Last week, I had the pleasure of attending and keynoting Carnegie Mellon University’s Corporate Startup Lab Demo Day. My friend and mentor Sean Ammirati first shared the Corporate Startup Lab model with me in 2017 and I’ve been a fan since Day One. The idea is to bring together Fortune 500 companies with interdisciplinary teams of students to build internal startups solving problems and developing new business models.Continue reading “Corporate Startup Lab Demo Day 2019”
Startups and corporates speak a different language
- Different timeframes
- Size of deals
- Response times
- Number of stakeholders
Corporate incentive structures for successful partnerships
- How comfortable is the corporate team in innovating? If comfortable, they’ll have a higher tolerance for misses. Look at the entire portfolio.
- Companies that allow intrapreneurship give employees new outlets to thrive.
- Allow more employees to scout for deals – innovation can come from all parts of the organization.
What are the benefits of startups-corporation collaboration?
- Inside large organizations (10,000+ employees) it’s an echo chamber. They only see direct competitors.
- Need someone looking outside of direct competition. Expose the corporate team to new ways of thinking.
- Startups also get exposure to see how their tech can apply to different domains.
You can listen to the podcast on iTunes, Spotify, or your favorite podcast player. Learn more about this and other great innovation episodes on the Inside Outside Innovation website.
Make sure to grab a copy of The Startup Gold Mine at your favorite bookstore!
My good friend Sean Ammirati has started a brand new podcast called Agile Giants. The show is inspired by his work over the past few years leading Carnegie Mellon University’s Corporate Startup Lab (CSL). In Sean’s words from his Medium post announcing the podcast:
If you already are a corporate entrepreneur, want to become one or are just looking for some advice around commercializing transformative innovation, this podcast is for you.
Sean was nice enough to interview me on the podcast. Our wide-ranging conversation was mostly focused on The Startup Gold Mine but also included stories from other projects I’ve worked on, like Estee Lauder’s External Innovation team.
You can listen to the episode below or on your favorite podcast player.
I recently had an opportunity to chat with Ryan Helms on his Hustle to Freedom podcast. It was a pretty wide-ranging conversation that included lots of background on Unlimited Brewing as well as The Startup Gold Mine. In particular, we got into how to start a business as a side hustle and de-risk it along the way. This episode should be useful to anyone interested in side hustles, beer, and problem solving.
Give it a listen and make sure to subscribe to the podcast!
“Sorry, this just isn’t a good fit for us right now.”
This simple but terrifying sentence is a recurring nightmare for founders trying to close deals with corporate partners. And it’s even worse when you’ve been working on a deal for months and were banking the fortunes of your company on its success. So when you’re rejected, is it all over or is there something you can do to turn things around?
Here are some tangible next steps to take when your corporate partner says no to a deal:Continue reading “What to Do When Your Corporate Partner Says No”
In today’s world, we’re constantly being inundated with “newness”. It seems like every day, there’s a new startup or company coming up with a technology to improve how we do things. Despite how much media hype there is around these new technologies, it’s hard to know which ones have lasting power and which will fall by the wayside.
When looking at something new, a mental heuristic I find really helpful is examining it through the lens of the Lindy Effect. Those who have read Nassim Taleb’s The Black Swan and Antifragile are already familiar with the Lindy Effect. If you haven’t, here’s a brief summary (though you should still go read the books):
The Lindy Effect refers to the life expectancy of non-perishable things, like ideas or technology. Basically, the rule states that the longer something has been around, the longer it will be around.
An easy way to grasp this concept is to compare two successful books, one old – say, The Bible and one new – like Fifty Shades of Grey. The Bible has been around for about two thousand years while Fifty Shades has only been around for a handful of years. Which book is more likely to still be around in a hundred or a thousand years? Obviously The Bible. This concept applies to more than just books though – it applies to anything. Technology, media, transportation – everything. Something which survives a long time has, by definition, gone through the crucible of time…and survived. That bodes very well for its future survivability.
