The One in Thirty Rule: Why Most Corporate Startups Fail

We need to bake culture into every single step of the employee life cycle. If you leave it open for the people to figure out what the company stands for, what is acceptable behavior, what is not acceptable, you will not be able to sustain such a growth. It's not possible.

Hello and welcome to the very first first episode of Leading the Scaler, the podcast where we explore the leadership required to grow and evolve organizations during their most pivotal phase. Whether you're scaling a business unit, a new product, or the entire organization, this is the show that cuts through the noise and gives you the tools to lead with confidence and clarity. I'm Ben Morton, a leadership trainer, executive coach and keynote speaker, and someone who spent the last 20 years helping businesses grow by growing their leaders. For this opening episode, I'm joined by someone who's genuinely reshaped how large organizations approach innovation and new business creation. Frank Matthes is an award winning thought leader and the creator of the Lean Scale Up Framework. It's a practical playbook used by Fortune 10 companies and taught in top business schools. Frank has worked with hundreds of other experts across more than 20 industries to crack one of the biggest problems in corporate innovation. How to take great ideas and turn them into scalable, profitable businesses without derailing the core. If you're serious about scaling without chaos, or if you've ever launched a new venture inside a large organization, then this conversation is a must.

Listen, Frank, can I start off, please, asking you about the scaling up maturity model that you've got and how you've identified sort of four stages in the end to end journey of creating a new business. Can you walk us through these levels and how maybe company executives, heads of innovation, can assess whether their organization really is sort of ready for that next phase of growth and scaling?

Certainly I can, Ben, for this question and for our conversation that follows, I'm talking about corporate startups, corporate scale ups, not the greenfield. So please, let's use this as a kind of reference, if you will. Before I start, Ben, it's not only about Frank. So Frank worked together with more than 100 experts, actually coming from the corporate side as well as from the academic side and trying to solve one of the biggest problems in corporate innovation. How can you make those great ideas scale? Right? Because if they do not scale, everything that comes before is just a costly hobby, as I say. But coming back to your question, these smart folks and myself, we discovered that success in making those innovation scale also depends on the language. The typical innovator uses a lot of jargon. They talk about problem Solution fit and product market fit and traction and pirate metrics. That's a whole language system they build. Unfortunately that does not resonate with the folks from the core business. So what we did in those stages, we used business language. I think a lot of corporate stakeholders understand a logic that builds on four steps. Step one, discovery. The world is moving. They call it the Vuca world, right? So there might be opportunities out there, there might be threats out there. So there's something to being aware of megatrends playing out. So where are great ideas out there? Right? And actually in the discovery phase, one check mark for the CEOs and the heads of innovation is do we have a quote unquote meaningful idea that relates to the company, relates to the changes in the external environments, et cetera? Then you go into the reality check or the validation as the innovators call it, right? You start off, since you are well advised to have many ideas, with a rather rapid and time boxed initial validation. I like to think about it. Every skyscraper needs to have a solid foundation. And so it is also for a new business as emerging. For instance, one of these initial validations that typically are done in one to two months, is there a burning hair problem that the customers see? Right? Because if you're innovating on priority number 17 for your customers, chances are that this will not work out. Next comes business strategy. So you need to plan in advance. One, two, maybe even three years, right? So who will be your competitors then? Will you still have a superior value proposition? And in that stage you also try to understand what product or service to build so that you can actually create and capture that value, the MVP minimum viable product, as the innovators say, at this stage you have basically demonstrated that your idea is scale worthy. Then comes the next stage that we chose to call the business design, right? So you have an idea that stood the validation and there's reason to believe that this could be come a business. But the business also, if you want to innovate for growth, needs to be scalable. So how could a business look like that is actually scalable? And in that phase you also not only design the business, but you create that product, the initial product that will hit the market, right? And if we think about B2B environments, product means a lot of things, right? It needs to be regulated, compliant, it needs to fit the corporate design and the corporate brand and the quality management that you need to build up for the operation. So that means quite a lot of things. Once you've proven that this is not only scale Worthy, but scale ready. Then you transition to scaling up and ultimately followed by the scaling up that takes say an initial one to three customers to initially a 10 or 20 million business and then you take it from there.

So this is really fascinating, Frank, and my mind is already going into overdrive. I've got a question here that I think pulls together lots of the strands that I've picked in several of your books actually. And I very much like sort of structures and thinking structures and things like that. So the first question I think will really resonate with executives in corporates who are thinking about kind of innovation or scaling up and it links to the business design part. Have you found a best sort of structure for organizations to think about innovation? What I mean by that is do you have a separate part of the business that is working on innovation or is it from the very beginning, is it spread across all of the organization? Or if it's a separate function doing it, at what point does it then integrate back into the main business? It's quite a broad question, but what's your experience, thoughts and expertise on that one, Frank?

