Northrop Grumman

Oct 1st 2019

Large Companies Acting like Startups: Agility and the Capacity to Scale


A great motivator to creating a startup is the aspiration of achieving a “hockey stick” revenue curve. At the outset, a small scrappy team with a grand idea faces tough times — revenue is zero, and good will investment (both financial and human capital) is fuel. With hard work and some luck, the company escapes that period into one of gradual growth and then abruptly into very rapid growth — the “handle” of the hockey stick.

If the company is to continue existing as a stand-alone entity, they have to get good at growth and good at delivering ever-larger volumes of products or services to consumers. That often means focusing less on innovation and more on efficiency. The recipe — invent something, get good at doing it profitably and repeat — is not so simple.

Most large companies got that way because the economies of scale for production mandated an ever-bigger workforce and infrastructure. At some point, companies stop paying a third party to take care of legal matters and set up an in-house legal department. Likewise with establishing a dedicated marketing organization. Perhaps they build a production line and invest in specialized capital equipment. Eventually, they figure out how to be efficient, and in the process develop mass and momentum.

One might think that having all these assets at their disposal would encourage employees at large companies to feel empowered and go innovate with them. After all, if you can repeat that startup process without those hard times (where a small team has to do everything themselves), wouldn’t things move faster? Wouldn’t it be possible to constantly make small bets, try new things and create new growth?

If you happen to work at a large company, you might be laughing at this point. More often than not, when a large company finds success at doing something, the dynamic radically shifts and the mantra becomes “protect the core at all costs.” Worse, when a company suddenly wins some new business, a new cycle of efficiency building occurs, and those assets become further specialized at doing what it takes to maintain momentum. Employees are incentivized by how well they enable the core, rather than challenge it — and in the short term this makes sense. There’s money to be made, and there’s a clear path to do it. Surely at some future point the company will invest in long-range planning, but that’s for the next C-suite to handle.

And then the digital camera was invented. The story of Kodak is one that no one wants to repeat, but it keeps happening (at an accelerating pace) and has earned a name now firmly embedded in our culture — disruption. No executive wants to be the one who just watches as their once-mighty business comes crashing down because a startup takes advantage of some new technology. So for at least the last 10 years, many large companies have created innovation organizations, and they range from completely ineffective to business model–changing.

One common denominator of innovation organizations is that they infuse new ways of working into an established culture. Large companies such as Adobe, LinkedIn, MasterCard, Coca-Cola, MetLife, GE, IBM, Cisco, Tyco and Northrop Grumman have established internal employee incubator programs. These programs allow employees to explore new business models, customer solutions and, fundamentally, a new way of working.

In the process of standing up a new business, participants are able to experiment with and learn about new ways to manage risk insulated from the core, but with all the amenities of an enterprise. With a 2015 survey by Accenture indicating that only 15% of millennials would prefer to work at a large corporation, programs like these address business growth and development, as well as recruitment and retention.

There’s some evidence that startup behaviors are providing real results and affecting the way large businesses operate — for instance, the recent success of the DARPA R3D2 project, which was executed and launched in just 20 months by a company that typically works on much longer timescales. The small, agile, Northrop Grumman–led team made use of streamlined procedures and even utilized an internal maker space to expedite integration efforts.

The threat of disruption isn’t slowing; as such, businesses can no longer afford to simply operate as normal. The barriers to bringing new ideas to market continue to fall, and many large companies are taking notice and putting real efforts into augmenting their scale and reputation with the agility of startups.

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