While not true 100% of the time, the Lindy Effect can be a useful tool for predicting which new technologies or ideas will survive and which are just blips on the radar. A great example of this is the butter vs margarine debate. For literally thousands of years, humans have consumed butter. Then, for a brief stint during the twentieth century, humans were told butter was bad for them and many people switched to margarine. But as is becoming readily apparent, butter isn’t nearly as bad as once thought and margarine may literally kill you. And accordingly, butter has made a comeback. Which is more likely to be around in a hundred years?
Thanks to what I do for a living, I’ve been thinking about the current state of the beer industry and looking at it through the “Lindy Lens”. I’ve made a series of predictions with explanations below that arise from following the Lindy Effect to its logical conclusions in the beer realm:
I’ve been making a point to ask startup founders I hang out with for advice, particularly about management, priorities, and growth. I’m mainly trying to preemptively ensure we at Unlimited Brewing don’t fall into the same traps that others have already solved.
A few weeks ago, my friend (and East Village neighbor!) Sebastian Metti gave some advice which really stuck with me. I asked Sebastian how founders should spend their time. His response was super simple:
“You should spend your time planting seeds.”
This is brilliant advice. The idea of “planting seeds” loosely translates to building relationships, which applies to sales, business development, hiring, fundraising, press, and pretty much everything else. Some of these “seeds” will flourish and yield gigantic harvests. Most of them will go nowhere. And that’s totally fine.
When a business is just getting off the ground, the founder is the entire company. They need to build, sell, market, pick up the trash – everything. But as a company grows, there’s no way the founder will be the most skilled in every function. Nor should they want to be. That said, the founder will still be the only person with a high enough view of the company AND the ability to steer the company where it needs to go. And that’s where building the right strategic relationships becomes super important.
Back to planting seeds.
Subject: Communication Within Tesla
There are two schools of thought about how information should flow within companies. By far the most common way is chain of command, which means that you always flow communication through your manager. The problem with this approach is that, while it serves to enhance the power of the manager, it fails to serve the company.
Instead of a problem getting solved quickly, where a person in one dept talks to a person in another dept and makes the right thing happen, people are forced to talk to their manager who talks to their manager who talks to the manager in the other dept who talks to someone on his team. Then the info has to flow back the other way again. This is incredibly dumb. Any manager who allows this to happen, let alone encourages it, will soon find themselves working at another company. No kidding.
Anyone at Tesla can and should email/talk to anyone else according to what they think is the fastest way to solve a problem for the benefit of the whole company. You can talk to your manager’s manager without his permission, you can talk directly to a VP in another dept, you can talk to me, you can talk to anyone without anyone else’s permission. Moreover, you should consider yourself obligated to do so until the right thing happens. The point here is not random chitchat, but rather ensuring that we execute ultra-fast and well. We obviously cannot compete with the big car companies in size, so we must do so with intelligence and agility.
One final point is that managers should work hard to ensure that they are not creating silos within the company that create an us vs. them mentality or impede communication in any way. This is unfortunately a natural tendency and needs to be actively fought. How can it possibly help Tesla for depts to erect barriers between themselves or see their success as relative within the company instead of collective? We are all in the same boat. Always view yourself as working for the good of the company and never your dept.
There are sooo many great points in this email. Let’s break them down:
500 Startups, one of the world’s leading startup accelerators, recently released a report on how large companies can best work with startups. Given their unique position in the market, 500 Startups surveyed executives at companies like General Motors, Simon Ventures, Embraer, and more to learn what they’re doing to drive collaboration with startups.
