Why Silicon Valley Rules Don’t Work for So Many Older Companies

How do you make sure your startup does not transform itself into a siloed lair of incompetent politicians as it grows ?- By Phil Mora (@philippemora) 
San Francisco, 06/09/14 - what makes silicon valley startup culture so great ? I am not sure the commute buses, free food, unlimited vacations and other perks are part of the equation. Rather, I am convinced that when a company is small and has a set goal ("we need to make it before we run out of money") then no-one can hide and actual work speaks for actual results. However, past a certain headcount, an organization's cultural makeup changes because new resources are brought in that thrive by using others for their own success. The cycle starts at executive level, who hire their circle and so on. In the end, a company gets bloated with legions of resources whose only purpose is to survive within the organization. Today I am seeing two schools of thought: one that deals with changing leadership but does not address the organizational topology (is industrial-era pyramidal structure suited for the creative and knowledge economy?) and a second that deals with organizational topology (flat organizations do not scale, especially when it deals with the propagation of information) without addressing leadership. I am convinced that there is an ideal organizational size, past which organizations start to deteriorate into inefficient, innovation-killing monsters that crush the good people and favors corporate psychopaths. So, how do we foster The Change? Learn more at hughescreative.net.

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We all have a lot to learn from the new generation of companies that have come out of the Silicon Valley revolution. Many of these entrepreneurial lessons have been codified in books, the new bibles for innovation — not just for entrepreneurs but also for managers looking to create new and innovative innovation businesses inside existing corporations. Companies that want to shake themselves out of their routines and generate innovation from inside take the Silicon Valley cookbook and start adding recipes from it to their own.

But it doesn’t always work. In our work at Change Logic, we’re finding again and again that established leadership practices, corporate cultures and identities, and organizational structures arefar bigger obstacles to successful innovation than whether or not you can train a small and talented group to identify and prove market traction of a minimum viable offering.

One conglomerate in the print media industry that we studied made an early and deliberate effort to apply the Silicon Valley cookbook. They did a sound strategic assessment of opportunities, structured a portfolio of small start-up teams around the most promising areas, and trained all of them in the latest Silicon Valley tools and techniques. With the support of a corporate team, each project team implemented rapid prototyping: iterating experiments on the different components of their new business design and strategy in order to identify the right business model.

But although several projects hit their milestones and identified promising new sources of growth, when the new initiatives needed the firm’s business unit executives to step in to provide a platform of support and investment, progress stalled and a program that was three years incubating daring new and innovative business models had its most promising successes dismantled or fumbled within 12 months.

Why? It turned out that neither the corporate team nor the business units had a coherent plan for pursuing their success beyond the seed stage. The corporate office could offer organizational cover but no further resources. The business units could supply resources but at a penalty to their own performance and the few business units that did shift resources forced the new businesses to fit into the traditional organizational structure and the requirement to to respect the standards of financial performance and the operational practices of the mainstream units quickly drove the innovation projects into the ground.

As this company discovered, building and running an organization that can excel at identifying and scaling new ventures while at the same time retaining the discipline in the profitable execution of current lines of business is no small challenge. There are organizational roadblocks along each step to success and those who achieve it must continuously manage the tension of having two or more business models and operating contexts running simultaneously under the same leadership. That’s a reality that Silicon Valley start-ups don’t face and which established company CEOs ignore at their peril.

What’s more, the success recipe of a firm and even a whole industry is bound up with its culture. If you are in a semiconductor firm, you’ll have a deep connection to the science and economics of silicon chips. In advertising, value is all about your creative team; they are the special ingredients that drive customers to your door. Leaders of these organizations rise because they understand these dynamics.

But in semiconductors, software is becoming more important than silicon and low power is now more important than raw performance. In advertising, creative teams are being displaced by open innovation platforms. These changes challenge the very essence of what it means to be a semi-conductor or advertising firm. Unsurprisingly, the leadership at these firms will push back.

The bottom line is that different cuisines involve fundamentally different approaches, which means that borrowing from a different cookbook may involve more than just following a recipe; it may require internalizing a whole new way of cooking. You can’t make a three-star French chef like Alain Ducasse into a sushi master like Jiro Ono overnight.

Similarly, bringing in Silicon Valley processes into an established firm really only works as a part of an integrated plan of growth and renewal that reaches far beyond introducing the practices of experimental business design and corporate “start-ups.”  You also need a plan for addressing the challenges to established norms and processes that cooking the new recipes presents. Only then will your organization be ambidextrous as a business, able to cook both its traditional dishes and make the most of the nouvelle cuisine from Silicon Valley.
[Read More Here > Thank You HBR 05.22.14]

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Phil Mora

Phil Mora (@philippemora) is a co-founder of Hughes Ventures (@hughesventures) and a Managing Director at Hughes Creative, a startup headquartered in San Francisco (hughescreative.net). Obsessed with creativity, fitness, wellness, work-hacking, finance and high-tech, Phil is an innovation strategist, a creative, a hacker, a leader, and a disruptor. Find out more about phil at toppgun.net