So maybe we start off looking at the question with a stat. The stat tells you, and I will explain in a second where this comes from, that only 1 out of 33.0 attempts to create a new $50 million business succeed, right? So 29 out of 30 attempts fail. When we co created that framework and all the pieces of insights, the best practices that went in there, we really tried to n down the problem. And that leads us to the answer to that question. The problem why the success rate is so low is actually two value creation systems need to work together, right? So on the one side you have what I call now the day to day business. 99% of people work there, right? They do the selling, the marketing, the procurement, the recruitment, the financial controlling, etc. You name it, right? And the second is the new, right. So breaking out of the box being the existing business model, the associated operating model, but also then the mental model, how you look at the world, at customers, what is of value to them, right? And that now system is designed for purpose, right? It's process driven, right? Because you want to repeat a past success formula, it's risk averse, right?

Risk is not good for the opposite of innovation, right?

Exactly. It's short, short term driven, right? Because if the processes do not work, you want to recognize it early on. So these people think in months and quarters and maybe years, occasionally three year perspective in the strategy offside. So that means if the People that are working in the system have that kind of mindset that you need to perform there to advance your career there. There's only a very limited bandwidth, mental bandwidth. But also if you think about budgets and funding and these kind of things, to step outside of the box. So the answer to that question in my view traces back to the question how far would you like to jump outside of the box? So if it's inside the box, they call it the incremental innovation. Typically that's 77,0% of the innovation budget. This can be done inside the organization, inside the structures. But if you want to step out creating adjacencies that either relate to new customer groups and or new technologies, or even have a brilliant idea that might change the world, this will not work.

So there's a section of. I can't remember if it was the lean scale up or now or new. I'm sure you'll tell me here. It's in now and new. Actually one of the bits you spoke about was misaligned leadership incentives, right? Which is. I think it's linked to what we're talking about here and how senior execs are often focused on that short term performance. Which makes sense, right? Because few executives are going to want to come in and be the one who tries something radical and fails, right? The maintaining the status quo or incremental kind of improvements is quite safe when I read that and I guess it taps into your 1 in 30 statistic there. Like is it really possible, do you think for like senior executives to break out of that anywhere except a founder owned or still a founder led business? Because generating shareholder value and managing risk is hard, right? If you don't own the business yourself, does that play into the statistic, do you think the 1 in 30 that succeed, do they, do you know if they tend to be where the founder is still heavily involved or even has full ownership of the business?

Again, I'm looking at the corporate right now. The greenfield startup that becomes a 50, 100, $500 billion business, right? That's not so much the focus of my work, but if we go for that corporate setting, two things I guess I would like to make. Number one is these people that are at the helm now, they made the career in that now system. I also call it the red shirts, right? Because these are the people working in the red oceans, innovators. The new is are the blue shirts then. So the red shirts, they know their stuff when they made the career there or they're joining the company from another company. In the same industry. So they know their stuff, right? They know how the machine ticks, what is going on in the engine room. They are able to discern fluffy proposals, right, because they know the background. So they're standing on safe ground in here. And when we look at the new, well then at the end of the day, new is new. So there is no coded processes and a lot of question marks in here. So from a psychological point, they might shy away from that. You succeed in that redshirt system in the now, if you stick to the rules, you do not take a personal risk to advance in here. So when we have a situation where we have goals and incentives tied to only short term success, plus the two factors that I mentioned, it's easy to understand that there is a certain, let's call it inertia. Right? Just keep on repeating what you did. 1% more productivity there, 2% sales growth inside the box over there makes a lot of sense. Right? But then again, I mean what you find is some C levels do have a larger ambition. They want to make, as Steve Jobs said, a dent in the universe or they are operating in industries that are heavily reshaped by external forces. So there's a need to act that might be an incentive to say, well, just repeating what has proven successful for the last decades is not good enough. If you're the leading manufacturer of horse carriage. That was a business model in the 19th century, but probably not today anymore.

Talking of that, Frank, when we spoke preparing for this, you mentioned the story that is told ad infinitum in sort of business circles around Kodak. But when you spoke about it, you sort of shared that there's more to the story than often gets told. Do you mind sharing a little bit about that? Because I'm always fascinated in busting some of the business myths that exist out there. So it's quite interesting what you shared with me.

