10 innovation tips for enterprise IT from the land of startups

SXSW tries to teach big companies the special sauce behind startup innovation.

"Whether you’re a big brand or a startup that has momentum but is not yet mainstream, how do you keep the wheels of innovation turning without cannibalizing your money-making product?"

That was the key question behind the Always Be Innovating: Thinking Like a Startup panel at SXSW earlier this month. Listening to Greg Tseng, co-founder and CEO of Tagged; Hetal Pandya, co-founder of EasilyDo; Ryan Magnussen, founder and CEO of the Grail Project, and moderator Mike Isaac from Re/Code, I distilled the discussion to 10 essential points for big companies who want to capture that startup innovation magic:

1. Vision vs. Metrics: Metrics are essential to figuring out how well you're climbing the mountain. But you need vision to figure out which mountain to climb.

2. Timing is everything: According to the panel, successful innovation is often more about timing than anything else. It's hard to believe, but in some instances being profitable too soon can actually be a problem. That's because if you have real profits, you'll be valued on some multiple of those profits. But if you haven't made any money yet, then the future is wide open and there's no ceiling on your potential.

3. Product/market fit is critical, but not sufficient: Product/marketing fit is the first and hardest step in any innovative endeavor. If you don't achieve that land grab for user attention, if you haven't created something people will actually use, nothing else matters. Whether it's a consumer startup or an IT project, if no one uses it, it doesn't matter how good it is.

4. A culture of innovation starts at the top: Many highly innovative organizations - from Apple under Steve Jobs to Richard Branson's Virgin Group - are built around a single person's vision. You can't outsource innovation to HR or consultants. If you want to be that kind of a leader, your commitment has to go beyond lip service: If you say you care about metrics but never show up to the metric meetings, no one will take you seriously.

5. The second product is always the hardest: Building multiple successful products from a single organization - whether it's a startup or an enterprise IT department - is the true measure of effectiveness. Getting one innovation right could be a matter of luck or timing. Doing it over and over again means you're actually on to something - and it's critical because the half-life of any one product in technology just isn't that long - and it's getting shorter all the time.

6. It's important to reward failure: If you want your team to risk innovating, they have to believe that they'll be judged fairly and not punished for trying. Instead of punishing people for failures, you need to encourage the effort. If it takes multiple failures to incubate a single success, no sane person will try if they believe they'll be slapped down if their first project doesn't make it.

7. Innovate on the cheap: Failure is fine, but you want to minimize the costs as much as you can. Fortunately, the rise of cloud technology has dramatically cut the cost of innovation. Rather than put all your expensive eggs in one basket, it's far better to use lean startup techniques to invest in multiple ideas.

8. Testing is critical - but only if you pay attention to the results: The best way to cut the costs of failure is to do it early - to figure out whether a particular innovation is going to work or not as soon as possible. That means meticulous and relentless testing and evaluation - and a willingness to abandon ship or change focus quickly when the data make it clear that things are not working.

9. Innovation at big companies is different: At a startup, everyone lives or dies with success of the company - that kind of connection is hard to recreate at a bigger company that's already beaten the odds. While it's much easier to change direction when you have nothing to lose, big companies need to understand that there's also a risk in rejecting innovation in favor of the status quo.

10. Acquiring innovation can build a "Frankenstein" business culture: Many companies have tried to buy their way into innovation, acquiring startups or startup workers, often at premium prices. But what typically happens, the panel said, is that rather than the innovators changing the acquirer's culture, the big company snuffs out the very innovation it thought it was buying, or you get a business culture where employees self-identify with the company they came from, not the one they all now work for. As Tseng put it, "if you feel like you need to acquire a company to get [innovation], you probably already have bigger problems."

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