
Fear of Failure and Lack of Speed in a Large Corporation - chwolfe
http://steveblank.com/2015/03/11/fear-of-failure-and-lack-of-speed-in-a-large-corporation/
======
nostrademons
"in a large company “fear of failure” inhibits speed and risk taking while in
a startup “fear of failure” drives speed and urgency."

I thought the conclusion from that was so obvious that Steve Blank was surely
going to talk about it later in the article, but he didn't...

In a startup, the "default" state - if you do nothing - is that you run out of
money and starve. That's why fear of failure drives speed and urgency.

In a big company, the "default" state - if you do nothing - is that you
collect a paycheck and live a relatively comfortable life. That's why fear of
failure inhibits speed and risk-taking.

I recall a comment or an essay of PG's where he said that poverty seems to be
a necessary condition for startup success, and without that incentive,
startups frequently die. (There are counterexamples like Evan Williams or
Travis Kalanick, but in both those cases they picked up their habits while
fighting for their previous companies' lives.)

I read that and thought "It isn't so!", and then got a job at Google hoping to
do the intrapreneur thing, but with the risk/reward balance slanted toward the
big company. I found that there were managers willing to give me nearly carte
blanche for finding & fixing new problems, but that didn't mean that I could
actually launch or grow anything new or revolutionary. The problem wasn't
actually with me or with management or with any corporate structure, it's that
for a new idea to take root, you need many peoples' help, and _each one of
them needs their incentives biased against the status quo_. That's why Silicon
Valley works: there is a critical mass of people here who get nothing if the
startup(s) they back don't take off.

~~~
carrotleads
I keep thinking about why I am not taking as much risks as I should and PG's
poverty factor could be the issue.

I am not poor and have a family with a bit of savings cushion. So does that
mean I need to freaking blow my savings before I start giving approval to
myself to start taking some big bets..

~~~
wpietri
Probably not. I think panicky entrepreneurs aren't particularly good either.

The worst case for most SV entrepreneurs is "have to go get a job" or "have to
move in with family or friends for a while". When you're young and single,
that's an ok outcome, especially since you have a level of control that
matches your level of risk.

It's a very different calculus with a spouse and kids. There if you blow up,
you don't want your family to end up homeless. And you don't want your spouse
worrying about ending up homeless, either. Since your spouse doesn't have
control over the business outcomes, it can be much more stressful.

I'd encourage you to jointly split your cushion into "can gamble with" and
"won't gamble with". Then if you want to do a startup (or join something early
enough that they can't pay you properly) the deal you make is that once you've
burned through the ok-to-gamble money, you go back and get a real job.

I promise you that watching your bank balance tick down is going to create
significant motivation, especially if your #1 investor (that is, your spouse)
is getting weekly status reports on the business progress.

------
scottshea
I was hired in a large corporation to 'bring an entrepreneurial spirit' to the
organization. After a year and a half of being pounded on for trying
innovative things and attempting to move fast I left. On my way out one of the
people on the hiring team said "I think I know why we do not have any
entrepreneurial spirit; you get punished for it"

~~~
brd
It's unfortunately an all too common story. I was part of a small, young team
that coalesced around an ambitious project. After being leveraged for a few
large initiatives we were split up to "spread the culture", after a year plus
of nonstop power struggles I put in my resignation.

------
vermooten
We tried the 'startup in a corporate' experiment, boy did it crash and burn.
We did great things, quickly and beautifully. Sadly when it came to get the
new things into Production, we crashed and burned. Exec sponsor got whacked
for 'failure to execute'. More to the point, he pissed a load of people off
because his attitude was 'move over grandad this is the new way'.

The article describes the antipattern very nicely.

