New to Big: How Companies Can Create Like Entrepreneurs, Invest Like VCs, and Install a Permanent Operating System for Growth

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NEW TO BIG

What are you going to do when this partnership fails? It was a simple question, but coming from two of the most respected and successful venture capital investors, Marc Andreessen and Ben Horowitz, it felt like a one-inch punch. They were doing due diligence before they invested in the Series C financing round of my four-year-old startup, Clickable, and I honestly did not have an answer. I had never considered that reality; I was going to will it to work. As if on cue, we all nervously laughed while I tried to keep my adrenaline under control.

As an entrepreneur, over the past twenty-odd years I have worked relentlessly and experienced modest success building several venture-backed startups. I have raised over $50 million in seed and growth capital and have exited twice. But a decade ago, at the moment Marc and Ben were doling out some radical candor, I was frozen with the realization that I had just made an irreversible, fatal decision in building my beloved startup.

Clickable was a pioneer in the search and social marketing space. We had discovered a real pain point: digital marketers had too many platforms to manage and too little understanding of which ones would actually move the needle. So we created and patented the Act Engine. It was a dashboard utilizing some of the earliest forms of machine learning to look across search and social campaigns and give marketers clarity on what to focus on each day.

We were in the right place at the right time and quickly raised over $22 million in our Series A and B financing rounds from some of the most respected venture capitalists in the world. But early on, we spotted a problem with our product-market fit. There were actually two groups of customers who needed us: large enterprises, who wielded the vast majority of online marketing spending, and smaller businesses, who felt the same pain but had much less money to spend on a solution.

The obvious fix would be to target the large enterprises; any entrepreneur will tell you their ideal customer is rich and in pain. But our earliest revenue came from the smaller companies, and we were reluctant to abandon them and shift upmarket. As a result of being stuck in the ugly teenage years, our growth rate had not yet met the exponential forecast required to raise another round of funding, and we were burning through capital quickly. It was a classic startup dilemma.

So when a Fortune 100 financial services company came knocking in 2009 with interest in pursuing a strategic partnership, we saw it as the silver bullet for our growth challenges. They were building a complete suite of digital marketing solutions for small- and medium-sized businesses, and our Act Engine fit perfectly into their strategy. They had paid a fortune to a prestigious consulting firm to analyze and recommend a leading technology partner, and the firm chose Clickable, resulting in a several-million-dollar partnership to launch a white-label version of our platform for their small-business customers. Unsurprisingly, their customers behaved exactly as our earliest customers did: they tried it, loved it, and then left it when the free trial was over because they couldn’t afford to invest in the paid version. The smartest plan you can buy was invalidated. The partnership couldn’t solve our problems; instead, it amplified them, which is exactly what Marc and Ben predicted. As serial founders and investors, they had hard-won experiences and critical answers that we severely required but did not yet possess.

Convinced we could still reboot Clickable’s growth, I embarked on a quest to learn from the world’s best (living) entrepreneurs. I wanted to understand how the most successful founders decided to bet their lives on a business, and then what they did in the first five years to keep those companies alive and thriving. What began as a series of conversations with entrepreneurs like Elon Musk, Reid Hoffman, Sara Blakely, Robin Chase, Steve Case, and more than forty other incredible founders, turned into my last book, The Startup Playbook.

What I learned was that while each founder’s startup journey was unique, they all had a nearly identical collection of mind-sets and lenses they used to discover the root of a customer problem and to scale a solution into a business. These growth mind-sets were distilled into a framework I called the Five Lenses. (We’ll dig into three of these lenses in chapter 7.)

Most entrepreneurs will tell you that the best ideas and the biggest opportunities are often discovered by someone in the right place at the right time, and in this particular story, that place and time was at the TED Conference in 2010, eating breakfast with Beth Comstock, then SVP and chief marketing and commercial officer of General Electric (GE). It was two years before I’d ultimately sell Clickable.

Beth and I had been friends for a decade, and our breakfast at TED was an annual affair, where we caught up on our various professional and family adventures in between presentations from some of the most creative and brilliant minds in art, technology, policy, and more. I was describing the Five Lenses from The Startup Playbook when Beth stopped me midsentence and insisted, We need this learning at GE.

She had long owned the disrupter role at the conglomerate, leading their digital transformation efforts (including overseeing the founding of Hulu) and environmental impact work (including creating the Ecomagination initiative), and had recently stepped into the chief commercial officer role. She knew better than anyone that the core of the conglomerate struggled to be entrepreneurial, to operationalize the mind-sets and systems of growth. Come work with me to install this at GE, she insisted.

