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Charleston Business

Three techniques to keep the startup spirit alive in your maturing business

Nov 07, 2018 09:22AM ● By Kathleen Maris
By Dirk D. Brown

I was recently having coffee with a friend at her office in downtown San Francisco. We were sitting in a large, open room with about 25 other employees, most of whom were working on their laptops or collaborating on white boards. Some were grabbing free coffee and snacks. There was a gentle but energetic buzz of discussion and activity.

It felt very much like we were hanging out at one of the many cool startups in San Francisco, but we were not. I was visiting IBM. 

My friend is a senior executive there and an IBM Fellow, the highest honor an IBM technologist can receive. We were discussing her role at the company and how it is leveraging the dynamic systems, processes, tools, and culture traditionally associated with entrepreneurial, early-stage companies. 

In today’s business environment, IBM feels that these are the keys to effectively growing their company. Many other large and medium-sized companies, across a broad range of markets, also understand how critical it is to leverage entrepreneurial systems for growth. And those that don’t soon will.

If you look at the U.S. Census Bureau Business Dynamics Statistics from the 1980s until today, you will see that young companies less than six years old generate all of the net job growth in this country. That means that among all the companies more than six years old, there are as many jobs being lost as there are being created. As a result, about 70 percent of the companies in the Fortune 1,000 are replaced every decade, and that number continues to increase. 

For the most part, the companies greater than six years old that are still adding jobs are the ones that have managed to retain many of the systems, processes, and cultures of younger, smaller, entrepreneurial growth companies.

Growing companies maintain entrepreneurship as part of their corporate capability. Some examples are discussed below.

Practice Discovery-Driven Planning (a.k.a. Lean Startup)
One best practice advocated in this approach is to: 1. Test the market with a minimally viable product (MVP) as early as possible in the development process; 2. Quickly learn from real market feedback what is good and what is bad about that product or service; and 3. Incorporate that learning into a new revision of the product or service. This idea has historically been embraced by startups as a way to validate new products or services and optimize the development of new things. 

However, in today’s rapidly evolving markets, this approach has also become critical for medium-size and larger companies that are producing more traditional products and services. One example of this is GE’s FastWorks program, in which lean startup principles are used to develop a broad range of products, from software to refrigerators.

The build-measure-learn cycle of lean startup methodology was popularized by Eric Reis in his book “Lean Startup”. Reis based his book on personal experience and previous research, including work by Rita Gunther McGrath and Ian MacMillan from MIT on discovery-driven planning. 

The concept of discovery-driven planning in general is to clearly define all of the assumptions in your business plan and then validate those assumptions as quickly and inexpensively as possible. If all the assumptions in your business plans are correct, then by definition things will evolve exactly as planned. The reason that things almost never go exactly according to plan is that some of the implicit or explicit assumptions underlying the plan are bound to be wrong. Discovery-driven planning encourages “planning to learn” in addition to “planning to execute.”  Write down all your key assumptions for the business plan, everything from vendor prices to employee retention and industry regulations, and then test and validate those assumptions continuously. As you better understand and tune the underlying assumptions, you will be better able to tune and execute your plans.

Perform An Ongoing Business Model Analysis 
Another very popular tool used by early stage companies is the Business Model Canvas, introduced in the book Business Model Generation by Alexander Osterwalder and Yves Pigneur. The Business Model Canvas is simply a template that allows you to show the key elements of your business model on one page, including your core value propositions, customer engagements, key partners, revenue streams, etc. It is a powerful tool for developing, testing, and articulating new business models. However, it is also a powerful tool for evolving or expanding one’s business model. One example of this is the Walt Disney Company.

Disney defines themselves on their website as “a leading diversified international entertainment and media enterprise,” but most of us would see their core value proposition as providing magical, engaging experiences for children of all ages. Disney has leveraged that core value proposition very well in growing their business. But when they expanded into China, Disney didn’t have the intellectual property protections to monetize their entertainment and media enterprise through films and toys as they had in the U.S., so they created new revenue streams such as Disney English Schools. Essentially, they leveraged the same core value proposition and brand, with the same target customers, but incrementally added to the channels, customer relationship systems, and revenue streams on the Business Model Canvas. 

More recently, Disney has expanded their business through the Disney Institute. With the institute, the entertainment company leverages its existing Business Model Canvas but adds a new set of target customers — businesses — thereby increasing revenue through business-to-business advisory services, professional development courses, and summits. 

Look at your Business Model Canvas and think about how the world is changing and growing. Maybe your business model should, too.

Embrace a Fail Fast Culture
Most early stage companies expect some failure as the inevitable consequence of doing something new. Robert Ployhart, Bank of America professor of business administration at the Darla Moore School of Business, wrote about becoming a fan of failure in the November 2017 edition of Columbia Business Monthly. Fast-growing companies generally think of failures as “ideas in progress.” They recognize failures quickly, learn from them, and leverage those learnings to adjust and strengthen their products, services, systems, and plans. (If it’s a big adjustment, we call it a “pivot.”) For companies to keep growing, ideas must flourish and failures will occur. It’s important to develop a culture that accepts and even rewards failures that come from smart people trying good ideas that may not work but will almost certainly lead to institutional and personal learning.

As we finished our coffee at IBM’s offices in downtown San Francisco, my friend and I discussed the workday of an IBM executive supporting multiple growth initiatives worldwide. It is not so very different from my workday supporting the growth of new ventures and projects in South Carolina. 

Entrepreneurial systems, processes, tools, and culture are being leveraged successfully by a range of very small to very large companies growing their business in today’s fast-changing business landscape.

Dirk D. Brown (dirk@sc.edu) is the faculty director of the McNair Institute for Entrepreneurism and Free Enterprise at the University of South Carolina, as well as a clinical faculty member of the management department in the Darla Moore School of Business. Brown is a seasoned executive with a strong track record of developing, marketing, and licensing disruptive, proprietary technologies and businesses.