~~~
Terretta
Ok, then what's the pattern?

~~~
vermooten
Still searching for it :)

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inthewoods
At one point in my career, I took a job as a hedge fund analyst. It was
interesting because the metrics of success were so radically different from
normal corporations. In a hedge fund, if you succeed, say, 55% of the time,
you're a rock star - like Ted Williams batting 400.

Psychologically, this was hard to take - and I realized it was because in most
corporate environments, success is expected.

Inside most companies, there is an assumption of 100% success. You can see it
everywhere - but particularly in goal setting. The idea is simple: you ask
people to set goals, often about areas they don't know much about, then you
measure them on their ability to hit those goals.

So one way to solve the problem, in my experience, is to make it clear that
goals are not expected to be 100% achieved - otherwise they wouldn't be goals.
If you make 100% of your goals, then you likely sandbagged the goals.

But to do this, you need to remove the connection between goal and financial
outcome. Not easy to do. The way I've been doing it is for well
known/understood areas (aka "mature"), goals should be aggressive and you
should be measured on them. However, if the project or product is very
nascent, you should shift goals to focus on iterations - namely that you do
your best estimate, but recognize that you don't know much, and therefore you
are more than likely to be wrong.

This has worked (thought there are always exceptions) - but it is challenging
for managing inside a corporation, mainly because some senior exec will sh*t
all over a failed project not understanding the difference between mature and
developing projects.

------
olivermarks
The VP of Innovation Steve Blank was impressing with his insights has a remit
and obligation to be innovative. Most of the other folks at that big company
I'll wager don't give a crap about innovation, they have their antennae out
the whole time making sure their job is secure around repeatable processes
that are a profit center for the firm they work for, and working hard to
appear to be indispensably at the center of that repeatable process. That is
the reality of large companies in the ranks...

------
gz5
"A startup is a temporary organization designed to search for a repeatable and
scalable business model"

"A company is a permanent organization designed to execute a repeatable and
scalable business model"

With modern rates of change, I would argue there are very few repeatable and
scalable business models (over long time periods, especially in technology
driven businesses).

Meaning many "companies" would be better off acting as a "startup" (scared not
to innovate), constantly seeking to replace themselves...before another
startup does.

~~~
wpietri
This is true, but possibly irrelevant to the problem. If you ask people in
large companies about the need to innovate and the risks of competition, I'm
sure you'll get most people to agree verbally.

But the practical matter is that any company (and most of the individuals
within those companies) will do better in the short term if they invest in
more efficient execution of the existing model.

This is compounded by modern American business culture, which is very focused
on short-term numbers and local efficiency. And those are probably
economically rational behaviors given that CEO tenure is dropping while
compensation has gotten more tied to stock market performance. Trading short-
term profits for long-term investment only makes financial sense if you'll be
around to reap the rewards.

~~~
jackweirdy
Does this imply that the Intel-style Tick-Tock model is most effective - where
you divide your time on a calendar between doing the current thing better, and
building the next thing?

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Yhippa
> Innovation processes and metrics need to be different from those of the
> execution organizations

At one particular organization I did a short consulting engagement for we were
brought in to help streamline their project delivery process. It turns out
that they really needed to have a corporate overhaul of their people
incentives. The idea generators were doing end-arounds on their current
process and went straight to the implementors so that they could put on their
year-end review that "I built relationships and influenced others so that I
could spam X projects". Because of this style of thinking this type of
activity was breaking their system because they couldn't implement the best
project for the company. Only the projects whose owners who were the best at
breaking the system.

I had actually been an FTE at this company before and definitely could see
what this article was talking about in regards to fear of failure. Who wants
to put on their year-end review that they failed half their projects?
Especially in a GE-style performance management model.

------
Animats
From the article: _" A startup is a temporary organization designed to_ search
_for a repeatable and scalable business model. "_

YCombinator explicitly rejected that model in their cutback in initial funding
amount. The decision was made that the startup should not have enough
financing to "pivot" and try something new, but should die a cheap death if
(usually when) the initial idea fails.

From the article, referring to big companies: _" And when we do make bets,
they’re small bets on incremental products or acquisitions that simply add to
the bottom line."_

That's what YCombinator, as an initial funder, is doing. YCombinator is a big
company making many small bets.

~~~
lifeisstillgood
It seems that YC is the startup in these terms, and bringing in a new batch is
the pivot. They simply discard the employees who did not find the right fit
(well discard is a strong word but you get the idea)

The idea is not explicitly rejected, the organsiation is wider than it looks.

