I’m due to have a conversation with someone about an ambitious startup-type idea they’re seeking to run within an established company.
They have an idea—it might be a great one–and they’re planning to invest real money in it within the bounds of a decades-old corporate operation. I’m not an investor or a CEO, but I’m worried about this. I’ve seen many companies try to reproduce “startup magic” within their standard (or near-standard) structure, and they rarely achieve what they anticipated. This got me thinking about why that is, and how to explain that in my forthcoming conversation.
As so often with things in life I see it as a probability distribution curve. In my beautiful diagram below the x-axis represents success on some scale—revenue or profitability—and each curve represents 100% of possible outcomes. The blue curve is a startup: success is much less likely, but there’s a small chance of a really big win, as the curve stretches out far to the right. The red curve represents a corporate project: real failure is very unlikely, but so is really significant success (at least on this scale).
Of course, reality is far more complex than this. Startup CEOs and startup investors typically have very different ambitions to corporate project leaders; we’re not really comparing like with like. But all the same, we can (and people do) put one kind of venture into the other kind of context. Does it matter?
It does if “success” is measured towards the right of the x-axis. A corporate project is very, very unlikely to achieve that kind of success; a startup is not certain to, but I’d say it has more of a chance (particularly if we also consider spend).
There are contraints in an established organisation that limit the chance of a really poor project result, but also limit the chance of a really good one. It is possible to change the corporate environment to simulate more of a start-up one, but that requires a lot of deliberate effort. Simply transplanting an idea from its natural habitat to an alien one will significantly reduce the chances of a positive outcome.
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