Startups versus corporates

I saw an interesting guest blog on Steve Blank’s blog by Henry Chesbrough who developed the idea of Open Innovation which is relevant to the discussion of innovation in the energy sector.  It was comparing start-ups to established companies and defined the difference like this:

• A startup is a temporary organization in search of a repeatable, scalable business model.
• A corporation is a permanent organization designed to execute a repeatable, scalable business model.

This is simple but profound realisation, and understanding it is critical to success in corporate venturing and creating new products and services within existing companies.  “The processes that companies have optimized for execution inevitably interfere with the search processes needed to discover a new business model”.   Although existing corporations have far more resources than startups this conflict can severely hamper them those very resources can become liabilities in searching for new ventures.  A corporate venture effectively has to fight two wars; one in the external market, and internally against the parent company.  This is something that those of us who have been in that situation definitely recognize.  It is a major issue for energy companies trying to innovate new products, services and business models.  It drives you to the conclusion that any corporation that really wants disruptive innovation has to either explicitly encourage and reward it in the culture, as 3M has successfully done for decades, or if that is not appropriate (and for many companies it won’t be) you have to separate people and resources entirely in the manner of a Lockheed Skunk Works^®.

Given the massive economic and political disruption going on in the energy markets that threatens the very existence of the incumbent suppliers, if I was an energy company CEO I would be setting up a skunk works with the objective of coming up with a repeatable, scalable business model that will disrupt the traditional energy supply model.   If the big suppliers don’t do it someone else will (or is already).