An interesting model for innovation inside an organisation though

~~~
nostrademons
Very often the founders of the failed startups get recycled into new ones too,
eg. Infogami => Reddit, Kiko => Justin.tv => SocialCam/Twitch/Cruise, Gamador
=> Parse, Auctomatic => Stripe (after acquisition), 3 startups => Scribd,
TipJoy => YesGraph (with stints at Facebook & Dropbox in between).

------
trhway
an elephant's curiosity, feeding and exploration behavior is different from
the same of a mouse. Trying to make the elephant to do the mousy things would
be strange at least. I don't think the lean elephant would be result, more
like exhausted to the death with significantly diminished capacity for
survival. Or may be a better illustration would be trying to explore the Delta
using 100K ton container ship instead of 28ft Bayliner.

------
cdnsteve
There's a different mental model for employees in a corp vs startup. I fully
agree with nonstrademons quote, "if you do nothing - is that you run out of
money and starve".

Put it this way:

A startup is like the reality show Survivor. People scrambling around,
focusing on the most important problem at hand - making fire. If you're not
contributing, it's easy to see and you get voted off the island (or run out of
money and starve).

A corporation is a much different setting. You're not alone in the dark on an
island. You don't care about fire, you have electricity, some other guy
figured out fire and electricity. You have your marching orders to focus on
but they're abstract. Contributions are usually not as visible The big problem
is too far away. The real problem is not understood anymore.

The real question is, how do you take away electricity and get the corporate
group to focus on fire like a startup? One option is the corporation needs to
borrow some of those fire making talents to spread the thought of flame.
Acquisition could be one route.

When you have people starting to leave the safety of electricity it's because
the primal thought of making fire is more appealing and exciting. You need to
bring back the flame.

~~~
k__
What does big corps prevent from founding their own start-ups?

I mean, MS could simply throw out $1,000,000, seed about 5-10 start-ups and
wait whats happening...

Since they know where their problems are, they could pre-filter the start-up
ideas and increase the success ratio.

~~~
beat
That lasts until half those startups fail, and someone asks why that
department has a 50% failure rate. Or until a startup needs to pivot, and
they're not allowed to pivot because it's not in the business plan. Et cetera.

Here in the Twin Cities startup scene, we talk a lot about enterprise-oriented
startups (because what we have here is the richest concentration of Fortune
500 HQs in the world). On one hand, it'd be nice to get Target or 3M or
someone to step up on investing and mentoring for our startups. But odds are
the cure would be worse than the disease.

------
mwsherman
Another way to think of this: the likelihood of “new Y” being invented and
succeeding is small, in any circumstance. The circumstances that lead to Y’s
existence are very contingent. The default is for Y to fail, or not to exist
in the first place.

The established company became so because they made X succeed, which itself
was unlikely. So what are the chances that the same organization would _also_
make Y succeed? Multiply the probabilities.

So yes, it’s politics and incentives, but we must also beg the question a bit
further upstream.

It’s why I marvel at questions like, why didn’t Microsoft invent the iPhone.
The better question is, why would it?

Tim Lee lays it out nicely here:
[http://www.forbes.com/sites/timothylee/2012/05/27/two-
views-...](http://www.forbes.com/sites/timothylee/2012/05/27/two-views-of-
innovation/)

------
sharemywin
The best way for a large corporation to innovate is to invest in small
companies and let their management run things as they will.

------
proksoup
Research and Development. Two separate tasks.

Research, breadth, trying many things, 95% of time spent trying and failing.
Development, depth, taking the most promising 5% of research and doubling
down.

I want my research Chief Officer to continually try new things. I expect them
to give me 19 bad ideas for every 1 good one. If anyone in this division is
afraid of failure, they are in the wrong division.

I want my development Chief Officer to succeed, and the culture of fearing
failure is perhaps more appropo in this tribe.

I wouldn't spend money on research if I didn't have a development budget ...

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nicholasdrake
I thikn there is a startling amount of groupthink going on. If big
corporations best way to be innovative is simply to copy the start-up model
(probably badly) of small teams moving quickly then you lose all the benefits
of a big company which is a massive balance sheet and the ability to throw
huge resources behind a project.

focusing on cultural terms like 'fear of failure' is probably largely counter-
productive, it sounds nice but it's hard to measure objectively. instead firms
need to be actively restructured to be able to take on more risk. one way this
could be done is when companies embark on r&d for a new technology they
release a bond to the market to allow the capital markets to invest in the
returns of a specific product line (e.g. the ipad) rather than the company
(e.g. Apple)

would love feedback on my essay on this subject if you have time..
[http://nicholasdrake.svbtle.com/4-proposals-on-how-to-
make-c...](http://nicholasdrake.svbtle.com/4-proposals-on-how-to-make-
companies-more-innovative-1)

------
wmt
Surprisingly my medium sized employer of ~1000 employees has had surprisingly
good experiences with internal startups, during the last three years there's
been three failures, one small success and one major success.

The startups were very cross-functional and very isolated, and the only
external pressure was the time until the product becomes profitable. Being
isolated from the main organization and a small size allowed the startups to
try new things fast, but knowing when to stop allowed even the failures to be
considered as successful experiments for scrapping the very different products
early enough.

Before these the company had tried to expand its business by bying another
smaller company, which was just a huge disaster, wasting years of work and
tens of millions for trying to keep the one new business alive just because
for too long it was regarded as too big to fail. The good thing from this was
that the old CEO "found new challenges" and the new one started driving the
startup model with an emphasis on knowing when to stop.