I hesitated. I’m an entrepreneur, not a consultant, and at that point I had a deeply personal and moral commitment to my Clickable team and investors to cross the finish line, no matter the personal cost or the timeline ahead. So we put the idea on the shelf. But two years later, after we sold Clickable and just months before I published The Startup Playbook, Beth asked me to join her keynote panel at GE’s Global Leadership Meeting in Boca Raton, Florida.

What I’ve learned from my experiences as a four-time entrepreneur and an angel investor in more than thirty startups is that while it often looks as if world-altering business opportunities emerge by accident, they can, in fact, be discovered and scaled in a methodical way. In the same way an MBA program teaches a form of management for administering and growing existing businesses, entrepreneurship and venture capital are, together, a form of management for discovering and building new businesses. And this is crucial: enterprises need both. It is the ecosystem created by the two that fuels world-changing innovation. This was the hard-earned, invaluable insight I gained from Clickable and our fatal Fortune 100 partnership. And what a gift it was. I needed to share this insight at the GE Global Leadership meeting.

The challenge would be how to introduce this new ethos and system into a traditional corporate environment. Existing corporations are focused on operational excellence and incremental improvements through process and efficiency. The MBA-driven methodology they use is about taking something big and making it bigger. It is, literally, the toolkit for operating what we call the Big to Bigger machine. Conversely, the integrated mind-set, mechanics, and methodologies of entrepreneurship and venture capital are designed and calibrated to discover new customer needs and devise innovative and new-to-the-world solutions. It is the toolkit of the New to Big machine.

What Beth had been articulating about GE—their struggle to innovate inside their Big to Bigger machine—was an issue plaguing virtually every large organization and enterprise. GE didn’t have a monopoly on this problem; it was everywhere. Corporate innovation is failing at a DNA level because the Big to Bigger machine has been engineered to be incompatible with New to Big. It is literally at war with growth. Truly new, cutting-edge ideas are too risky, too amorphous, too non-consensus to survive the metrics and evaluation process that well-run companies apply to capital investments.

Bionic was born at GE’s conference in Boca. It was not intended, but it happened with a single provocative question. Near the end of the session, Beth surprised the three panelists by asking us onstage if we had any questions as outsiders to the company. Off the cuff, I aimed a question from the stage down to then CEO Jeffrey Immelt, who was seated front row center in an audience of seven hundred executives: Jeff, how many fifty-million-dollar startups did GE launch last year? The room shifted uncomfortably. I bet the answer is zero, I continued. And if that’s true, I would be terrified if I were you. With ninety billion dollars in the bank and three hundred thousand employees, how does this not happen all the time?

The silence was deafening.

Finally, Beth, stunned, broke the chill in the room with humor: Tell us how you really feel! The audience golf-clapped as I walked offstage, and I was certain my unintended, three-hour career as a thought leader had just been nuked. Instead Jeff closed the annual conference with a bold statement: That was the most important question in the history of this leadership conference.

By the time I left Boca, I had agreed to partner with Beth. Over the next year, my initial work with GE was a series of keynotes on growth and startup mind-sets, alongside the brilliant thought leader Eric Ries, who was scaling his Lean Startup framework for enterprises. This work quickly expanded to Boeing and Tyco with an early version of Bionic’s Validation methodology (something akin to a startup accelerator with lean experimentation mechanics).

As the demand grew, I saw a need for a more robust New to Big operating system, so to speak. So, with entrepreneurs Anne Berkowitch and Rick Smith and a handful of my core Clickable team, I cofounded a new company, Bionic, to create just that. Over the past six years, we have worked with over a dozen partners, including Citigroup, Procter & Gamble, Nike, Exelon, Microsoft, and others. We’ve bootstrapped to over seventy-five fellow entrepreneurs, early-stage investors, and gifted product creators to help Bionic advance and refine this growth operating system (or Growth OS, as we call it). The Growth OS pairs the mind-sets, tools, and platforms of entrepreneurship with those of venture capital, and supports this ecosystem with the organizational systems enterprises need in order to work at the speed, cost, and competitiveness of startups. It has become a powerful, integrated way to unlock growth.

After six years of successfully installing the Growth OS into more than a dozen Fortune 500 partners, we wanted to share some key learnings. These are insights that I believe are relevant to anyone searching for growth, whether you work in a large enterprise or a regional nonprofit, whether you are the CEO of a mature SMB or a middle manager who wants to understand what keeps your senior leadership up at night.

Here are some of the headlines:

Are big organizations screwed when it comes to innovation?

In a word: no.

