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One particular issue I’ve been thinking about with startup vs. big company culture (and that is referred to in a comment on my last post as well as comments over on Facebook) is how to encourage useful failure – failure where you learn something and then apply what you learned to improve next time.
This sort of grit to struggle through failure (what Seth Godin calls “The Dip”) to find the next level of success is rare in a big company. As is typical for me these days, I would argue this is an issue of incentive alignment.
At a startup, walking away from a failure means quitting and finding a new job, whereas pushing through to find the bigger success (what Marc Andreesen has called product-market fit) has the potential for tremendous upside in the form of stock options. The risks are higher, but it’s worth it.
Big companies and their annual performance reviews tend to reward piling up little successes rather than long struggles with a big success at the end. Sticking with a project that isn’t working can lead to a bad performance rating, so people look for a quick transfer to a different project where they can ride on somebody else’s coattails to success and keep their ratings up. Those that do stick around and try to turn a failing project around rarely benefit from the upside if they succeed – maybe they get one good rating that doesn’t make up for the previous poor ones.
At an organizational level, it’s also easier for the big company to walk away from a “failure” because the company has other projects and revenue streams. As The Only Sustainable Edge points out, companies that only do one thing (e.g. startups) are driven to be the best in the world at it because they have nothing else to fall back on. That lack of a safety net drives further achievement than they would achieve if they could give up more easily.
Another perspective comes from this description of successful startups from Glenn Kelman (CEO of Redfin): “They weren’t afraid of failure, and they didn’t “pivot” when faced with their first setback”. And sometimes by having the grit to stick with a project that they were initially doing for their own passion without regard for commercial potential, they found a way to inordinate success.
How can we instill that kind of grit and passion into a big company? I can think of a few cases where a strong leader has bet the company on a change of direction (e.g. Bill Gates’s Internet memo, Steve Jobs turning Apple into a consumer electronics company, Jeff Bezos mandating that Amazon transform its infrastructure into a service-oriented architecture, Larry Page trying to focus Google on social), but this can also backfire (e.g. Elop’s “oil platform” memo). And these cases are more about a top-down change in direction rather than creating a new culture.
On the topic of encouraging useful failure, I could see some ways of trying to design an incentive system that would encourage people in that direction. Unfortunately, I think the people who work at a big company would rarely agree to such an incentive system. And in my experience, the people who would like such a system will try to do the right thing regardless of the incentive system.
So to re-state the question in a different way – is it possible to create more “startup” people who are willing to take chances and struggle through failure? I wonder if it would involve a re-design of our education system – the US education system is designed to reward people who follow directions and respond to incremental incentives (aka grades), and punishes those who fail even intermittently. Could any incentive system be powerful enough to overcome a lifetime of cultural conditioning?
Hard questions. I don’t have any answers. And, obviously, a lot of digressions. But I’ll keep exploring these sorts of topics over the upcoming weeks. Let me know if you have any thoughts.
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I think you have caught the point here -although I’m not sure I’d agree at all that Elop’s oil platform memo backfired. Quite the opposite, in fact: it did wonders for internal morale, and the Lumia 800 really is the end result of the process that that memo started, and it’s a stunning phone.
But – and this is perhaps more useful as a comment on your last post – I wonder what would happen if you took a more STSy look at this. That is to say, what is the rhetorical value of, for example, Larry using the phrase “act like a startup”? There’s clearly some things he doesn’t mean (small size, for example) and presumably some he does mean (a focus on profitability). But partly it’s a framing thing, a la Lakoff, and partly it’s a nod towards a shared but deliberately underdefined language. It’s a Valley shibboleth, but I’m not convinced it’s got any particular intrinsic meaning. Does he mean, for example, a focus on short term projects that make money? Does he mean a simplication to release 1.0 of things? Etcetera. I think there’s a lot there to think about if one takes a bit more critical look here.
Jopesche
Jopesche: I’m not sure what you mean by an STS-y look in this particular regard. I do love the “Valley shibboleth” idea – the meaning of “act like a startup” is one where we project our own biases of how we think the world should work. Some of my coworkers think “act like a startup” means going really fast without any process, but they are generally also the people who are trying to quickly spend lots of money that a startup wouldn’t have. I’ll have to think more about that.
