In the 90’s we experienced dot com one. You may recall the flood of Silicon Valley startups hitting the IPO market in the U.S. Some companies failed, like Pets.com. Others, like Amazon, have survived and are now thriving.
A few months ago, I was working for Moves the Needle, helping build their lean startup training business in the Midwest. After completing a Three-Day Bootcamp with an enterprise customer, I found myself in their dining room wearing a sports coat and trying hard not to look uncomfortable.
Everything in startups follows a power law function. The reality for most early-stage portfolios, returns are not linear.
"People are uncomfortable talking about inequality, so they either ignore it or rationalize it away. It is psychologically difficult for investors to admit that their best investment is worth more than the rest of their portfolio companies combined. So they ignore or hide that fact, and it becomes a secret." - Peter Thiel, class notes from CS183.
In one of our startups, Acquisition Science, our biggest customer accounts for 90% of total revenue. This is normal especially when you are an early stage company trying to find and validate product-market fit. This doesn't make me sleep well at night, but it's often the reality when building a startup. The 80/20 rule, or 90/10 rule in this case, exists naturally in all kinds of systems.
We think the power law function applies to ideas as well. This is something that is difficult for traditional startups to get their minds around.
Let's say you have a killer idea and you've found inspiration to start and startup. You just quit your job and are willing to risk it all to change the world. But what if you find out there isn't a viable market for your idea? What does it take for you to realize and accept this?
In two previous posts, I outlined several cultural barriers to innovation. The first post covers fear of failure and expected value bias. These cultural barriers are alone sufficient to stifle innovation. In the second post, I describe the business case bias and execution bias which both prevent new, innovative ideas from taking root in the enterprise.
In this third post, I’m going to complete the analysis of cultural barriers by covering alignment bias, retirement bias and strategic fit bias.
Helen Fisher - Explorer vs Builder and how it relates to this chart.
I like to do new things. It's my greatest strength and my greatest weakness.
Steve Blank talks about this in the context of his entrepreneurial career. In his assessment, he believes he is a "creative CEO." It took him eight startups to realize this. Being a creative CEO means you are good at inventing new ways of solving problems. This is a great asset. But here's the rub: creative CEO's suck at getting the company to scale.
This is part two of a description of common cultural barriers to innovation in the enterprise. In the first post, I discussed two of the barriers: fear of failure and expected value bias. This post covers two additional cultural barriers and how they destroy innovation in the enterprise.
I recently wrote a blog post that is a critical review of lean startup training programs from companies like Moves the Needle. In this post, I mentioned deeply-rooted cultural and structural barriers that destroy innovation in large enterprises. I'd like to explore these barriers in more detail, so we can better understand what they are and how they destroy innovation in the enterprise.
This post is the first of two posts exploring cultural barriers that exist in large enterprises. A subsequent post will describe structural barriers.
With the lean startup movement, large enterprises are trying to implement lean startup principles in their businesses. It turns out this is a challenge for almost all large enterprises. There are several reasons why big companies have difficulty moving quickly and developing disruptive innovations. Still, there is sincere desire in Corporate America to change this as most enterprises are being disrupted beyond recognition.
Large Enterprises Employ Waterfall Development
In our experience and research, approximately 95% of large enterprises use a waterfall approach to developing new products and services. A traditional waterfall approach looks like this:
Three weeks ago, before the MLB playoffs started, I had the pleasure of meeting Crane Kenny, President, and Jed Hoyer, EVP/GM. The event was organized by the Harvard Business School Club of Chicago and the Wharton Alumni group.
Both Crane and Jed gave presentations that were awesome. In their talks, they shared a lot of inside information on the Cub's turnaround strategy and how difficult it was in the early years as they were losing everything.
What makes a good startup team?
I think it's a lot of things. But mostly, it's that they come together and make a good team.
One of the best teams I know as a comic book geek is the Avengers. Yes, you know them, but geeks like me have know then for years before they appears on the silver screen.
I think the Avengers are an interesting way to thing about a startup team. Captain America is my hero, so I'll pretend that I'm him for a while. Actually, that's the main reason I'm using the Avengers analogy, so I get to be Captain America!
I'm in heavy team building mode. So, the following question came to mind.
What kind of people do we want on the team?
What kind of entrepreneurs do we want to work with?
What is our standard for considering someone to be a successful entrepreneur?
I don't think these are easy questions to answer.
I received a lot of feedback and general support from entrepreneurs who took the time to read my argument about accelerators vs. venture studios. In general, the model at InsightStudios resonates deeply with entreprenuers.
You always know you're on to big idea when not everyone agrees with you. In an email exchange a few days ago, I made the statement that accelerators are dead. I've been feeling this way for a while, based on my first-hand experience with a number of startup accelerators in Chicago and San Francisco. It was the first time I said it out loud.
Just marking the day our website went live. Yay!