citigroup, we worked with an internal team called D10X to build a startup ecosystem for the bank. Debby Hopkins, former CIO and founder of Citi Ventures, was already well aware that the key to this work could be increasing the speed of their learning. “It’s not just that you’re learning about yourself, you’re learning about the process, you’re learning about the technology. There’s absolutely no substitute for experience.”
Venrock partner and VC Nick Beim appreciates productive failures when funding a startup team: “For us, when someone’s failed and they’re really thoughtful about it, and they’ve gotten much smarter, they’re going after the new opportunity armed with what they’ve learned. That can lead to terrific outcomes.”
The entire entrepreneurship/VC ecosystem is based on a portfolio theory that assumes a high rate of failure. We’ll dig deep into this concept in chapter 7, but for now, a quick overview: The data show that 60 percent of VC returns come from just 6 percent of capital deployed, while more than half of deals lose money. The top VC firms don’t have fewer misses, just bigger hits.4 Yes, this means even the very best VCs usually make investments that fail. Spectacularly. But they increase their odds for big wins by looking at potential opportunities through a lens of “What if this works?” rather than “What if this fails?”
Bringing this model into a healthy, discovery-driven, growth-obsessed established company means the company must be willing to try dozens of things, be comfortable with watching the majority fail, and be self-aware enough to extract wisdom from the process. A company that “fails to fail” is both missing out on learning opportunities and leaving money on the table. A leader who inhibits productive failure is inhibiting meaningful growth.
Venture capitalist Esther Dyson uses the phrase “Always make new mistakes!” in her email footer.5 Great advice from a venerable investor. We must give our teams permission to fail, and create systems to ensure those failures are productive.
Fear all internal failure, associating it with lost time, money, and resources.
Feed the zombies instead of pivoting.
Are surprised when a “sure thing” bombs after years of planning.
Struggle to get the full picture of why a project failed.
Think of failure as an inevitable by-product of risk-taking and a necessary input for meaningful learning.
Build a portfolio of bets knowing that many will not succeed. (Again, more in chapter 7!)
Always ask if there is a cheaper/faster way to get to the same learning.
Are honest and open about mistakes without being judgmental. Leaders discuss them in meetings, write about them in newsletters, and make their entire company comfortable with learning from failure.
At the risk of sounding like somebody’s ornery granddad, business cycles sure do whizz by awfully fast these days. Want proof? Let’s take a stroll through the acceleration of change over the past eleven thousand–odd years. (Don’t worry, it’ll only take a paragraph.)
When agriculture came on the scene around 10,000 BCE, workers were able to develop an enduring and reliable mental framework for how their world worked.6 Once they’d determined the yield of corn from an acre of land and the demand for corn in the nearby market, they could execute on that knowledge for their entire working lives. The industrial revolution in the nineteenth century brought faster cycles, but it formed the core of the global economy for nearly two hundred years. Since most modern business careers span twenty to sixty years, that speed of change allowed most workers to spend a lifetime relying on the same time-tested techniques. Today, the commercial internet is only about thirty years old, closing in on the length of a single career cycle. And the mobile internet revolution is only ten years old, a mere fraction of a career.7 Major cycles of change in technology and customer habits are happening more frequently as the years tick by.
Which means that business data remains relevant for significantly shorter periods. Just a few decades ago, we could successfully leverage heuristics, learnings, and data from the early phases in our careers for present-day decision-making. Now that change is moving at such a clip, we can’t reliably do that anymore…but old habits die hard. Disregarding hard-won experience is unnatural to us, and it requires conscious effort to abandon earned knowledge.
At Bionic we set guardrails with our partners that only allow data from the last twelve months and forecasts up to three years into the future. Data more than a year old needs to be revalidated. And forecasting beyond three years is intellectually dishonest, because the technology and business models are unknowable beyond that horizon.
As an example, many of the business models that failed spectacularly during the dot-com boom, such as pet food delivery and online currencies, are now—twenty years on—the basis for profitable and sustainable businesses.8 How did Chewy succeed where Pets.com failed? What was different?