~~~
dagw
That sounds like my experience as well. The last two companies I worked at may
have looked like boring traditional mid-sized engineering firms from the
outside, but both also had a "startup scene" internally. Sure they have their
bread and butter business that brings in the steady revenue, but they both
realized that just doing what you did yesterday isn't going to work forever
and fund small groups to strike out on their own and try to start up some new
venture, develop new products and break into new areas and markets.

------
tlogan
Excellent article - but I do not think that large corporation are doing it
wrong.

Some large companies even encourage people with entrepreneurship spirit and
ideas to leave the company (and their VC arm / friends even invest in them).
And in many cases they are acquired back.

The problem is actually with relatively smaller companies: which do not have
$$ in the bank to acquire anything useful.

------
beat
I've been saying for years that in big corporations, not being wrong is more
important than being right. Slightly different phrasing and intent, but same
basic principle.

I think this is one of the things that kills many startups targeting the
enterprise - unless the founders have extensive enterprise experience
themselves, they simply don't understand the perverse disincentive structures
that dominate corporate decision-making. Hell, I have 20 years of enterprise,
and as a founder, it's still hard. For example, selling a product as a time-
saver for engineers doesn't work, basically because enterprises don't care
that much if they're wasting their employees' time.

------
redhatneck
The leaders of large corporations are able to spread out failure, so no one
can ever accuse them of it.

For small enough startups, leader failure is visible, so a culture of "no
failure" is not possible and failure is viewed as a learning experience.

When the leaders surround themselves with enough yes men and start to believe
they are infallible and if there were only enough people to catch all of the
pearls of wisdom falling from their mouths everything would be perfect, the
"failure is not an option" culture takes hold.

Happens to good leaders and will happen to me if I'm in the position were
everyone is telling me I'm right all of the time.

------
ChrisAntaki
Lack of speed can be a safety feature. As a pizza delivery man operating in
the city of Chicago, I've seen all too many young hotshots come in the
business, and leave with moving violations.

------
lifeisstillgood
tl;dr

folks in startups fear failure. So they move quickly and end up with
innovative models (or dead) Folks in enterprises fear failure, so they move
slowly and don't take risks

The reason is that (successful) startups measure on "searching for a
product/market fit" (c) Steve Blank So projects are judged on how quickly /
well they show fit or move on.

But enterprises already have a product market fit and it pays the bills - so
projects are judged on execution metrics.

So if you want innovation, judge those projects differently.

~~~
alexqgb
Aeon recently published a piece on luck, which - as it turns out - is a real
and measurable thing.

[http://aeon.co/magazine/psychology/does-lacky-luck-exist-
or-...](http://aeon.co/magazine/psychology/does-lacky-luck-exist-or-do-you-
make-your-own/)

As the investigation notes, luck - good or bad - stems from the kinds of
decisions people make. If you're doing well, you're more likely to place bets
with lower risk, which are more likely to pay off. This is how success breeds
success; good fortune optimizes for more of the same.

Conversely, if you're doing badly and feeling desperate, you're more likely to
take the riskier bet, which is naturally the one more likely to fail. In this
way bad luck usually leads to worse - except in the rare cases when it
doesn't.

If you're (a) in a position to cast a very wide net by (b) placing lots of
relatively small bets in (c) a field that produces rare but ginormous winners,
then you can turn the loser's dynamic into a gold mine (maybe!), but that's
three hard things you have to get right, and coming up short on any one front
will reduce you to the exact same roadkill that your model churns out daily.

------
swampthing
I know the story was just a vehicle for the broader point - but I don't know
that it's apples to apples re the fear. In a startup, you work hard because
you fear the company dying. Practically nobody at a large corporation is
afraid of it dying - the fear there is for their own career (e.g. they don't
want to get fired for a failed project). To me, it seems like it's that
difference that explains the different outcomes.

------
digi_owl
Innovators dilemma by different words?

------
stox
Be thankful for the inefficiencies of large organizations. Otherwise, we would
all be working for MegaCo by now.

------
pbreit
It seems like one, strong leader should be able to make good progress on this
front in most large organizations?

------
dmichulke
If you don't fail 90% of the time, you don't try hard enough - don't know who
said it

------
kordless
It's the rubber band effect of trust at work.

------
pyb
mbed is an example of a startup that was born within a large organisation,
ARM. Could anyone mention other examples ?

