Business Magazine

7 Ways Growing Companies Drift From Startup Thinking

Posted on the 16 February 2020 by Martin Zwilling @StartupPro

brainstorming-businessmen-computerEvery new venture that survives the first five years starts to drift away from their entrepreneurial thinking, and assumes they have achieved the path to longevity. In fact, even within Fortune 100 companies, almost 90 percent have encountered growth stalls or flirted with failure, or worse, in the last 50 years. No company can afford to lose the agility, flexibility, and innovation of a startup.

Examples of great companies that have achieved longevity, by initiating major changes, include American Express (originally express mail), IBM (tabulating and computer hardware), and J.P. Morgan (chemical manufacturing). Others, including Eastman Kodak (film and cameras), Pullman Company (railroads), and RCA Victor (radio) never kept up with change and are gone forever.

The many ways that great firms can slip away from entrepreneurial thinking were highlighted in the classic book, “Achieving Longevity,” by Jim Dewald, based on his own experiences as a corporate executive, entrepreneur, and Dean of the Haskayne School of Business. Here are a few of the key challenges he outlines that I have seen as well:

  1. Competitors are easier to quantify than new opportunities. Competitor statistics are the domain of analysts, financiers, and shareholders, so naturally it is attractive for companies to focus on them primarily. Undefined opportunities which may be built from innovation are the stuff of dreams and passion, relegated only to entrepreneurial thinking.
  1. Companies follow each other rather than the market. Change is hard. Businesses firmly ensconced down an existing path find it hard to leave their comfort zone or jeopardize current revenue streams, and tend to prioritize the value of incremental change, even in the face of new markets, technology, or economic conditions.
  1. The future is extrapolated from internal data analysis. Metrics and observations while running the existing business become the primary basis for future projections. This data reinforces what they already know and believe, so a divergent path rarely looks attractive. The result is a self-fulfilling prophecy that often leads to disaster.
  1. Efficiency focus strips away resources from innovation. Through cost-cutting and highly-specialized hiring, firms unintentionally weed out the capacity to innovate and adapt to change. The drive for resource-based advantage can be profitable for big companies, but it is always temporary, never permanent.
  1. Penalties for management learning experiences. In an entrepreneurial venture, errors are expected, and even celebrated when positioned as learning opportunities. In stable corporate ventures, mistakes are seen as a signs of incompetence, and penalized by loss of bonuses or position. As a result, undefined new opportunities are deemed too risky.
  1. Focus on data-driven leadership versus passion. Strong creative views or even arrogance in new realms by entrepreneurs is expected and often revered, as was the case with Steve Jobs at Apple. In corporate boardrooms, a show of hubris or emotion is deeply troubling, and can end careers. Logic and data-driven leadership is the norm.
  1. Intolerance for pivots and failed experiments. Every startup I know has pivoted at least once, and expects failed experiments to lead them to the true market. In corporate environments the cost in time and dollars of a pivot or failed experiment can be huge, like turning a large battleship. Stakeholders and board members alike react very negatively.

What is most ironic is that the inverse of many of these challenges is critical to success in the first five years of a new venture – focus on competitors, generating internal data and analysis, emphasizing data-driven leadership, and creating standardized repeatable processes. Many see these activities as the elimination of entrepreneurial thinking, for stability and endurance.


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