Julie Wainwright, the former CEO of Pets.com, weighed in in a Business Insider article: “Here is what the world looked like in 2000: there were no plug-and-play solutions for ecommerce/warehouse management and customer service that could scale, which means that we had to employ 40+ engineers. Cloud computing did not exist, which means that we had to have a server farm and several IT people to ensure that the site did not go down. There were less than 250 million worldwide internet consumers in 2000. Now there are 5 billion.”9
Expire Your Data means that instead of a knee-jerk reaction of “That doesn’t work. Don’t you remember what happened to X?” we should ask, “Why could this work now? What is true about the world today that could make it viable?” It means a business venture that was catastrophic ten years ago might be lucrative today. It also means that as leaders, we must constantly be questioning what is true about the market and our place within it.
Seasoned VC Albert Wenger agrees: “Break all of the rules. I think most great investments are great specifically because they broke some rule that you previously had.” As a growth leader, it’s your responsibility to encourage your teams to question and test the strongly held views and assumptions that support day-to-day business. “This is how we’ve always done it” is a death knell. Burn the rule book, expire the data, and look at the problem with fresh eyes.
Believe they can forecast markets, business models, and technologies multiple years into the future.
Are embarrassed about the risk of making the same mistake twice.
Are known for saying, “Been there, done that.”
Read the same books, attend the same conferences, and listen to the same thought leaders as they always have. (You might even say they’re in a bit of a rut.)
Examine and understand new market forces and technologies before pursuing a project.
Put an expiration date on data, typically no more than twelve months in the past. Then they reset and revalidate all assumptions on any old data.
Always ask, “Why now? What has changed and what’s driving that change? How do we know and when did we learn it?”
Are intellectually honest about what should work vs. used to work vs. does work.
Nobody likes to be wrong. Seriously, even science says so: Psychologists have found that when we’re “unfairly” accused of something, the cognitive dissonance we experience is jarring and deeply uncomfortable,10 triggering the same areas in our brains that register physical pain.11 Consultant and author Judith Glaser has compared our collective desire to be right and win arguments to an addiction, from a psychological perspective.12
Addiction or no, the constant need to be right is unproductive on several fronts. First and foremost, it turns us into intolerable jerks. Equally worth noting, bullheaded insistence that we’re right is utterly ineffective in convincing the other party of our rightness. Cornell researchers found that, in the context of debate, language that is more hedged and open to alternatives is considerably more persuasive.13 And in the longer term, clinging to the notion that we’re already right can hold us back from actually being right. When we close ourselves off from discussion and experimentation, we miss out on discovery.
Andy Grove, one of Intel’s founders and its legendary former CEO, had a useful approach to protect against this addiction in internal discussion: the mantra of “disagree and commit.”14 This philosophy allows team members to voice disagreement while simultaneously deferring to another team member and committing to make the chosen path work. Both sides recognize that nobody can really know the right direction with total certainty, so they move ahead together rather than wasting time in debate.
Grove is not alone in his belief that wrongness can be productive. Former leader of GE Culture and cofounder of GE FastWorks Janice Semper has admitted, “We had a culture of being addicted to being right…we had a culture of perfection. We didn’t know how to partner with our customers and see their problems from their perspective. We had to train our leaders to lead in a different way. We had to get them to ask questions in place of providing answers.”15
Debby Hopkins also sees the danger in addiction to being right. She says, “It’s that inherent thing of having been very successful and really believing that you created that business. The challenge now is to bring to those incredibly successful leaders the understanding that the equations that we’ve all depended on have been dissolved. The real thing, the underscore, is that predictability has disappeared.”16
Leaders who jettison their addiction to being right often gain access to new worlds of inspiration and inventiveness. Part of implementing entrepreneurship and venture capital as forms of management within your company means encouraging venture teams and their advisors to be open to proving themselves wrong in order to unlock new opportunities.
Tell teams what to think, rather than asking questions about why they think A is the right decision or how they learned B.
Highlight data in presentations that support the thesis being defended, while dismissing data that doesn’t fit the narrative.
