Creating Sustainable Internal Startups

According to the Wikipedia, sustainability is the capacity to endure.  In recent years, the term has been used almost exclusively in ecological sense, but I am going to stick with the simple definition: capacity to endure.

Within every large self-respectful company, there is an R&D organization that targets long-term aspirations, works on crazy projects that may or may not pan out, makes lots of mistakes and sucks up a lot of company money. Executives accept that fact because entrenched R&D organizations provide future foundation for the company by doing both fundamental and applied research that is relevant to the company’s aspirations, even if in the short-term they have nothing to do with the problems at hand and the only thing that a company gets from their R&D folks next quarter is most likely a huge bill. I am not going to argue with this status quo because I think that just like fundamental scientific research done at universities, corporate R&D is basically a good thing.

What I wanted to talk about is so-called “Labs” projects that spring up from time to time in addition to primary research organizations.  Those guys act like startups – they are typically small driven teams that have a brilliant idea (or so they think at least) and that are lucky enough to have at least one executive who is willing to support them initially and let them work on that idea while protected them and supporting them by the money from corporate coffins. Sooner or later, however, this good will always ends. Always. Why? Because the fundamental goal of every corporation is to make profit and as far as crazy research goes, they already have that going on in their R&D department.  I would estimate this grace period at maybe 2 or 3 years. After that, a Lab/Startup project has to show a real profit and have a significant impact on the business to make its executive sponsor look like a rock star.

If not, 9 times out of 10 it is going to be axed, reorganized or split, I guarantee you.  More often than not, Labs don’t work because they make one of the following mistakes:

  • They focus too much on internal needs first, provide “white glove treatment” to some of their internal customers and partners, neglecting other “less important” clients and choosing to not worry about basic viability and profitability of their product for the outside world.
  • Conversely, they focus too much on external customers, trying to generate industry buzz, giving out glorious interviews and writing superb articles in industry publications, but they never try to make their product accepted and used internally.
  • They neglect to formulate a long-term road map outfitted with both quality business model and clear technological improvements.
  • Their mission includes grandiose aspirations to change internal corporate culture and deliver the world peace and forgets primal need to make gazillion dollars within the first 5 years of existence.
  • Their internal structure resembles a garage project full of geeks having way too much fun for way too long, forgetting about releasing as often as they can and holding people accountable to the scope and schedule commitments they make.
  • They get comfortable being shielded by their executive sponsor and forget about the fact that this executive is the only protection they have from packs of hungry wolves that have to deal with today’s problems and who bring home profit every quarter doing things that may be not so cutting edge.

So how do we create a sustainable internal startup that survives beyond the 2-3 years? By not doing these things. By making sure our strategy focuses on inside and outside needs. By working on business aspects of our idea as much as we work on technology.  By making our technology scale to our (prospective or real) customer needs early and well. By partnering with external organizations with which our company already has good relationships and asking, begging them to use our product and see if they like it. By making our executive sponsor look good every quarter because we landed another customer, or drastically increased scalability and performance, or shaved a significant chunk off our internal support costs, or shipped something really useful to our partners that saved or earned them real money.  By holding our development team’s feet to the fire all the time. By making our architects code and by making them help our developers understand their vision instead of isolating themselves into “I had a brilliant idea. I am great. Now you do the work” tower.  By constantly checking and challenging every decision our management makes against our long-term survival and profitability goals and against main goal of publicly releasing our product. By servicing as many customers as we can, even when it seems difficult. By relentlessly and obsessively eliminating every inefficiency and manual work in the product and in the process. By not expanding the headcount unless we have shown enough profit to pay for additional employees. By assuming that this quarter might be our last.

In short – by being a bunch of hungry artists.


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