Separately, Seth Godin’s post today is on a similar topic: “It’s difficult to change an industry, set a world record, land big clients, or do art that influences others. When faced with this difficulty, those with other, seemingly better options see the barrier and walk away.”
“Act like a startup” to me means:
1.) Everything matters. You’re (ideally) making something no one has made before. You can’t get that across with a rough sketch. From every dollar you spend, to every pixel you push, you pay attention & focus on what counts.
2.) You make tons of mistakes, learn from them, and move on as fast as possible.
3.) You believe, deep in your heart, that what you’re building is something people either desperately need, desperately want, or will *love*.
4.) You give it everything you have, because there are no coattails to ride, or laurels to rest on. You succeed or you *fail*. No in between.
Is that everything that makes a startup? No. You could toss in a 90%+ failure rate in the first year. You could crush numerous relationships. You could turn friends into enemies. You could do all manner of those things, but what you get out of it in the end is the satisfaction of creating something that is yours. Maybe you don’t technically own it anymore, maybe you don’t even really profit from it all that much. But you built it. That satisfaction is something that’s hard to replicate at a larger company.
But if say, Daniel Pink’s book, Drive, is on the money, then in terms of getting satisfaction out of autonomy, mastery & purpose is what you want, then the startup gets you as close as you can to that. You have autonomy – you’re making something ideally you’ve chosen to make. You have mastery – you will learn immeasurable amounts, both about what you’re doing, and about yourself. You have purpose – because what would drive someone to this kind of insane environment *other* than that you believe in a higher purpose, a calling – a way in which you can make a difference.
(’cause if you’re doing it for the money… fuck you – you’ll deserve the failure you achieve.)
seppo
I think you’re underestimating the safety of working at a startup.
Sure, you often have to push through failure at a startup, because the only other option is to lose all the time and effort (and sometimes money) you’ve already invested. And exactly as you say, walking away means quitting and finding a new job.
But that’s all it means. People who work at startups may risk losing their apartments and having to move back in with their parents if the startup tanks — but they’re not risking being literally homeless and out in the streets. They’re not risking bankruptcy, or worrying about being unable to feed their kids, or courting medical disaster because they lost their health insurance.
Because people who DO have to worry about those kinds of disastrous outcomes? Don’t go to work for startups!
There’s a tremendous amount of economic privilege entailed in attempting to launch a startup, just as there is in taking an unpaid internship to get your career started. In both cases, all that’s actually at risk is some time and opportunity cost. Because if there’s significantly more at risk, it doesn’t make any sense to make that wager.
If you want employees to take risks like they’re in a startup, you need to give them the same risk-reward tradeoff that startup employees have. And I think that has very little to do with cultural conditioning or incentives; it has to do with removing the disincentives associated with failure. Make failure safe and people will take risks, because humans like to explore and play. (That’s why we play games, and why games make good learning tools.)
Have another look at it: are people risk-averse simply because of cultural conditioning? Or is their risk-aversion actually a sound judgment about the expected cost of failure?
If you’re on a failing project, and you have the grit to struggle through, and you stick with it, and it still fails… what happens? Do you get rewarded for trying hard and learning something?
Seppo, Beemer, great comments.
I love Seppo’s summary of what I think are some of the important aspects of startup culture.
And I appreciate Beemer’s point that startups are an act of privilege. Beemer, I don’t know if I agree that humans like to explore and play, at least in their working lives. The downside of “failure” at work is often minimal but people fear it so extravagantly that they will take zero risks. Admittedly, I’m one of those people – my mentor once told me that I wasn’t failing enough and not taking enough risks. The “expected cost of failure”, as you put it, is relatively minimal, and those who take that risk and succeed are often rewarded with promotions and the like.
Lots to think about – thanks for the great comments!
So, I’m posting this in the middle of another startup experience, some years down the line from having the feeling that I didn’t want to “do the startup thing” again.
I think your comment that people fear even small failure is partly down to the education system. Unless you encounter some failures during your education, it’s easy to get used to being right… which leads to not wanting to be wrong… which can lead to not taking risks…
And since I’m a culture commentator – a comment on the culture of the USA – there are all sorts of elements that promote risk-taking, but financial respectability is very important in the culture and that isn’t all good for risk taking.
I’d note that Beemer is correct to suggest that in many companies failure is punished and fixing that is the first step in many behemoths.
That may not be the issue where you are Eric, though…