#leanenterprise

60,000 words. 12 chapters. Interviews with GE, Intuit, Hearst, Nordstrom, Qualcomm, and others.

Brad Smith, CEO of Intuit, is calling it, "A framework for empowering the greatest entrepreneurial talent to thrive."

When compared to the stereotypical corporate persona, entrepreneurs are stoic individuals. They work out of basements and garages and hire their friends and family when no one else will work for them. Many go without pay for months, if not years, through ups-and-downs, for the chance at making something out of nothing.

Considering this level of determination, why do they often quit a year into being acquired by a larger company, or why would they never consider working for another corporation in the first place? Corporate politics and bureaucracy are just another obstacle that can be learned and overcome. In fact, they're relatively insignificant compared to the adversities entrepreneurs have to otherwise overcome. Considering the fact that entrepreneurs can leverage greater resources and a networks inside a company, why does the thought of that make them sick?

The answer is compensation. Not that big companies don't compensate them enough, but that the compensation structure is not aligned with an entrepreneur's world view.

Entrepreneurs are not motivated by money (except for a god-like amount), but compensation informs perception. Entrepreneurs look for up-side and the ability to arbitrage the system. Even though the potential for an exponential outcome is slim, entrepreneurs are overconfident in their chances. An entrepreneur's ideal situation is closer to a less than one percent chance to rule the world and a ninety-nine percent chance to be broke.

So when entrepreneurs say they hate working for big companies, it's not because they can't deal with the obstacles. It's because they perceive the best case scenario as being a waste of time. They see a better opportunity outside the system.

If enterprise innovation is to succeed as a new paradigm in corporate America, big companies need to develop new rules of entrepreneurial compensation. This means giving employees significant potential upside, while paying them minimum wage (if anything at all). There's a special kind of motivation that entrepreneurs get from taking the money of the world's most influential people, and betting their entire careers on a two year period.

There's three strategies big companies should use to innovate:

Acquire Startups

Invest in Startups

Build Startups Internally

The difference is the level of control and momentum the company will afford.

Building internal startups is incredibly difficult--it takes a lot of energy an effort to get started but is likely the strategy that has the most long-term potential. Companies traditionally overspend on this option significantly. But now that new research is emerging around Lean Startup, this option is becoming viable and cost-effective for the first time.

The success rate of startup acquisitions is historically very low while the cost of acquiring a successful company is very high. Cisco is actually known for being highly successful at the acquisition process (claimed 70% success). Usually the problem is around keeping the original entrepreneurs engaged either through compensation or access to resources. For example, Dennis Crowley (foursquare founder) famously left Google after he couldn't get the engineering resources he wanted for the company they bought from him.

I've thought a lot about how I can empower everyone to have the job of innovator here at Lean Startup Machine.

Lean Startup methodologies and the decreasing cost of failure are causing the time we have to seize market opportunities to approach zero. Therefore, it's even more important to enable an adaptive workforce.

This boils down to two things: creating a disruptive culture and a disruptive infrastructure to enable that culture. I'll start by explaining the latter.

Disruptive Infrastructure are the processes that enable someone who has an idea to act on it, to attain resources & permissions, while safe-guarding existing business models from risk. It also includes compensating that person appropriately for the value she is bringing the company.

Many people leave Google to start startups, rather than build them internally, because the right disruptive infrastructure is not in place. Infact, Instagram, Twitter, Foursquare, and Pinterest were all started by ex-Googlers. This is a huge lost opportunity, and will become more and more common in other companies as the entrepreneurial path goes mainstream outside of Silicon Valley.

The simplest form of disruptive infrastructure today is a venture-fund that invests in and supports the startups of a company's alumni (but is not limited to them). This form of infrastructure compensates the entrepreneurs based on the fair-market value of the startup funding market.

But there's a middle ground. One where the company can share more of the financial risk with employees and add more resources than a venture fund. This would be in exchange for more ownership and control.

A Proposal for a Disruptive Infrastructure

1. Enable employees to act on ideas

Give all employees a number of innovation days every year that they can take at any time

They could also use these days to attend emerging tech conferences like CES or SXSW, or take classes on learning to code, build hardware, or design web interfaces

Every employee should be trained on Lean Startup

Employees can earn more innovation days by validating new ideas

2. Enable employees to acquire resources

A directory to easily find team members and advisors with similar interests and ideas

Approval to look for help outside the company

3. Enable employees to acquire permissions

Permissions should be given automatically, without approval needed

Clear success criteria should be defined for each stage of the product

4. Safe-guard existing business models

Before taking any innovation days, employees must be able to answer the question, "Who will take over my role if I take on an innovation project full-time?"

The transition of human resources needs to be as effortless and guilt-free as possible

When startups start to gain traction, separate them from the company. Put them in a local co-working space or separate office

5. Compensate employees properly

When a project gains traction, employees should be given the ability to choose a reduced salary in exchange for significant equity in the new project

There should be a minimum amount of risk the employee is willing to take in order for an idea to pass to the next stage, as the business has more case studies, this bar can increase

One of the keys to a successful infrastructure is one that is clear and transparent, and employees can count on that it will be honored. No one will stick around or take a risk if they don't trust their employer.

I will cover the second essential part of this, the Disruptive Culture, in a follow-up post.