To avoid becoming a one-hit wonder, you must create a culture of innovation
Face it: nobody wants to be the Vanilla Ice of entrepreneurialism. Ice Ice Baby may have reached the top spot on the Billboard 100 but the singer’s career since has not exactly attracted acclaim. But at least his inability to follow up on his initial success is something founders can learn from: many startups’ first product may woo both VCs and customers but they’ll face trouble if they don’t follow up on their hit debut. “We see this all the time with scaleups where their initial service is innovative and they grow for a while but then stop evolving,” says Nelson Phillips, professor of strategy and innovation at Imperial College Business School. While it’s possible for startups to coast on their past successes for a time, not innovating as they scale could see them easily be overtaken by the competition. “If you don’t follow up your early success with ongoing innovation then you’re setting yourself up for failure,” says Phillips. Fortunately, founders can avoid becoming a one-hit wonder by creating a culture of innovation amongst their employees.
The first step to achieving this is for business leaders to take a long, hard look at themselves. “Creating something new is very different from innovating in an established business,” says Phillips. While a startup’s early days may have been devoted to raising funds and launching a minimum viable product, the focus changes as an enterprise scales. Suddenly, entrepreneurs will find their days being spent dealing with everything from HR to accountancy rather than innovation. “Founders have to be honest with themselves and thoughtful about whether they really want to run the company as it grows,” says Phillips. If they do want to remain the CEO, then they have to recognise that they must focus more on leading the business than on coming up with nifty solutions.
However, not all entrepreneurs may thrive shifting into a more managerial role and leaving the innovating to others. “It might not be fun for them,” says Phillips. Fortunately, founders who’d rather stay at the coalface can easily solve this issue by letting someone else run the company while they themselves focus on innovation. “A great example of this are the founders of Google who hired a CEO so they could focus on the technology and the projects they loved,” says Phillips. Given that Sergey Brin’s and Larry Page’s company has since grown to become the world’s second-largest tech company after Apple, according to the annual Forbes Global 2000 ranking, founders could do worse than taking a step to the side.
But whether they choose to stay at the helm of the company or not, entrepreneurs still have to ensure they don’t lose touch with their user base. “Often the initial innovation came about because they were very close to the customers,” says Phillips. “But running a company, they get increasingly distant from them.” As the startup scales, founders’ attitudes towards their clients may shift. Instead of being a source of inspiration, interactions with customers risk being seen as problems to handle. However, given that 14% of startups that fail do so because they ignore their customers, according to research from CB Insights, the VC database, founders must take care to maintain this relationship and not let valuable ideas slip through the cracks. “They have to put in place systems and processes ensuring that the information from the people dealing with customers is fed back into the organisation,” says Phillips.
While customers are an important source of insights, startups can also encourage innovation by actively giving employees time to really think. This is something Michelle Wright, founder and CEO of Cause4, the startup-and-charity-advising firm, has taken to heart. “For instance, we create time for employees to write blogs because it’s a natural way for them to think about their opinions, ideas and gain more knowledge,” she says. This can also be achieved by giving them the opportunity to visit other companies or to write down ideas into a suggestion box. “It’s about finding ways for people to contribute,’ says Wright.
Another popular method of ensuring insights lead to innovation is to introduce regular brainstorming sessions. “If you keep those regular time slots and allow people to share ideas – no matter how crazy, wacky or stupid they are – then you can find out what’s ticking away in people’s minds,” says Jacob Beckett, co-founder and creative director at Vitamin London, the digital-innovation studio. And these sessions don't just have to be within each individual team but the company could benefit from cross-pollinating ideas from different departments. In fact, it can also be an idea to collaborate and listen in on brainstorming sessions with partner companies. “It can be quite useful because sometimes you see something from the fintech sector and can use it in something like horse-racing,” says Becket. “But you have to give people a structure to come up with these suggestions that might otherwise be deemed a bit silly.”
But in order to ensure these sessions don’t waste time, entrepreneurs must actively try out ideas. One way of doing that is to empower teams to be more entrepreneurial. “Essentially, it’s about giving people the reins of the project and product they’re working on,” says Beckett. For instance, at Vitamin London, Becket has created teams that essentially act like mini-startups within the company. Each team has a developer, an account manager and a product manager that aim to solve problems or finish projects. “That way you don’t lose sight of that innovative spirit because you have to solve problems and remain close as a team,” he says. “So you can still act a startup no matter how big you get.”
Finally and no matter how counter-intuitive it might seem, founders must allow employees to fail. Instead of measuring success in revenue, entrepreneurs are encouraged to measure it in knowledge. “If you run an experiment and you don’t know why it was successful, then it wasn’t really a success,” says Phillips. “But if we try something that doesn’t really work but we learn a lot about our customers in the process, then that’s a huge victory.” That’s essentially the thinking many Silicon Valley startups have adopted. By implementing a constant feedback loop where they develop, see how things work, learn from it and develop again entrepreneurs can ensure they innovate as they scale. But to do that, they have to be less disappointed when things don’t work out as planned. “The CEO and senior managers must act in a way where it’s okay to fail and even promote people if they learned something from their failure,” concludes Phillips. In other words, if startups want to scale and keep innovating they should take a leaf out of Mark Zuckerberg’s book and not be afraid to move fast and break stuff.