See changing their minds as “flip-flopping.”
Value decisiveness over learning.
Ask questions—real, open-ended questions (not leading ones)—rather than giving answers when teams share work in progress.
Change their vocabulary: evidence that proves their point is not a “win,” an assumption proved wrong is not a “loss.” Both are learning.
Make decisions based on the evidence the teams collect, even if it contradicts what they “know” is true.
Reward the “truth tellers”—the individuals who are willing to contradict company wisdom, industry best practices, even their biases.
Reporters writing corporate profiles and academics writing business cases love their silver bullets. Nothing makes a story sing like a single brilliant feature or strategy that launches a company into the stratosphere or saves it from certain doom. Silver bullets are appealing because they’re deceptively simple and seemingly effortless. “If we work hard enough and smart enough we’ll discover the one thing that will solve our complex and seemingly intractable problem!” the argument goes. Not to be a downer here, but that is straight-up magical thinking.
In fact, the idiom derives from an ancient belief in the magical power of silver and the widespread folklore that silver bullets were the only way to kill werewolves or supernatural beings. (Talk about an intractable problem…)
Early in his career, entrepreneur and venture capitalist Ben Horowitz learned his lesson about silver bullets. While he was working as a product manager for web servers at Netscape, Microsoft released its Internet Information Server (IIS). Microsoft’s product was five times faster than Netscape’s and would be given away for free. Furiously, Horowitz planned a set of partnerships and acquisitions that he believed might shield Netscape’s product from the attack, but when he outlined his plans to his engineering counterpart, he got an earful. His colleague, who’d gone toe-to-toe with Microsoft many times before, told him, “Our web server is five times slower. There is no silver bullet that’s going to fix that. No, we are going to have to use a lot of lead bullets.” So Horowitz and his team focused on a barrage of small improvements that collectively fixed the performance issues, and eventually Netscape beat Microsoft’s performance benchmarks.17
Lead Bullets Only is a mind-set that acknowledges that when it comes to growth, there are no silver bullets. This work is hard, and it takes a lot of metaphorical lead bullets to install a growth operating system that seamlessly interfaces with the rest of the enterprise. There isn’t one framework (or book, or conference, or thought leader) that will magically fix this. There is no way to “avoid the battle,” as Horowitz puts it. You have to “go through the front door and deal with the big, ugly guy blocking it.”
Ultimately, companies eager to grow must be willing to invest the resources, time, and political capital to develop a robust and integrated growth capability rather than flit between innovation “fixes” that are little more than flavors of the month. Leadership must be willing to acknowledge that this process is not about “solving the quarter” but about long-term survival.
Constantly search for “quick wins.”
Know the “lead bullet” solution, but avoid it because it’s daunting.
Are reactive to innovation rather than proactive.
Believe acquiring a company or copying a competitor or any one thing will solve their problems.
Take a hard look at their situation and consider all the levers they can pull and the opportunities for change. Remember it’s never just one thing.
Look at how they are measuring and rewarding work. Changing priorities requires updating metrics and incentives.
Keep a dual timeline for success: looking at the arc of progress over months and years, while celebrating small wins and fast learning over days and weeks.
Don’t drink the Kool-Aid: PR is not reality, and those purported “overnight successes” were decades in the making. (Keep your eye on the prize.)
We all remember Lennie from Steinbeck’s Of Mice and Men, right? The big galoot who loved to pet soft animals, yet always ended up killing them? Lennie was not a malicious character, or a budding sociopath. He was well-meaning and brimming with affection for critters of all kinds—he just didn’t know his own strength. He, quite literally, loved things to death. (That’s right, we can be downright literary when we want to be.)
Shifting to a process that involves tons of trying and failing makes it tempting to hold fast to any successes, no matter how tenuous they may be. You’ve invested company time in dozens of small innovation bets, learned from the ones that didn’t prosper, and provided more funding to those that did. It’s only natural to latch onto any and all bets that show traction or promise.