Super. So the book also contains a couple of case studies and the story that I'm about to tell, obviously the book stretches out more than just the one or two minutes. Is the story about Kodak. You try to use that opener because as you said, there's more to that. Kodak was once a leading figure in the photography, silver based film photography. And they didn't get that the world is changing, technology disruption, photography became digital and hence they lost, they went bankrupt. So that's the common narrative. Right. But as you said, there's more to the story. Number one is as I worked out in the case studies, actually Kodak was faced with Three disruptions. And they managed to get half a disruption. Right. As you may know, Kodak invented a digital camera. And so from a technological point, they were prepared. They had thousands of patents in that space. They still generate license revenues from those patents. But they were not able to understand that the digital cameras from an industrial point have a different logic than silver based film. Right. So it's about consumer electronics, let's put it that way. Actually, they've been monitoring the rise of digital photography long before the peak when they started to decline. So that was what they got, half of it. Right. What they didn't recognize is that consumer behavior was massively changing. Right. You and I and other folks, we are looking at images not on silver film anymore, right. We're looking on computer screens. And the third disruption that they did not, were not able to manage is to align the troops for a new future. And here comes the second part of the story. Thanks for building the bridging here. What few people are aware of is that when Kodak started to decline, there was another company, same industry, same size, faced with the same challenge. Name of the company is Fujifilm. So they had the same global market share and obviously both of them were making silver film and both saw digital was coming. Now Kodak looked at the world saying, we are a manufacturer of silver film. Right. So the corporate identity was the product, if you will. Fujifilm said, we have an expertise in surface chemistry that in the first part of our corporate history was about silver film. The next part of our corporate journey will be different. So we're looking for applications and new businesses that build on our capabilities, our special expertise. And so they build business after business, from pharmaceuticals to coatings for nutritionals, et cetera, et cetera. And Fujifilm, that was once at the same size as Kodak is today worth 20 times more than what is left of Kodak. One important part of the story, happily to dive deeper in that is what I call the one company mindset. Fujifilm, as compared to Kodak, was able to get the troops behind the new corporate identity and the new corporate vision.

It reminds me also of Kimberly Clark.

That's one of the first stories in Jim Collins's book Good to Great where makes the bold move, I guess, the innovative move to sell off the paper mills. And actually they completely pivot. It's very similar, right, to what you shared with Fuji. They had an expertise, but where else can they apply it?

Yes, that's the subtitle of the book, right. And how companies can use their capabilities for scaling innovation as I said, if you do not scale, it's just a costly hobby and new growth. So that's the angle. But here's another point to that story that you just mentioned. Another case study that is in there is Amazon. And it's not just the typical Amazon, right? Jeff Bezos was driving across the country, got the idea for an online bookstore and the rest is history, right? I looked at Amazon at one particular point of its corporate history. The year is 2007. That's the year when the iPhone came out. And Jeff Bezos and the leadership team decided to disrupt themselves, right? They had been a retailer of media, books, DVDs, etc, you name it. And they said, we take the decision to go into digital media, right? Disrupting ourselves, right? The whole journey, which today is probably a $70 billion business for Amazon. The whole story started with the first Kindle, right? And obviously there was also the debate, should we just stick to our existing capabilities, risking to be disrupted or. And that was the position that Jeff Bezos took. We decide what we need to win in this new world and we acquire those capabilities, build it internally or buy some smaller companies, hire the right people, et cetera. It's not a one size fits it all kind of decision, but the basis. And in that case it was basically the customer centricity and the deep understanding how to build the businesses that has the customer in the focus. This capability was leveraged for the digital business, right? So it must be a super easy to use product, highly integrated, that allows Amazon to get even more insights from customers. And by the way, leveraging the infrastructure Amazon Web Services that they were building at that time and as we all know, that was a kind of flywheel and Amazon Web Services is one of the dominant IT players today.

That's a nice link, Frank. Actually back to another thread I was trying to hang on to from a few minutes back in our conversation when sort of you mentioned the almost the inertia that can come from hanging on to the existing. And again, that reminded me of books. I've really got a lot of value from in the past few years, certainly just in running my business. But talking to clients as well is the four disciplines of execution. One of the things that really stuck out from that book for me was some research. I think it was done by Gallup. And to sort of set this up in the book, they talk about the day to day activity of running a business. The now, to use your term, being like a whirlwind. That's everything, just to maintain the status quo. And the sort of organic growth in the core business. And then they look at how many projects or sort of big initiatives or new launches a business tries to take on in addition to the whirlwind. And they found that if you try and take on 2 to 3, you can deliver 2, 2 to 3 with excellence. As soon as you go beyond that, it's massively diminishing returns. But I guess my question was like, what about the opposite? How often is it the case and there are any things that leaders can do when they're trying to scale up within a corporate setting to prevent the core from being damaged as you try and innovate? Because I saw that firsthand in an organization I worked for a much smaller scale. It was scaled up and sold for about 25 million kind of sterling Toui travel. But in the period I was there, which was three years pre sale, two and a half years post sale, as we was trying to grow the business so it looked bigger and profitable on paper, like we were absolutely damaging the core product. And then post acquisition we got rid of some of the extra bolt on elements to the business and fully went back to the core. Like what's your experience there? And is there anything leaders can do to protect the core in that situation?