They just have to recognize the need to build a separate New to Big machine to run in tandem with their established Big to Bigger way of working. New to Big discovers, validates, and grows new ideas into big businesses, say $50 million or so. Big to Bigger takes those $50 million businesses and scales them to $500 million or more, leveraging the customers, manufacturing, distribution, and brand of the enterprise—the core strength of Big to Bigger. Ultimately, the success of New to Big sits squarely with the CEO. It’s not a money, ideas, or talent problem; it’s a permission and ownership problem, and it starts at the top.

How do you plan for growth in this New to Big machine?

The surprising answer: You don’t. At least, not in the linear, blueprint planning model most of you are probably thinking about. Growth must be discovered; then you can steer toward it using what we call a portfolio approach.

The future technologies, trends, and markets are not yet known, and they are changing far too fast for a traditional business-planning approach. The future looks nothing like the past, and relying on old expertise, old data, and old insights will only ensure expensive failure. So instead of sinking large amounts of capital into a select few new ventures, often called rack-and-stack planning, companies need to embrace the power of portfolios—placing dozens of small bets, using the tools of discovery and validation to reveal which ones will be successful. Angel and venture capitalists do this innately, and large enterprises can adopt their playbook. This is fundamentally about learning velocity, and whoever learns the fastest wins.

Can you apply New to Big methodology to a product or service that’s already in development in a company?

Yes. But you have to be prepared to learn that you may need to kill it instead (even if it’s already in market).

First you need to make sure that the product or service in development is addressing your customer’s problem, rather than solving your own problem. Market-making innovation isn’t about you. It’s about the problems or needs in the world that you are strategically positioned to address. Look outside your own walls and pay attention to the new behaviors, shifting market forces, and emerging technologies that will define both what you build and how you build it. You must reorient from inside out to outside in to discover growth. You’ll never find disruptive growth in internal, consensus-driven beliefs.

Everything you’ll read about here is based on a combination of research, decision science, the expertise of our advisors and partners, and our own firsthand experiences working with Fortune 500 companies. My team and I sought to create a resource that captures our methods, explains them in plain language, and empowers all readers to ponder, experiment with, and apply them in ways that truly suit their organizations. This book was written by Bionic as a team, and brilliantly orchestrated and captured by my partner, Christina Wallace.

In general, we tried to keep things fairly high-level. We dig into a few tactics, but don’t want to bog you down with too many details. We give you the scaffolding and let you decide how to erect the needed structure in your organization. We are convinced that the refounding of iconic companies—including the development of the next generation of growth leaders within those companies—is the most significant opportunity and the greatest leadership challenge of our era. This is why we built Bionic. In this book, Christina and I are giving you the tools and encourage you to use them in ways that will complement your specific business model and growth goals.

Now, if you’d like a bit of historical context on why real, market-making innovation is so difficult for companies across all industries, dig into chapter 2. But if you want to get started fast, skip to chapter 3, where we’ll outline the first set of crucial mind-set shifts you’ll need to tackle at your own organization.

Either way, welcome. Welcome to what I hope will be a powerful, accessible, and inspiring tool to install an always-on, permanent capability for growth. Welcome to the power of New to Big.

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HOW WE GOT HERE

In 2001 the list of companies with the highest market caps was dominated by blue chips. GE, Microsoft, ExxonMobil, Walmart, and Citigroup—all were businesses led by managers who had mastered efficiency and optimization and who grew their businesses by making them work better than they had previously. Fast-forward to the present, and the list looks strikingly different. As of this writing, Apple, Amazon, Alphabet, Microsoft, and Facebook now top the list, with Tencent and Alibaba close behind. They are, for the most part, young firms led by founders and their teams, driven by bold, first-generation leaders who continually prioritize new growth over efficiencies in their core businesses.

Many things have happened in the intervening years to contribute to this shift, but the signal is undeniable. The market now rewards these pioneering enterprises and supports their vision and continual investment in new growth. Large enterprises have been attempting to respond to these developments for some time, mainly by applying the methods of startups, such as lean experimentation, design thinking, and agile development. But the focus on entrepreneurial tactics without a shift in our leadership mind-set is merely a Band-Aid on the problem.

Before we can dive into better ways to address new growth, we have to understand how the efficiency mind-set came to rule the business world—and how it was neither inevitable nor all that effective.

CAPITALISM AS PATRIOTISM

Privately held corporations of the late 1800s were run by the families that founded them. Back when Carnegies and Rockefellers dominated the earth, legacy sons, regardless of their interest levels or skill sets, nearly always inherited moneymaking empires from their fathers. Lower-ranking