Experienced entrepreneurs know that the first customer revenue is often the “wrong” revenue. Early adopters are typically not representative of your potential customer base, and it’s unwise to draw broad conclusions from that initial small sample. Startups often spend months, or even years, working to understand who the “right” customer is, tinkering with pricing, loyalty, margins, and operations, before they are ready to scale. These are the “ugly teenage years” of a startup, and you can’t skip them. Otherwise, you’re scaling something that is still unproven. (And that could mean a big, expensive failure, which is the wrong kind of failure.)
It’s also tempting to coax success from bets by showering them with the best amenities established corporations can offer, like great infrastructure, privileged access to customers and partners, expensive staff, and special attention. As leaders, we want to reward progress and play to our strengths. But restraint fosters creativity, and comfortable entrepreneurs will never get as far as scrappy ones. In a study of award-winning work from 1.7 million people by employee incentives consultancy O.C. Tanner, researchers found that the most creative and successful outcomes were born from limitations and constraints, rather than unlimited resources and blank canvases.18
New to Big growth requires leveraging your expertise, talent, and strategic assets in innovative ventures, while also preserving a healthy and genuine entrepreneurial environment where startups must prove their models and earn their keep. Trust that, and don’t force early promise forward too soon.
Jump the gun whenever a venture shows even a glimmer of potential, and push it to prematurely scale by showering it with extra resources…and extra pressure.
Measure success by increasing hype, not customers, growth, revenue, and, in time, profits.
Have a team that isn’t hungry enough.
Believe the first customer revenue is representative of the entire customer base, and push teams to “get on with it” and replicate that success before they’re ready.
Before providing support, ask, “If this were a stand-alone startup, what resources would it have?”
Search for team members who are gritty and thrive under limited constraints. These are less likely to be the “high-potential” employees and more likely to be the makers, tinkerers, and truth tellers.
Practice restraint when a team/startup begins to take off. They don’t absorb it into the core at the first sign of success; instead, they give it six to eighteen months to work through its “ugly teenage years” first.
Encourage teams to push past the first customer revenue and search for the (profitable, obsessed, loyal) customers they need to scale the business.
In May 1961, President Kennedy gave a speech before a joint session of Congress announcing that the United States would land a man on the moon before the end of the decade. The first-ever “moonshot” was a huge and ambitious goal to accelerate our space technology and catch up with the Soviet Union, which had already launched a man into orbit earlier that year. On July 20, 1969, with just 164 days before the decade was up, Apollo 11 landed on the moon and Neil Armstrong took his “giant leap for mankind.”
More recently, the term moonshot became buzzy corporate speak when Alphabet’s innovation arm—called simply X—described itself as “a moonshot factory.” X has launched wildly ingenious projects such as Waymo self-driving cars and Loon balloons designed to make the internet globally accessible. Jealous? Understandable. The notion of a fully funded think tank that’s allowed to ponder and experiment with truly transformative ideas is incredibly seductive. However, it’s easy to forget that ideas are presented to the public in their most mature stage; we aren’t privy to the step-by-step evolution that transformational ventures typically take.
A “moonshot” is usually framed as a big, expensive, risky bet, but that original “giant leap for mankind” took eight years of methodical research and development, which built on decades of quiet work before that. Each bit of progress, each increment of success is a rung in a ladder. Backstage activity is what makes audacious achievement truly possible, and we must invest both patience and resources into cultivating it. In other words, when businesses contemplate our own moonshots, we’re far better served by building ladders than catapults.
Building a “ladder to the moon” may sound tedious and deeply unsexy, but here’s why it works: It allows you to learn and capture competencies out of order when necessary. With a catapult, you put all your resources into constructing a device that offers one exhilarating chance to reach the exosphere. With a ladder, you start at the bottom, locking in your rungs as they come available, and do so even if rung nine shows up long before rung four. The ladder lets the learning process unfold organically, and even if it feels a little messy, it gives you a complete, intimate understanding of how you reached your goal. And it gives you the ability to cruise both up and down multiple times instead of putting all your energy into a single, colossal effort.
