Corporate Procurement is Killing Startup Innovation

July 3, 2019
Leadership
Business
Startups and Entrepreneurship

Speed is absolutely fundamental to innovation.

But for so many of today’s traditional, large organizations, speed is not their strongest hand — in fact, it’s usually their 2–7.

Plagued with an environment of consensus-seeking, process paralysis, regulation, and legacy systems, traditional organizations which realize that they need to innovate — but often struggle to do so internally — are turning to startups and scale-ups.

By combining the domain expertise, assets, and resources of a large organization with the talent, tech, and speed of startups, good things are said to happen.

You Can Only Move as Fast as What’s in Front of You

When it comes to open innovation and working with external parties, corporate procurement often crashes the party, requesting the same kind of documentation from startups — who operate in a fundamentally different environment — as they do from large, established players in mature industries.

All in the name of arse-covering. 🍑

Here’s a small snapshot of just some of what a traditional organization typically requests from startups and scale-ups that they have an interest in working with.

What this signals to the market is that this organization:

  • is not ready to work with startups
  • is not ready for the fast-changing and increasingly uncertain realities of the 21st Century, that call for flexibility and adaptability
  • has a weak innovation function that either doesn’t ‘get it’ or has little influence over the big decisions that actually matter

A consequence of this is that:

  • Credible startups and scale-ups will refuse to work with you
  • Those that do can’t meaningfully work with you to deliver outcomes
  • Your organization won’t be able to move quickly enough to take advantage of emerging technology and business model shifts, relative to your more fluid competitors

What Good Looks Like

Rather than default to a mind-numbing, morale-sucking culture of consensus-seeking, organizations should look to take a leaf out of the radical ownership playbook of companies like Netflix.

Netflix pays at the top of the market, not just to attract the best people, but by attracting great people, being in a position to keep processes lean and keep the company moving forward fast — a serious competitive advantage over organizations who need to call a meeting with a handful of participants every time they need to make inconsequential decisions.

In fact, Netflix’s core philosophy is people over process; “we have great people working together as a dream team… with this approach, we are a more flexible, fun, stimulating, creative, collaborative and successful organization”.

An extract on process from the company’s famous culture deck reads as follows:

In many organizations, there is an unhealthy emphasis on process and not much freedom. These organizations didn’t start that way, but the python of process squeezed harder every time something went wrong.
If this standard management approach is done well, then the company becomes very efficient at its business model — the system is dummy-proofed, and creative thinkers are told to stop questioning the status quo. Eventually, however, over 10 to 100 years, the business model inevitably has to change, and most of these companies are unable to adapt.
To avoid the rigidity of over-specialization, and avoid the chaos of growth, while retaining freedom, we work to have as simple a business as we can given our growth ambitions, and to keep employee excellence rising. We work to have a company of self-disciplined people who discover and fix issues without being told to do so.
You might think that such freedom would lead to chaos. But we also don’t have a clothing policy, yet no one has come to work naked. The lesson is you don’t need policies for everything.
Most people understand the benefits of wearing clothes at work.

Contrary to popular belief, your corporate dress policy isn’t what’s preventing this from happening.

Netflix understands that in a fast-moving and increasingly uncertain business landscape, keeping process to a minimum and empowering people to move quickly will inevitably result in mistakes, but by hiring smart self-disciplined people and by moving fast, they can learn, pick up the pieces and move forward even faster.

Over time, the gap between them and their competitors who might still be pontificating around a boardroom table becomes huge — and today, this is evident in their market cap; a neat US$163B as at writing.

Organizations that are serious about innovation, both internally and externally, need to realize— as James Clear puts it - that they don’t rise to the level of their goals, but fall to the level of their systems.

Until those systems have been addressed, all the lip service and grandstanding in the world won’t help them.

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Steve Glaveski is the co-founder of Collective Campus, author of Employee to Entrepreneur and host of the Future Squared podcast. He’s a chronic autodidact, and he’s into everything from 80s metal and high-intensity workouts to attempting to surf and do standup comedy.

Leadership
Business
Startups and Entrepreneurship
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