If you want to create a business primed for innovation, says David S. Kidder, Bionic CEO, you have to adopt a growth mindset.
By David S. Kidder
Fortune 500 executives have been trained to think of growth in a very particular way. Eager to satisfy shareholders, they are conservative and overly cautious with their investments. They sift through many potential growth opportunities and decide on just one or two consensus-driven plans. Once they’re convinced that the plan that they will buy will work, the executives pour capital and attention into these expected “winners.” They do so because, often, they have spent their entire careers following the rules, checking the boxes, and being terrified of failure, no matter how small or inexpensive it might be.
This is a risky approach. Just because massive companies have the financial and human resources to keep such initiatives alive for years longer than they deserve doesn’t mean they should. Entrusting an organization’s growth to a handful of projects might have made sense a few decades ago, when large organizations really did offer the most competitive solutions to customer needs, and before the Internet took root in the lives of everyday consumers. However, over the last twenty years, startups have successfully snatched customers from bigger companies simply because the startups are committed to solving real, acute customer needs with solutions that were rigorously tested with those same customers. It is no longer sufficient to hurl resources at perceived customer problems from the board room; to beat startups at their own game, the Fortune 500 needs to borrow some of the same entrepreneurial mindsets that startups engage.
They also must build their growth portfolios like venture capitalists do.
When VCs make funding decisions, they recognize that it can take twenty investments in an industry to get even one big success. As a result, they pack their portfolios with a lot of smaller investments rather than several bigger ones. This varied portfolio tells market truths to investors that one or two larger investments never could, because it contains ten to twenty times more sensors for new customer trends, technology adoption curves, and regulatory shifts. By investing a lot less money in a lot more places, the best VCs buy themselves near-guaranteed success and constant, timely lessons.
This change requires recalibrating your mindset, not just throwing money at more projects.
For an enterprise executive to adopt this portfolio-based approach, she must decide that long-term strategy triumphs over short-term profit; that a test-and-learn process reveals more than a leadership vote; and that understanding customer needs matters more than serving stakeholders. To enact these changes, the executive and her leaders must embrace a growth mindset that champions strategic risk-taking by encouraging fast and cheap failure. If the C-suite inherently views failure as dangerous to its corporate future, it won’t grant the necessary permissions to develop and support an investment portfolio of startups. Some will inevitably fail, but all of them support a rapid, crucial learning velocity and ultimate financial gain. Not only must they be allowed to fail; these failures must also become celebrated opportunities to learn.
Successful startups have and are all of these things. That’s why they won the first round of disruption, while almost all of the Fortune 500 outsourced growth and innovation to Silicon Valley. But major corporations have some proprietary gifts that startups might take half a century to develop: loyal customers, immense distribution channels, sophisticated manufacturing capabilities, scaling mechanisms, and brand equity that startups and venture capitalists can only dream of. Imagine what such companies can do with the discoveries that emerge from a robust portfolio of bets, a leadership team that believes in constant exploration, and a culture that champions fast and cheap failure. Enterprises that “refound” themselves in this way can certainly take back market share that they lost to startups. They can bring about the future of their industry sooner.
David S. Kidder is an entrepreneur and an angel investor in over 30 companies. He is currently the co-founder and CEO of Bionic, a company that unlocks new growth for the world’s most competitive enterprises by leveraging the mindsets and methodologies of venture capital and entrepreneurship. Previously, he served as the co-founder and CEO of Clickable and co-founded SmartRay Network. A graduate of the Rochester Institute of Technology, he received Ernst and Young’s Entrepreneur of the Year Award in 2008. He is the creator and co-author of the New York Timesbestselling series The Intellectual Devotional and The Startup Playbook. His latest book, New To Big, was published in April 2019 by Currency, an imprint of Penguin Random House. David lives in Westchester County, New York, with his wife and three sons.