SpaceX, a commercial rocket company whose founder’s ultimate ambition is to colonize Mars (so we guess that would be a “Marsshot”), has experienced out-of-order rung progression and the importance of the slow build. Here’s a timeline of the company’s progress:
2001: SpaceX took its first baby steps toward its lofty goal by exploring the use of cheap, third-party Russian rockets to send greenhouses to Mars. When the sourced rockets proved too expensive, the company decided to build its own.
2008: SpaceX launched its first spacecraft into orbit. (Note that seven years have gone by. Seven years, people!)
2010: Making commercial rocket flights financially feasible for non-billionaires meant recovering and reusing the spacecraft, so SpaceX focused on honing these protocols. The year 2010 saw the first recovery, but reuse was still a ways off.
2012: To make itself financially viable, SpaceX launched a side business as a space delivery service. This year saw its first delivery of a satellite to a space station.
2013: Next came delivery of supply shipments to space stations.
2015: SpaceX achieved its first controlled landings on land and on an ocean platform.
2016: The company began studying the viability of launching a network of four thousand satellites to provide global internet access. The profits from this operation would fund its interplanetary ambitions.19
2017: SpaceX saw its first successful reuse of a proprietary rocket. (A rung the company wanted in 2010, but didn’t have until 2017.)
This stroll through SpaceX’s history shows how moonshots may be the ultimate goal, but smart entrepreneurs start small and tackle them step-by-step. The company quickly abandoned the unrealistic notion of aiming for Mars right away, instead developing the competencies it needed to eventually reach it. This approach differs from the incrementalism of “sustaining innovation” because each step is more challenging than the previous one, even when they come out of sequence.
There’s nothing wrong with aiming for the moon. Expecting to get there in one shot, however, will just lead to disappointment. Focus instead on step-by-step progress.
Focus on the size of the solution only, not the bigger problem it’s solving, and often kill solutions that seem too small.
Dream of the day after launch, rather than the smaller wins they can aim for this year.
Plan for continuous, linear growth from launch to the moon as if it happens by momentum.
Are more worried about how to scale a startup, rather than helping the right cofounders and advisors just get the work started.
Solve the first few pieces of the problem right now. (Over time, those pieces build a ladder to the solution.)
Focus on portfolios of bets rather than single catapult shots. (With a portfolio, teams can leverage learnings from invalidated bets to get closer to a solution that works.)
Are willing to learn “out of order” if that’s what it takes to keep momentum going.
Deal with scaling when it’s time to scale.
Nobody likes to fail, we get it. But do you know what is worse than failure? Failure masquerading as success. The term success theater was coined by Eric Ries in his book The Lean Startup. He defined it as the action of “making people think that you are successful, [using up] energy you could put into serving customers.”20 Success theater is usually accompanied by “vanity metrics,” stats that look great but fail to fundamentally measure the health of the venture.
For instance, a startup website that has high traffic but low conversion might focus on traffic in reports and press outreach to present a pretty picture. As the saying goes, “What gets measured gets managed,” so traffic then becomes the focus of the team and perhaps the investors and advisors supporting them. But if the more relevant metric for that specific business model’s success is conversion, the startup will struggle.
This shouldn’t be an altogether new concept for established companies. After all, the quarterly dance of optimizing financial ratios for Wall Street analysts could also be categorized as success theater. Slashing assets to artificially increase ROA when you haven’t been able to boost returns? That’s success theater in a nutshell. (It stings, but you know it’s true.)
In the context of launching new businesses, success theater can be deadly. Most corporations are used to focusing on a few large and relatively safe projects. They’re not familiar with the high-risk nature of startups, where it’s normal for more than half to fail. Ideally, large companies become more comfortable with this over time, cultivating a portfolio of small bets that are ramped up as they demonstrate success. But if they only pretend to accept this alternate way of launching and supporting products, that make-believe will mask the rot but never deal with it. (Remember our discussion of zombie projects?)
