When Google announced that co-founder Larry Page was replacing Eric Schmidt as CEO, the official reason was to "streamline decision making" at the top. Instead of a triumvirate, there would be one person clearly in charge. Speculation among Google-watchers, however, is that there were deeper underlying issues that triggered the change, including the fear that Google is losing its "start-up" edge. In an interview following the announcement, Page confirmed this concern by saying, "One of the primary goals I have is to get Google to be a big company that has the nimbleness and soul and passion and speed of a start-up."
But can a big company like Google really act like a start-up? After all, start-up employees have a totally different psychology and motivation than those in established firms. Joining (or founding) a start-up is an act of faith -- the conviction that an idea eventually can become a sustained commercial success. To translate that belief into reality, start-up participants pitch in wherever it's needed, put in long hours, and forego financial security. In effect, they are rolling the dice in the hope of hitting the jackpot -- but willing to take the slim odds because of their strong belief in the new venture, the adrenaline rush of living on the edge, or the potential size of the prize.
In contrast, employees of large established firms operate with a different sense of risk and reward, reassured by financial security and structure. They want the enterprise as a whole to be successful, but are more motivated by the challenges of their particular function and the ability to advance in their careers. Within this context, people in big companies tend to focus more on protecting and preserving their existing businesses than on breakthrough innovations that might cannibalize or destroy them.
Obviously these broad generalizations don't apply to every start-up or established organization. But from my experience, they do represent stark differences that make it very difficult to turn a big company back into a start-up. For example, a number of years ago the CEO of GE Capital, Gary Wendt, was worried that rapid growth had reduced the sense of innovation that fueled the company's success in the first place. To get back that "start-up spirit," he offered one million dollars in seed money to any manager who could turn an idea into a new business. Across more than two dozen managerial teams, there were no more than one or two takers. Most managers felt that they could be more successful by continuing with their established business.
My point here is not that big organizations shouldn't try to be innovative and fast-moving like start-ups. Rather, with all due respect to Larry Page (who is clearly more successful than most people), trying to turn back the clock on a big organization and return it to its start-up days is probably not going to work. Instead, managers of large organizations should try to deploy other approaches that might be more effective, such as the following:
1. Set up a venture group that can fund internal (and external) entrepreneurs who want to start businesses that are related to or adjacent to your core. Obviously, criteria need to be established about types and sizes of investments, but if run like a real venture fund this kind of approach can attract people who have the right mentality and energy both from inside and outside the company.
2. Carve off skunk-works groups to tackle new opportunities that might be threatening to existing business units, or that will never get enough attention from them. However, treat these groups themselves like start-ups -- with risks and incentives that match. Don't overfund them or they will become projects rather than start-ups; and put real rewards on the table so that start-up types of people will want to play.
3. Sponsor innovation contests to generate ideas for new businesses and innovations related to your company and its space. Put up enough money that it will attract internal or external entrepreneurs who will want to turn the idea into a start-up.
Let's face it: Big companies are not the same as start-ups, and never will be. But that doesn't mean that they can't be innovative and fast-moving like start-ups. They just have to do it differently.
What's your experience with big companies behaving like start-ups?
This post was originally posted onHarvard Business Online .