The Startup Way

1. The Modern Company: Embracing Continuous Innovation

A modern company is one in which every employee has the opportunity to be an entrepreneur.

Continuous innovation is crucial. In today's rapidly changing business landscape, companies must foster a culture of continuous innovation to remain competitive. This involves:

• Empowering every employee to think and act entrepreneurially
• Embracing experimentation and rapid iteration
• Balancing disciplined execution with entrepreneurial management

The modern company focuses on sustained impact through continuous innovation, rather than relying on steady growth through prescriptive management. It operates with cross-functional teams that work iteratively to serve customers, rather than siloed departments passing work in a linear fashion.

2. Entrepreneurship as a Core Function

Entrepreneurship fundamentally requires learning by doing.

Entrepreneurship is a missing function. Many organizations lack a dedicated function for fostering entrepreneurship and innovation. To address this, companies should:

• Create a dedicated entrepreneurship function within the organization
• Develop career paths for corporate entrepreneurs
• Integrate entrepreneurial thinking across all departments

This function should oversee high-potential growth initiatives, infuse an entrepreneurial mindset throughout the organization, and manage the integration of successful internal startups into the broader company structure.

3. The Startup Way: Principles for Transformation

Think big. Start small. Scale fast.

Five key principles guide transformation:

1. Continuous innovation
2. Startup as atomic unit of work
3. The missing function of entrepreneurship
4. The second founding
5. Continuous transformation

These principles help organizations create cycles of continuous innovation, unlock new sources of growth, and develop the ability to rewrite their DNA in response to new challenges. The Startup Way combines the rigor of general management with the highly iterative nature of startups, providing a framework for organizing, evaluating, and allocating resources in conditions of extreme uncertainty.

4. Lean Startup Methodology: Building, Measuring, Learning

If you cannot fail, you cannot learn.

The Build-Measure-Learn loop is central. The Lean Startup methodology provides a framework for testing ideas and learning from customer feedback:

1. Identify leap-of-faith assumptions
2. Create a minimum viable product (MVP)
3. Measure results and gather validated learning
4. Use insights to pivot or persevere

This approach allows teams to test hypotheses quickly and cheaply, reducing waste and increasing the likelihood of creating products that customers actually want. By embracing failure as a learning opportunity, organizations can iterate more effectively and find success more quickly.

5. Implementing Change: From Critical Mass to Deep Systems

If the bonds are broken randomly, without the apparatus to manage the energy, the process can be tremendously destructive.

Transformation occurs in phases:

1. Critical Mass: Pilot projects and early adopters
2. Scaling Up: Widespread rollout and deployment
3. Deep Systems: Changing internal processes and structures

Each phase builds on the previous one, creating momentum for change throughout the organization. Key elements include:

• Starting with limited projects to build proof of concept
• Creating dedicated, cross-functional teams
• Establishing growth boards for decision-making and resource allocation
• Developing internal coaching programs

As the transformation progresses, it becomes necessary to address deeper systemic issues within the organization to sustain long-term change.

6. Innovation Accounting: Measuring Progress in Uncertainty

Innovation accounting is a way of evaluating progress when all the metrics typically used in an established company (revenue, customers, ROI, market share) are effectively zero.

New metrics for uncertain environments. Innovation accounting provides a framework for measuring progress in highly uncertain situations, where traditional metrics may not apply. Key aspects include:

• Using leading indicators to predict future success
• Creating a chain of metrics that show progress over time
• Tying long-term growth to a clear process for funding innovation

This approach allows organizations to make informed decisions about resource allocation and project continuation, even when faced with limited data and high uncertainty.

7. Entrepreneurial Management for Long-Term Growth

The goal of this process is to create a true synthesis: a new, modern way of thinking about organizations and leadership that can become the basis for twenty-first-century growth and innovation.

Balancing entrepreneurship and management. Entrepreneurial management combines the best aspects of traditional management with the agility and innovation of startups. This involves:

• Creating a system for continuous innovation
• Developing new accountability structures
• Fostering a culture of experimentation and learning

By integrating entrepreneurial thinking into management practices, organizations can create sustainable growth and adapt more effectively to changing market conditions.

8. Fostering a Culture of Experimentation and Iteration

We care so much about creating a brand that has longevity to it, we decided it was time to create a space to do just that.

Create space for experimentation. Organizations need to cultivate an environment that encourages and supports experimentation:

• Establish "islands of freedom" for testing new ideas
• Implement metered funding to manage risk and resources
• Create growth boards to oversee and support internal startups

This culture of experimentation allows companies to test new ideas quickly and efficiently, learning from failures and scaling successes.

9. The Role of Leadership in Transformation

The courageous folks you've met in earlier chapters...are all examples of corporate entrepreneurs just as real as the startup founders you see on the covers of magazines.

Leaders drive change. Transformational leaders play a crucial role in implementing and sustaining the Startup Way:

• Champion new ways of working
• Provide air cover for experimental projects
• Model entrepreneurial thinking and behavior

Effective leaders must balance the needs of existing business with new sources of growth, creating an environment where innovation can thrive alongside established operations.

10. Continuous Transformation: Adapting to Future Challenges

Once this way of working becomes embedded in the everyday fabric of an organization, it's no longer a transformation.

Embrace ongoing change. Organizations must develop the capability for continuous transformation to adapt to future challenges:

• Treat organizational change as a key part of the entrepreneurship function
• Develop career paths for transformation leaders
• Create a system for ongoing experimentation with organizational structures

By embedding the ability to change and adapt into the organization's DNA, companies can remain agile and responsive to new challenges and opportunities.

11. Towards a Pro-Entrepreneurship Public Policy

I believe a new kind of union-management relationship is available for organizations that are willing to break the mold and try some experiments.

Policy can foster entrepreneurship. Public policy plays a crucial role in creating an environment conducive to entrepreneurship and innovation:

• Implement "sliding scale" regulations that adapt to company size and stage
• Reform bankruptcy laws to reduce personal liability for business failure
• Create a new "pre-public offering" status for companies between late-stage financing and IPO
• Establish a Long-Term Stock Exchange to encourage long-term thinking

By addressing these policy areas, governments can help create a more fertile ground for entrepreneurship and innovation, driving economic growth and societal progress.

Last updated: August 9, 2024