The 500 Startups Corporate report has tons of useful takeaways for both startups and corporate innovation teams. Here are their best practices for corporate innovation teams and my take below:
The optionality trap starts when we’re young:
“Get good grades in school. You’ll have more options when choosing a college.” -Parents
“Pick a major that applies to many different industries. That way you’ll have more job options.” -College Counselor
“Consulting is a great field. From there, you can do whatever you want.” -Career Advisor
While this advice isn’t necessarily wrong, very rarely do we take a step back and examine what exactly we’re collecting all these options for. Perhaps at the beginning of our careers, we have some vague idea of a goal or accomplishment we want to reach but we’re not quite sure: a) how to reach the goal and b) if we even want to reach the goal in the first place. So naturally we choose the path that keeps the maximum number of future possibilities available to us. Unfortunately, this fuzzy goal mindset is often carried through to adulthood and leaves us grasping for optionality with all of our major life decisions. And over the course of a lifetime, this optionality maximization mentality turns us into habitual option collectors and prevents us from reaching our goals.
But I’m getting ahead of myself. Let’s start with the basics.
What is Optionality?
Optionality is a concept from the finance world. When someone holds an option, it means they have the right to do something but no obligation to do it. As Mihir A. Desai puts it in his Crimson article, “Optionality is the state of enjoying possibilities without being on the hook to do anything.”
When the universe conspires in your favor, you participate in the upside. And when it doesn’t, you aren’t on the hook for the negative consequences. It sounds pretty great, doesn’t it? In finance, this is referred to as a “non-linear payoff”, which literally means you stand more to gain than you do to lose.
Thanks to books like Antifragile, the idea of optionality has become popular in the mainstream. Predictably, people are very interested in the idea of having possibilities without any obligations. The optionality concept has been applied to things like careers (picking a job that opens up as many future opportunities as possible), relationships (dating around and not making commitments because you never know who else you’ll meet), and more.
Of course, in the financial world, every option has a cost associated with it. And so do real world options. But while financial options have an explicit price attached to them, real world options have more subtle costs.
What is The Optionality Trap?
When we first start making life decisions on the basis of the future options they create for us, we do so to reach some long-term goal. Perhaps we want to someday travel the world or start a company. Maybe we want to build enough skills and reputation so we can work on our own schedule. Or most common, we just don’t know what we want to do so picking an option that gives us more options seems to make the most sense.
However, when we do this for long enough, it becomes a habit and we start making all of our decisions through the lens of future optionality. After awhile, we aren’t even conscious of this rationale. We post-rationalize decisions and think we want to go to business school or consulting for their own sake but really, we’re optimizing for the opportunities we’ll have afterwards. Quoting Mihir Desai again:
The Yale undergraduate goes to work at McKinsey for two years, then comes to Harvard Business School, then graduates and goes to work Goldman Sachs and leaves after several years to work at Blackstone. Optionality abounds!
The optionality trap is something that ensnares us, not through outside forces, but through our own risk aversion and indecisiveness.
My opinion is that the optionality trap originates from an aversion to being hurt emotionally. A desire to avoid emotional pain is of course, completely natural. But in this avoidance lies an emotional stuntedness that prevents us from ever trying anything worthwhile and learning through the process.
Common Optionality Trap Examples
The optionality trap can affect more than just our career choices:
Let’s face it: coming up with startup ideas is not hard. The hard part is determining if your idea is viable and then of course, executing on it. And yet there are thousands and thousands of potential entrepreneurs sitting on the sidelines with a concept or an idea that “isn’t quite ready yet”.
Guess what? It’s never going to be ready. Instead of getting started with customer development to see if their idea has legs, these would-be entrepreneurs are keeping the option of being an entrepreneur alive, while not engaging in any of the emotional (ego) risk of being wrong.
If you have ideas, start testing them.
I also often see entrepreneurs who come up with tons of ideas but can’t pick one to go deep on. This is a close cousin of the “not ready yet” problem. These entrepreneurs are giving themselves optionality but never actually selecting one of their options.
By focusing on optionality of ideas over execution, would-be entrepreneurs will never succeed. But perhaps more importantly, they will never make mistakes and in the process, completely stunt their own learning curve.
Individuals aren’t the only ones guilty of optimizing for optionality. Companies frequently do it too.
