How Innovative is a Startup?

Leaders of startups will typically tell you, often with energetic arrogance, that they are perfectly happy with their team’s level of innovation. In most cases, they shouldn’t be. Why, then, are managers of startups, a mostly intelligent breed, so prone to overestimating their team’s innovative abilities?

1. Although the title “startup” can refer, literally speaking, to any endeavor in its first stages, the term is very often used to denote an initiative led by a small number of tech-savvy founders and based around a novel idea with (hopefully) large business potential. So, almost by definition, a startup is based on innovation, or at least on the potential for innovation.
2. A startup’s founders are very often considered brilliant by their environment, and very often they are indeed bright and creative.
3. Successful founders often manage to raise money based on their ideas, which confirms their perception of their ability to invent stuff that others like.
4. As startups raise funding, they tend to pay generously to founders and employees, which further feeds their sense of self-worth and their self-perception as great innovators.
5. In the first stages of its lifecycle, a startup often focuses much of its effort and energy on R&D, creating the (misleading) equation: “we focus on R&D – therefore we are innovative”.

None of this is totally baseless: startups do indeed tend to be innovative to a certain extent and in certain domains, and their founders and early employees probably tend to be more creative than average. Still, in our combined 50+ years of experience, we have found that founders and members of startups suffer from fixedness just like members of any other type of organization. In fact, because of the phenomena mentioned above, they are often in danger of being even more blind to their innovation-deficiencies than most. Whether this is the reason for the dramatically high rate of failure among startups is debatable, but it is interesting to note that this dismal record is, for some strange reason, accepted as the norm. A closer look at the role of innovation in startups’ development could perhaps provide a clue to some possibilities of changing this currently accepted suboptimal performance.

The following questions can help throw light on several common blind spots, related to a startup’s innovation status. You are welcome to ask yourself these questions about the startup you have founded, work for or have invested in as a mini-diagnostic exercise.

1. Granted, your founder is a mathematical genius, her algorithm is unique and powerful. While the team works on developing applications to the algorithm, is she thinking about the next step? Is she in love with her original invention or is she willing to pivot? Is she able to come up with the novel ideas needed for pivoting?
2. Is all your startup’s innovation concentrated in the brain(s) of the founder(s)? Or are there additional innovative ideas being generated by others in the team?
3. Do you have mechanisms for sharing thoughts among team members, so that ideas can be developed jointly in open and productive conversations? Or are thoughts exchanged only in improvised brainstorming sessions with members sitting around and throwing out ideas?
4. Does anyone make sure that valuable thoughts, comments and ideas get documented?
5. When you think of your startup as innovative, which aspects of its activity are you referring to? Only R&D? Have you fallen into the trap of thinking that innovation relates only to R&D?
6. Have you had any innovative ideas lately about go-to-market strategy or tactics? Are you planning to offer your product only to the usual-suspect-segments? Or have you challenged yourself to think about totally different alternatives to your market promise and targets?
7. Do you have a problem with hiring talent (probably, since most everybody has)? Have you treated this as a topic for innovation, or are you simply joining the herd by offering high salaries and other goodies to tempt promising prospects?
8. Do you find the time to discuss less-probable future scenarios? To challenge your assumptions?
9. As you grow, what is your strategy for maintaining the innovation level that created your startup in the first place? If you’re betting exclusively on the founders’ creativity plus recruiting creative talent, do you think it is enough?
10. Is money constraining your ability to innovate?

• Initially, when scarce, do you hold on desperately to what you have, afraid of “distractions” such as opening your strategy to candid assumption-breaking discussion?
• Later, when abundant (hopefully), throwing money at your problems instead of finding innovative solutions, the hard way?

If the answers to none of these questions seem to warrant a change in your modus operandi, you are either misleading yourself or in excellent shape😊. If you do find that you may benefit from a more structured approach to your innovation strategy, here are three strong recommendations:

1) Make time to deliberately discuss how to be more, and more correctly innovative. Not by the way, not as part of your normal R&D activities, but dedicated, raising-your-head and breathing time.

2) Make sure to hold at least some of the discussion with the help of an external facilitator. They do not need to be experts in innovation, but they should know how to facilitate a tough discussion with hard-headed participants (yes, you and your team).

Once you’ve followed the first two recommendations, chances are that you are on the right track. To make sure you are, and to accelerate the change, you can follow recommendation number 3:

3)     Enlist the support of innovation experts, who follow a methodology and have accumulated plenty of experience with other companies (yes, true, we are such experts, but there are others out there as well).

You will be surprised at how much of a startup’s culture and practices down the road will be determined by taking these steps at the outset and how these steps can help prepare the team for the hurdles on the way to success.