No success theater means putting on your big-kid pants and being willing to both hear and deliver bad news. It means measuring what’s really happening rather than sifting for the metrics that paint a positive picture. It increases trust on teams, because the only story told is one anchored in reality, rather than illusion and political maneuvering. And it means when you do stumble across “good news,” you can trust that it is more than optics. Ending success theater ultimately frees up talent and funding for bets with the potential to actually succeed.
Focus on successful aspects of their bets, instead of looking at their performance holistically.
Hide failure, because it’s politically damaging.
Shy away from the weaknesses in their business.
Have two distinct points of view on the business: the true one and the one they present to others (including members of their team).
Present performance metrics in the context of the bigger picture. They take the bad with the good.
Dig into signals and metrics that indicate weakness in the idea. That’s where they’ll find the opportunities to improve.
Focus on the success of the startup in the market. Hiccups and triumphs in the testing phases help teams learn, but to drive growth, the endeavor must make its mark in the real world.
Don’t personalize failures—or successes.
Every business faces a trade-off between creating new businesses and operating those that already exist. Historically, breaking new ground has been the responsibility of entrepreneurs and R&D departments, while managing the status quo has fallen to managers and executives. However, true growth leaders must train themselves to handle both, to become fully ambidextrous.
Way back in 1991, Stanford professor James March tried to tell us this. He published a paper titled “Exploration and Exploitation in Organizational Learning” in which he outlined the importance of leadership tactics that balance old with new. March posited that—given its greater uncertainty and longer time frame—exploration is always vulnerable to being deprioritized. Exploitation is the safe bet, while exploration is unnervingly risky. And when organizations train themselves to be rock stars at exploitation and rack up a long list of exploitation-based successes, exploration becomes less and less appealing. Companies can coast along, exploiting their existing products, services, and core competencies, for quite some time. A complete eradication of exploration, however, leads to stasis and decline.21
“The only way to have this type of flexibility is to build a culture that makes change totally expected and acceptable—that’s what will make these instances less painful,” says Facebook’s VP of product, Fidji Simo. “You create this culture by putting people in charge of a problem, not a product; reinforcing again and again that you’re all working in a market where assumptions change and that’s okay; releasing products early to get initial feedback and adjusting accordingly. If you do all that, you create an organization that can absorb change—and that’s vital.”22
On the ground floor it makes sense to task your creators with discovering new opportunities while your operators focus on executing against existing plans; but at the leadership level, you must learn to do both.
The huge advantage that established companies have over startups is their ability to take New to Big and make it Big to Bigger. And the only way for that to happen is if leadership speaks both languages and creates the interface between the two capabilities. Shifting from analyzing a strategic plan in the morning to coaching a startup team in the afternoon requires a mental dexterity that only comes with practice. Becoming an ambidextrous leader is your biggest challenge in your search for growth.
Have isolated pockets of the company dedicated to creative discovery. Their oversight is separate, and they are not integrated with other departments.
Focus on the success of the margins rather than the launch of new projects.
Feel anxiety over the decline of a core profit stream, rather than excitement about new opportunities.
Let cash pile up on the balance sheet or use it for share buybacks to boost stock prices, rather than invest it in growth opportunities.
Explicitly include both business-operating and business-creating experiences in leadership job requirements, and incentivize accordingly.
Craft professional development plans that build “creator” competencies alongside “operator” ones for their leadership pipeline.
Build business-creating processes and staff into the organization, rather than setting them off to the side or shipping them off to Silicon Valley.
Evaluate New to Big through growth mind-sets, rather than traditional efficiency mind-sets. They use the right tools for the work.
In the first section of this book, we’ve laid out a philosophy. We’ve introduced New to Big vs. Big to Bigger, examined the market forces that drove a wedge between enterprise and startups, explained the importance of shifting from TAM to TAP, and explored the mind-set shifts executives must make to become growth leaders. This section has been focused on why: why old methodologies won’t work, and why you need to head in a new direction.
In the next section, we’ll get into how. We’ll begin to outline the steps you’ll take and tactics you’ll implement to install a growth operating system in your own organization.
Ready? Let’s do this.