This article is reprinted with permission from CEO World
Many leaving corporations as part of the ‘Great Resignation’ go on to set up their own business. Though some are making a lifestyle choice, it also represents the enduring appeal of the entrepreneur. Wharton Professor Jacqueline Kirtley says that many of the managers resigning their jobs are going straight into entrepreneurship attracted by the ‘hero stories’ of great entrepreneurs like Jobs and Bezos. They want the freedom to create something new and put their stamp on the world.
How can employers compete? It seems like an unfair fight for corporates who cannot match the freedom, opportunity, and reward of a startup. However, that need not be so, and a new breed of Corporate Explorers are building successful new ventures from inside existing corporations. These are leaders like Yoky Matsuoka at electronics giant Panasonic, Kevin Carlin at tech firm Analog Devices, and Jim Peck at LexisNexis. Each of these leaders won support for their idea from senior managers and scaled it into a fully-fledged business, sometimes turning them into multi-billion-dollar units.
If they can do it, why can’t others replicate this success and do more to retain top talent that are fleeing for the entrepreneurial promised land? There is no way to compete with the potential financial payoff of owning a slice of a billion-dollar-valuation unicorn company. However, very few startups get to be unicorns (that’s the point of the term) and it is unclear that money alone is the initial driver for becoming an entrepreneur. Most find that setting up a new company involves begging family and friends for seed funding, only to later fail. What wannabe entrepreneurs want is freedom. The opportunity to realize an idea and test their own business building capabilities. Can corporations match startups for autonomy? Not entirely, but they can do enough to enable Corporate Explorers to succeed.
Here are five things that any company can do to nurture managers with the entrepreneurial gene and encourage them to set up a venture inside, rather than doing it outside.
- Set a growth ambition
One of the reasons explorers leave their employers is that they think there is no interest in innovation and growth. They interpret caution about high-risk investments as disinterest. Let them know you are serious by setting a bold ambition. Former Mastercard CEO, Ajay Banga set an ambition to ‘wage a war on cash’ and ‘convert some of the 85% of cash transactions to digital’. This was a game changer for Mastercard and triggered a surge of innovation across the company which underpinned a decade of growth under his leadership. Your ambition needs to say something about what you want to achieve and where (e.g., digital payment solutions that replace cash) and create some excitement (e.g., waging a war).
- Invite Corporate Explorer’s to emerge
What is most notable about successful Corporate Explorers is that very few are ‘given’ the opportunity to create a new venture, most ‘take’ it. Jim Peck at LexisNexis took the brand of an established company, as well as its people, and data assets, then combined that with selected acquisitions to create a business that is now larger than the original. He went on to be CEO of TransUnion and now leads NielsenIQ. Many other Corporate Explorers follow a similar trajectory. Like a classic entrepreneur, they see something wrong in the world and want to fix it. What’s different is that they then build support inside the organization to pursue the opportunity, rather than raising venture capital to do it on their own. They see that the assets of the existing business can help them go faster than a startup. You can create opportunities for your Corporate Explorers to emerge by sparking their curiosity about unsolved customer problems. Get managers thinking about what it is that nobody is doing for customers today. Fired up by a mission to fix these problems, they will soon generate some potential breakthrough ideas.
- Learn to experiment
Having an idea is just step one. A common failure amongst established firms is to think that you need to move quickly to making an investment in a new idea. They invest too quickly in an unproven concept. The internet browser firm Mozilla was guilty of this with the Firefox phone, sinking $400 million into a product that nobody wanted. Intel famously did the same when they invested in video conferencing in the early 2000s. The smarter approach is to move slowly testing each aspect of the new business idea. Do customers want it? What are they willing to pay? How will they use it? Executives used to business a P&L with relatively predictable returns can find this level of uncertainty intimidating. Running well designed experiments can help de-risk the new venture, thus making it possible to commit in increments. That way when you fail – and you will – the financial hole is not so deep that you are discouraged to never try again.
- Give autonomy to a few
You cannot run experiments for all the brilliant new ideas managers have, so culling the least promising early on is key to success. The few that remain need autonomy to operate. Running an experiment to test a new business concept has a completely different rhythm to managing an operational business. One is managing a known business, the other uncertainty. It is best to separate them from one another organizationally. Do not leave a new venture reporting to a manager responsible for driving an existing business in the same area. In any conflict between the two, the old will always beat the new. If you are serious about keeping the most innovative, entrepreneurially minded managers inside the company you have to give them space to succeed or fail. That means managers need space to run experiments without having to report on progress or justify their existence. One company asked us to examine why all their innovation projects failed. What we found was that they were spending over fifty percent of their time preparing presentations for the Board and senior managers. Your performance expectations should still be high, but you measure success differently. You are not trying to sell to customers, you want them to teach you what works. Use metrics that tell you how much a Corporate Explorer is learning, not whether they are driving to revenue.
- Build a path to scale
Turning successful experiments into a revenue generating business is what innovation is all about. This is the payoff. You have a new source of revenue and a leader that has grown exponentially in confidence and capability. However, many ventures do not go to scale. What they lack is an aspiration for the venture and a path to get there. The first Corporate Explorer I worked with was Carol Kovac at IBM Life Sciences in 2000. Carol and team set the audacious goal of building a $1 billion business in 3 years. This set the scale for all their decisions and stopped them from being merely incremental in their decision-making. Having the aspiration, successful Corporate Explorers build a path to assemble the customers, capabilities, and capacity to scale. The best ones see that the assets of the existing business, combined with ones they build or buy, can help them go faster than a startup. Jim Peck at LexisNexis took the brand of an established company, as well as its people, and data assets, then combined that with selected acquisitions to create a business that is now larger than the original. Krisztian Kurtisz proposed a radical new offering while running the Hungarian unit of European insurer UNIQA. He used the firm’s insurance license, brand, and resources to build an entirely new digital insurance offering. The two most popular answers are culture and senior leadership. Our culture does not support innovation. Our leaders are too risk averse. Guilty as charged! These are real problems. Successful firms dislike uncertainty. It is hard for leaders of established businesses to place a bet on an unproven venture.
It is easy to say that established businesses cannot innovate. The culture is too slow and the leaders too risk averse. Guilty as charged! However, there is nothing miraculous about the companies from which Corporate Explorers emerge. They have the same challenges as any other large, successful business. What sets them apart is a willingness to give a few managers the freedom to pursue innovations outside the corporate structures. This was always important to do. Today, it is critical if corporations are to avoid a drain of the very talent on which their future most depends.