Six Rules For Incubating Lean Startups Within The Enterprise

Corporations want to build the next Facebook or Groupon as much as you, I, and the guy in the garage. While corporations might have an advantage in resources and capital to do so, they do at the same time meet with hurdles that independent startups don’t.

Over the past years I’ve been fortunate enough to learn from corporate new- business analysis, product roll-outs, and early-stage M&A assessments at the one side, and from founding or helping raw startups at the other side. Unfortunately, there is a pattern – the methods often provided by the former are rather diminishing in successfully incubating new ventures.

Aside from knowing your customer development and Lean Startups basics, I share here lessons learned that you should know if you want your corporation to innovate like a startup.

Rehabilitate from analysis paralysis

While a challenge with corporate business planning is that it often is comprised with mountains of information, with an early startup there is a minimal quantifiable track record. Doing what they do best, corporations cram such information about existing products and markets to that of the startup. Unfortunately, executives and managers have founding teams develop detailed financial estimates and market analysis way too early. Secondary data may be fine for known-, but not for unknown conditions, which most often is the case of new startups. The answer lies not with your $500 Gartner or Forrester report. Rather, it is time to un-MBA and get out of the building.

Learn like your kids would

With time, grown-ups gradually stop learning. Kids, however, learn all the time. Kids experience their environment and make assumptions which are tested against reality, again and over again. Essentially, for companies that are adopting new technologies in fast pacing and quickly changing markets the learning process is no different. Emerging entrepreneurial methods such as Lean Startup and Customer Development assume that startups are children, and not smaller versions of mature companies. Startups need their own methods and tools, which means it is time for hands to get dirty.

Separate the wheat from the chaff

In corporations new projects compete over attention and resources. When a startup project’s performance is compared to competing initiatives within the corporation it often falls short. Because known products and markets are often deemed less risky and pay higher dividends in the short term. Rather, a corporate venture should answer to its own performance metrics and not to be evaluated against the corporation’s. Intentionally you’d consider to create distinct units that have their own processes, structures and cultures, also known from ambidextrous organization design and disruptive innovation thinking.

Hire true entrepreneurs

Recently, I learned from a startup in residence at global corporation that it was hiring 30 people. And that was even before it was in beta (the technology is not rocket science). At this stage large investment in teams has little to do with customer traction, and mechanic growth like this would put red numbers at the startup from the very beginning. Nonetheless, for this same startup the corporation looked to hire experienced project managers with experience from, yes, large corporations. It was issuing a 1o % of the startup’s total shares among the several co-founders. What is wrong with this picture? Naturally, startups need entrepreneurs that are driven by a risk/award formula. Entrepreneurs need to work their own magic apart from existing policies, structures, and corporate requirements which they flee.

Peel the onion

When innovating new products and services many enterprises would hire a consultancy to do the job. What happens then is that the consultants impress their future customer (the enterprise) with sexy ideas and features in order to win the project. The enterprise (customer) gets hurried and negotiate the most possible features answering to their budget, and a rigorous roadmap is made. The truth is that most startups do not go as planned. They pivot. Consequently, the corporate venture builds the wrong things and is stuck with features that customers don’t want. Whether or not hiring a consulting shop, the same lesson applies to new internal projects competing for resources within the enterprise. Either way, the more the merrier is usually counterproductive to a startup.

Beware unicorns and rainbows

In enabling corporate entrepreneurship I often most see companies talk about carrying out 20/80 pet project programmes ala Google, or pulling off idea contests investing in expensive idea management software. Such usual suspects are nice enough, but they do not account for the fact that startups are more about execution than delightful ideas.

Corporate venturing, corporate entrepreneurship, intrapreneurship, spin-outs – dear child has many names. At its best it is all about enabling entrepreneurship. With that comes everything that belongs motivation;  freedom, opportunities, lifestyle, visions, risk, and awards. Never kill that.

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