The anger that fuels my mission today surges from a speech I heard a year ago, in Las Vegas, in a packed conference hall. The keynote speaker opened with the line: “I have come to believe that large organizations cannot innovate. They produce ‘innovation antibodies’ that attack new ideas.”
The crowd chuckled in agreement. I determined that moment to prove them wrong.
If you work inside a large organization you know why this nearly universal sentiment must be wrong. If you work in a smaller one, your success will eventually place you among the ranks of the large, and you will find yourself sitting on the same side of the debate.
Since that day, I’ve interviewed more than 100 successful “large organization” innovators and studied the efforts of several big companies to become more agile.
Their challenge is epic. It’s important. It’s universal.
Just yesterday afternoon, across a shiny marble conference table reflecting the Los Angeles skyline, my client said, “We cannot choose when the next threat or opportunity will come; our strategy needs to be agile.”
I believe those who believe large companies cannot adopt agile approaches are asking the wrong question. They ask, “Can agile approaches work inside large organizations?” when they should be asking, “What agile approaches work?”
If you give cat medicine to your dog and he gets sick from it, do you blame the dog? If your flat-head screwdriver can’t twist a Phillips-head screw, do you blame the screw?
Of course not.
Yet, when agile tools designed for start-ups fail to work inside large organizations, we persist in blaming the organization’s largeness, overlooking the fact that we are applying inappropriate tools.
Instead, we need to recognize the fundamental differences between large firms and start-ups, and adapt the agile tools to accommodate the differences. We need to understand:
- What agility involves
- The complications large organizations place on agility
- How to adapt your approach
What agility involves
I laid the key agile frameworks next to each other – Eric Ries’ The Lean Startup, Steve Blank’s Build, Measure, Learn framework, the Scrum approach created by Jeff Sutherland and others, John Boyd’s OODA loop, Barry Boehm’s Spiral Model, etc. Mash them together and you will see they all speak of having to step rapidly through six steps:
- Describe potential solutions
- Design a test
- Build something (e.g., a minimum viable product)
- Observe and gather data
- Draw conclusions
- Pivot or evolve
The complications large organizations place on agility
Given complete freedom, you can perform these steps easily. But large organizations give you a different kind of freedom. They complicate your ability to cycle through these but reward you disproportionately when you do.
Start-ups can design, build, and learn with ease, but the capital, talent, and market access needed to commercialize the resulting new product or service is more difficult to secure. Large companies, in contrast, complicate your attempts to design, build, and learn but can then arm you with capital, talent, and market access start-ups can only dream of.
There are five key constraints large organizations place on cycling through the agile steps:
- Time: Job functions are already so clearly defined that they allow you little “out of hide” time to work on something different.
- Talent: For the same reason, recruiting people to work on your idea is difficult.
- Capital alignment: Start-ups can look for investors to match their ideas. But in a large organization, your investors are already defined so you must create a capital-idea match in reverse, finding ideas that meet your investors’ needs rather than vice versa.
- Internal functional alignment: Rather than building key functions yourself – like a sales force, accounting department, legal team – these functions are given to you and you must deal with their pre-existing rhythm and norms. This makes the internal political game more complicated and central.
- Partner alignment: Beyond the walls of your organization, your company operates with a network of partners – vendors, distributors – and if your idea does not eventually work with that network, it will struggle to survive.
Once you understand and accept these constraints, you can adapt your approach intelligently.
How to adapt your approach
The fundamental difference between seeking agility as a start-up versus in a large organization lies in what economists like Adolf Berle, Ronald Coase, and Gardiner Means proposed when they began developing the “theory of the firm.” Firms and open markets are simply two forms of organization for managing transactions.
Firms, they argued, exist wherever the hierarchical approach is more efficient than the open market’s approach. For example, when it’s more efficient to hire employees than to find, negotiate, and contract with workers each time you need a task performed, firms grow.
Similarly, firms grow when it’s more efficient to sign long-term agreements with strategic vendors, rather than find, qualify, and contract with new suppliers each time you need an input. Whenever the cost of clearing transactions externally is higher than the cost of doing so internally, firms win.
Sure, entrepreneurs can quickly tap open markets to access the resources (time, talent, capital, expertise, and partners) they need to perform each step of the agile loop. But once you accept that you and the start-up are fundamentally doing the same thing – transacting to secure resources to complete an agile step – through a different organizational model (hierarchy rather than open market), and when you appreciate when and where the firm model has advantages, you will begin seeing how to work your firm structure to get what you want, when you want it.
The matrix below lays out what you will most need to complete each step.
And here is the key that I believe most distinguishes successful big-company innovators – or intrapreneurs – from the rest of the frustrated masses:
Intrapreneurs enjoy the political game.
They enjoy the critical, forward-thinking strategic work that precedes any game, putting their project into a position that ensures they can tap the time, talent, capital, functional support, and partner support when they need it. As Sun Tzu wrote, “The skillful fighter puts himself into a position which makes defeat impossible.”
At lunch today I was sitting with the chief marketing officer of a major bank. She was outlining her corporation’s strategy. I could see her mind speeding forward, ticking through the key people she would need on board to get her strategy implemented. This kind of political foresight is what distinguishes successful big-company innovators from the rest.
A 2012 study by researchers Abbie Griffin, Raymond L. Price and Bruce A. Vojak measured various characteristics that distinguished successful internal innovators from their peers. They found a key dimension in which innovators succeed is “political skill,” and they primarily developed this political skill on the job (not from books or classes).
They view the political challenge of lining up their resources as a simple part of the innovation process. They don’t wait until they need a critical resource – they do it far ahead of time.
For example, one executive who heads a division of another major bank shared with me that he makes sure to take a new key internal stakeholder out to lunch every day. By cultivating the relationships you will need before you need them, you can dramatically cut down the time needed to access your resources.
“It’s like lining up cannons,” the former head of Nike’s digital business told me. “It takes time to line up all the cannons on your deck, but when they go off, they make a huge bang.”
So, you can to be agile in your large company if you:
- Think through each step of the agile process ahead of time and ask, “What support will I need do this?”
- Map out the key support you will require.
- Start implementing a plan now to line up that support.
- Recognize when the cannons are lined up … then ignite them.