In companies, the optionality trap is often seen in the insidious form of endless meetings, which leads to decision-making procrastination. Quite simply, companies that don’t make decisions can’t be wrong. Actually, that’s not true at all – by not making decisions, companies are defaulting to making the wrong decision. But the individuals at the company (a key distinction) get to avoid making a decision which could potentially be wrong, which means they avoid any potential blame.
This is once again the optionality trap at work. By not making decisions, individuals within a company keep all their options open. But by not making a decision, their company (which ultimately includes them) fails at solving whatever problem they were trying to solve.
The optionality trap in dating is the ultimate modern day problem. When you can login to a dating app and get access to a huge number of single people, it becomes tough to commit to anyone. What if there’s someone better just on the other side of that app?
Plus, as you get to know someone, their flaws start coming out while the ephemeral “people” on the dating apps are still perfect. At least in theory.
When you live with the belief that there are people better than your current fling just a tap away, it becomes impossible to emotionally commit to someone. And without emotional commitment, no relationship can flourish.
For those lucky few who have the option to live wherever they want, the easiest thing to do is to live nowhere. I’m referring, of course, to the currently en vogue nomad lifestyle. Don’t get me wrong: the ability to live and work anywhere is generally awesome. Lord knows I’ve taken full advantage of it. But there are downsides that very few people talk about. For example:
When a person spends all his time in foreign travel, he ends by having many acquaintances, but no friends.
This quote about the nomad lifestyle was made by Seneca in Letter II of Letters From A Stoic, which is about 2000 years old but still holds true today. By not living anywhere, you experience a wide variety of locations but never develop deep relationships with people and place that someone who lives in the same area for years would enjoy.
How To Get Out of The Optionality Trap
You’re probably sitting there thinking to yourself, all this talk about optionality traps is fine but HOW do you actually make a decision? If you’re looking at two options with different risk profiles and appeal, how in the world do you decide which one to go for? Andy Dunn from Bonobos says it better than I can:
The risk is not in doing something that feels risky. The risk is in not doing something that feels risky.
Very little is obvious in the research on human decision-making and happiness. Very few things are proven. One thing that is proven is this: the only regrets octogenarians have are for the risks not taken.
If the risk taken does pan out, it is good. But if it doesn’t — and here’s the key thing — we find a way to justify the risk taken as learning.
That’s the secret.
If our goal is to live a good life without regrets, it’s so important to internalize Dunn’s quote. If we choose the path that doesn’t speak to our souls but feels safer, there’s a very strong likelihood that we’ll ask that dreaded question years later: What if? What if we took the plunge?
But if we choose the risky path and it doesn’t work out, we can (usually) call it a learning experience and move on. There’s very little thinking about what would have happened if we had taken the safe path.
By knowing this and then projecting to how you’ll feel in 10, 20, or even 40 years out as a result of this decision, you can take on the fear that quite naturally arises at a decision point. And by taking fear out of the equation, you can make a decision that’s based on what you actually want, rather than basing it on what’s safe or comfortable.
Is There a Time and Place For Optionality?
Despite what you may think from my railing against the optionality mindset for the past ~1800 words, there are plenty of times in my life where I’ve chosen optionality over the more direct path. While I do regret some of those decisions, there are a couple times that I’ve chosen optionality and it worked out.
Like most complex matters, there’s no “one size fits all” solution to decision-making. Big life decisions are deeply personal. Even something like deciding to go into consulting, which on the surface seems like it’s driven by optionality, can be a courageous decision depending on what the motivation is.
Ultimately though, if you know you want something, the fastest way to get there is to chase it directly. Optionality is a backup tactic, not something to pursue first.
The siren call of optionality is admittedly an alluring one. But it’s also dangerous. Unfortunately, when we don’t know what to do or the path to our goals is unclear, the easy default choice is to defer and pick something that gives us the most future choices. But the universe is strange. When we choose a path, things start to happen. Things we can’t necessarily predict in advance. Andy Dunn says it nicely:
If you can’t decide what to do, get on the road. You won’t find the answer. It will find you.
In other words, go punch the optionality trap in the nose and get after it.