Why Large Companies Need Small Garages for Their Digitization Initiatives
Many established companies face the challenge of digitization and possible disruption by innovative startups or new market entrants.
When Steve Blank - a serial entrepreneur and startup-guru in Silicon Valley - talks about his one major learning point in the past years, he says: “a startup is not a smaller version of a large company.”
Startups are about searching for a business model versus executing a plan efficiently. They are comparable to children, who are not just small adults but instead follow stages of their development, each with its distinctive behaviors and psychology. Similarly, as a startup you might not just hire a VP of sales to get the sales job done (that comes later, when a repeatable sales model has been found).
First, you have to be ready to learn and eventually pivot several times before success is happening.
Get ouside the box…
Many established companies face the challenge of digitization and possible disruption by innovative startups or new market entrants. After all, digitization is all about testing new business models – exactly what innovative startups are good at. So what should I tell these established companies when they want to switch to a “searching” instead of an “execution” mode? Of course it can’t be something along the lines of “sorry guys, you are too big to innovate, you will never get it.”
Certainly enough, large companies have been able to come up with disruptive innovations that lie outside of their existing business model before. But while innovation comes naturally to startups, large companies first have to think of ways to escape their efficiency traps, regulations and silo thinking. Founding or buying startups is a way of doing so, but when it comes to the digitization or transformation of a company, you might not want “all the cool stuff” to happen outside your organization and culture. You want to be able to think and act “outside the box” while staying inside your own (organizational) box.
... and go into a garage
For my clients, I use the metaphor of a garage to describe what it takes to create a startup spirit within an organization. If you face uncertainty, a challenge or a thread of disruption, the garage takes you as close to a startup-like environment as possible.
Here’s how it works: Build a small, interdisciplinary team which works on the project for a specific time frame and on a specific budget. The members of this team will have to get out of their existing jobs while they are in the garage – including no line management, no duties, no calls from the boss and no rigid dependencies. Regulations and procedures do not extend into the garage – you may use resources from your company, but only if they do not hold you back. Inside the garage, you concentrate on what works on the market, what the customer loves and is willing to pay for. Everything in the garage is set up to let your idea evolve, it is all about searching and learning instead of execution or efficiency.
Let’s assume you have a great team who is ready to take up the challenge to make an idea visible or even successful in a couple of months. The team is working together in a space, almost literally in one garage. In the garage, you use powerful tools such as Lean Startup, Design Thinking or Agile methodologies to turn your idea into reality; step-by-step. No status updates are coming out of the garage as following the reporting lines just distracts from the commitment to the success of the idea. Remember, you are not running the garage for someone else! If someone wants to know what’s going on, let them go there and see for themselves. They will find all the information visualized on the wall and will be able to talk to the people inside the garage.
Pitch-slam for innovation
Things start changing when the budgeted time for the garage runs out. Again, the garage borrows ideas from the startup world, more precisely from the venture capitalists. The garage ends with a “Venture-Pitch”, which brings everything together in a couple of minutes: the team, the product, the business model and what they have learned. The pitch also contains a financial outlook, the major milestones for marketing the product and what it takes to take the work to the next stage or scale up. This “Venture-Pitch” should be held in front of C-level executives and stakeholders and should ideally already attract its first customers. The more pitches at the same time, the better it is for stakeholders, because it helps to look at the results from a greater distance. In order to provide a truly independent opinion on the content of the pitch and the ideas, my company ti&m connect our clients with startup- and venture specialists. Generally speaking, a “Venture Pitch” is a great tool for your innovation process – but that’s a different story and will be told some other time.