Nov 27, 2017
Steve Jobs. Jerry Yang. Andrew Mason. Jack Dorsey. All successful founders. All replaced by professional CEOs.
There is a pronounced difference between founders and CEOs that is well-documented in Noam Wasserman’s “The Founder’s Dilemma.” On rare occasions, founders become capable executives, such as those at Salesforce, Microsoft, and Amazon. More often, they fail — JetBlue’s David Neeleman, Twitter’s Jack Dorsey, Research in Motion's Mike Lazaridis — losing credibility with the public and shareholders, at least until they create the next big thing.
The issue is that entrepreneurship and management are two distinctly different skill sets. Entrepreneurial founders discover and build new businesses, whereas professional CEOs sustain and maximize existing ones. In a large company, the latter tends to dominate, which, as we know, is the reason why it is so hard to innovate in the enterprise.
Fortunately, entrepreneurs are everywhere — even within large companies. They’re hiding in plain sight, taking on extra projects, pitching product ideas, and failing frequently in their hunt for innovation. Rarely do these enterprise entrepreneurs receive the recognition they deserve. In fact, many are fired for their insubordination or leave to found successful startups.
In their tireless quest to eliminate risk, market-leading companies inadvertently create it by driving off entrepreneurial employees. How many ex-Googlers have shed enormous salaries and perks to found Twitter, Foursquare, Pinterest, and other competing startups? How many corporations have fired their biggest, boldest thinkers only to find themselves without the talent they need to stay ahead?
Rarely do executives realize that they're stymying innovation. They simply don't see the world from the enterprise entrepreneur's eyes. To the executive, risk must be eliminated; to the enterprise entrepreneur, it must be embraced.
Without executive buy-in, enterprise entrepreneurs face three barriers to innovation:
Put any large organization under a microscope, and you'll see individual contributors with big ideas but little people power.
Those unrecognized enterprise entrepreneurs have three options for amassing their innovation teams: Recruit help themselves, tap internal teams, or work with an external partner.
Those who manage to round up a ragtag group of makers may find the process gratifying: What could be better than hand-picking people who want to participate in an innovation project?
In an ideal world, this is how corporate innovation would work. But finding and training the right people for a team can take weeks, if not months. Plus, few enterprise entrepreneurs have recruitment experience. Will they know a great designer, copywriter, or engineer on sight? What training and team-building methods will they use to create cohesion?
We've also seen hardscrabble innovators turn to independent contractors to fill gaps. But those contractors aren't always happy to work in an office or be team players. Even if they are, the additional overhead associated with contract workers can complicate projects. That's why enterprise entrepreneurs often try to recruit from the inside.
Office politics can make internal recruitment a rugged route. Getting resources from upper management means stumbling into financial squabbles or quiet rivalries. It might sound surprising, but executives are usually more willing to give money than they are team members. Most function leaders rightfully protect their people from extradepartmental encroachment.
That brings enterprise entrepreneurs to their third option: working with an agency partner. Agencies charge premiums that can be unsustainable over a product's life cycle. Cost, however, is counterbalanced by upfront convenience. The agency has done the legwork to hire and train the right people who bring their diverse experiences to bear. Agencies do great work to protect their reputations, but they're admittedly expensive.
Our suggestion? A hybrid approach: Kick off projects with an agency's help; then, build an internal team as the project finds traction.
We know that agency partnerships can be a stopgap solution. That's why, as we prototype, test, and iterate on projects, we teach our clients to do the same. When Royal Caribbean debuted its innovation department, we helped it seed the division with great work and a reliable process. Those seeds have since grown into a burgeoning internal team and initiatives worthy of whole-company support.
In the corporate world, would-be innovators are often blocked by a catch-22: Executives want to see a strong business case before budgeting resources, but without resources, entrepreneurs can't provide market validation for a truly novel idea.
How do enterprise entrepreneurs avoid this trap? The key lies in prototyping. Prototyping turns ideas into tangible product demonstrations, all while helping creators refine their concepts.
Doesn't prototyping also require resources? It does, of course, but it tends to be much quicker and less expensive than the traditional product development paths. We're fans of metered funding for new projects, whereby executives provide a small amount of seed funding to prototype and test an idea — and more if it works. Because that initial funding is much smaller, it might be easier to come by.
Executives understand that prototyping is a smart investment. In manufacturing, production machinery and molds cost millions. But prototyping is no less important in software than it is in hardware. The costs of not prototyping are simply more insidious. If it hasn't been prototyped, a software product's flaws may not appear until it meets the market, at which point millions of dollars and months of work may have been wasted.
But prototyping doesn't just reduce risk; counterintuitively, it can actually cut time to market. Prototyping may seem like an extra step, but it helps teams discover solutions sooner than if they'd simply sat around a whiteboard spitballing.
Corporate budgeting is at odds with the work of software innovation. Procurement is based on purchased assets; the costs associated with an exploratory endeavor like innovation don't have predictable ROI. However, this doesn't mean it can't have a predictable cost.
In Silicon Valley, companies like Facebook consider software development costs to be operating expenses. Sinful though it may be to corporate accountants, companies must learn to treat software research, discovery, and prototyping as ongoing expenses.
Recognizing this, we've adopted a unique team-based pricing model in which we define our work in terms of an overarching objective, a tailored team, and a fixed weekly cost. We don't have a financial incentive to rush through work or settle for minimum contract requirements, and our clients can stop and start as they please.
There's a reason why we at Philosophie call corporate innovators "enterprise entrepreneurs." Just like startup founders, they fight battles of pitching, runway, and uncertainty.
But unlike traditional entrepreneurs, they're going to bat for a business that erects barriers at every turn. Many risk their careers for corporations they care about, and they're often denounced for doing so. But I believe that they have the potential to create things that make a substantial impact for large groups of people, and that's why we stand for them. Long live the enterprise entrepreneur!