Startup companies operate in a world of their own. A bunch of like-minded, creative individuals come together to have fun while also working. Software startups that grow out of a business idea students had over beers are a rare exception in the corporate world, a tiny space within the economy and the society.
Can their innovation model be applied outside of this space? Can existing corporations embrace some of the open and boss-free spirit of software startups to drive innovation and increase productivity? A steel factory can simply not be built without planning and its design can not be modified every week. But spectacular investment failures – which are more often than not planning failures rather than due to unforeseeable, sudden changes in the project environment – might be avoided if large corporations developed their culture away from hierarchies that see a few lonely decision-makers at the top and instead involved more of their own employees in flatter hierarchies.
But there are two important elements that make the innovation model of small startups work and that can not easily be replicated elsewhere. Technology and online communication reduce the cost of replication to zero and allow developers to work and collaborate from anywhere at anytime in the environment that they exclusively create, greatly boosting their motivation and productivity.
The other element is trust, an essential prerequisite to make flat hierarchies or structure free of bosses work. And here might lie the biggest constraint to scaling the innovation and organizational model of startups, both to their own growth and to applying it to corporations outside the software development industry. Trust is most easily created between members of a like-minded community. Such as young, male tech geeks who spend most of their day in front of screens and who enjoy after work beers with young, male tech geeks. Women, for instance, are still a tiny minority in software development. It might be difficult to create this environment of trust at bigger and by default more diverse companies. For instance, getting developers to work with designers can create friction already.
Speaking more broadly, the biggest barrier to adapting some of the innovation models used by startup companies at larger companies is the difficulty of creating a corporate culture that fosters this innovation. Changing corporate culture is maybe the most difficult change of all. It requires that employees who are used to implementing what they being told to take initiative and responsibility themselves.
British Telecom managed to implement aspects of the agile software development model. The changes that took hold at the product development of Procter & Gamble are another example. Realizing that most innovation is driven by smaller companies, individuals and university labs, the company created an open innovation platform it called “Connect & Develop” to reach out to developers and innovators outside its own research and development division. The corporation claims that more than half of its new product initiatives receive input from people not working for the company.
The Norwegian oil company Statoil is another example. The company has launched an open innovation blog, on which it shares areas of innovation on which it currently does research on. It frames some of the areas as challenges, to which the public can respond with ideas. For example, the company is looking for new evacuation strategies for its personnel working under the extreme weather conditions of the Arctic.
It is not clear whether large corporations would share their most sensitive areas of research. The fact that some corporations disclose what they are working is a tremendous departure from the mainstream corporate culture. Beyond the corporate world, the open approach of the software start-ups discussed above might as well drive social change by fostering an open culture in society and government through the spread of their online collaboration tools. In one example, German software engineer Stefan Wehrmeyer has adapted the repository system of Github to document laws passed by German parliament, in an attempt to increase transparency in politics. The repository tracks all changes that were made to laws during the lawmaking process, just like a section of software code would have been changed in collaboration of an online community. This could provide insights into how lobby groups influence lawmaking.
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About the Author
Frederik Richter has worked as a financial journalist since 2004. He has reported from more than 15 countries in the Middle East, Asia and Europe, focussing on the interplay of politics and business in emerging markets and particularly in the Arab world.
For several years, he worked as a Reuters correspondent in the Gulf where he wrote about investment and financial markets.
Having taken an interest in the innovation prowess of social media during that time, he is now based in Thailand as an independent journalist and editor.