I mean, you're touching on the most sensitive part of it. Many senior managers like the idea of innovation, right? I guess you have to be innovative these days, right? You also need to fill two pages on the annual corporate report, right? And you need to put innovation on your website so that potentially attract top talent. These kind of things I'm interested more in say let's call it serious innovation, not innovation theater. And the point that you mentioned leads us to a very fundamental concept in what the book and the whole framework builds upon. Every innovator knows that a innovation in order to be successful has to fulfill three criteria, right? It's about desirability should be customers that care for the product, even buy it for the innovation. It should be commercially viable, right? So you can create a new profitable business from it and it should be feasible, right? So it should be able to solve the technical challenges and take it to scale in here. The interesting point is, and this is, if a company defines corporate innovation and the framework that should ensure that you find these three dimensions. But here's the funny thing, Ben. We talk about corporate innovation and corporate startups and corporate here and corporate there, but the corporate context is completely missing in these kind of thinking frameworks. That's one of the reasons why these smart people and Myself said we need to have a fourth dimension. We called it contextuality. The point is this is permanent in the end to end process. From the way you search the types of innovations that you target until the scaled up business. Let me give you a practical example. I was working with one of the leading truck manufacturers of this world, right? And they said, well, one of our search fields are autonomous trucks, cars that do not need drivers anymore. And they did the validation by the book, right? A lot of excellence in here. What they found is that the customers of these autonomous trucks would be the customers of today's customers. In other words, if they scale this innovation, they would induce a huge sales channel conflict and hence actually, as you said, damage the core business. So you need to weave this in right from the start, that corporate context and that limits you on the one side, but also provides the opportunities to succeed in that scaling up. Let me also share one thing that I learned along my way. In many companies you hear the battle cry, the company must become more innovative. I don't buy that thesis because what I learned is you only need 4, 6 12%. I'll come back to that in a second of staff. That is what you call ambidextrous. That means they understand the industrial logic, they understand the processes and are able to take the new stuff into those processes and the industrial logic of now. Because at the end of the day, for your innovation to succeed, it will have an industrial logic as well, right? The 4% that was a car manufacturer, 6% that was a bank and 12% that was a telco company. So only roughly say 10%. And thinking about these data points, you might also conclude the more digital a business is, the higher the percentage is, right? Cars versus telcos or banks, right? You only need to have get this interface, right, if you will, right? And 10%. The crux is that these experts that you need in here, the ambidextrous experts, they are triple or quadruple booked, right? They are needed for running the day to day business. They're experts in here. Then the company is undergoing digital transformation. And then you come with the new with the innovation, right? So speaking about the car manufacturer, you have the brilliant idea about a new mobility service, right? But at the end of the day it needs to go in the box and this box needs to be available on the way where the cars are manufactured, right? And these four, six 12%, this is the key stuff, plus the contextuality, I guess to address the issue that you raised.

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The link's in the show notes. Back to the episode. So I guess here's the million dollar question that every CEO is like desperate for me to answer. They're listening, right? And saying, Ben, ask this question like, where do they find these people? Like if you're that MD or CEO that's looking to seriously scale within the corporate context, where do you go looking for those people? And are there particular traits or previous experiences that you should be looking for in their cv?

Sure. I mean many companies as I see, are really running very lean these days, right? So they have a narrow focus, efficiency, productivity. So there's not much bandwidth to do innovation here. Let's be right. So if the ambition is or the need is to create new growth outside of the box, it might be really a point to ponder, to think about where in these critical interfaces additional resources should be built up in here. But one option that is often overlooked in here is in my few interim resources. Okay, yeah, we have large pools of experts or managerial types of people that you can build in on a time based basis, right. Someone that ran the manufacturing operations at a different company and is now working as a freelancer. Why don't you hire him or her for 3, 612 months, right. To make that bridge into the industrial logic. One of the key things that you also need to solve is how to create a kind of startup like entrepreneurial space for these people who want to scale up the new inside the corporate context. And it turns out that this only works if you have the right people in the relevant functions. Right? Those 4, 6 12% that I was speaking about, the interesting point that I observe is when the call goes out, we need people like that who are interested in that these people show up. And if we look at these people, well, they have a growth mindset, right? They see the opportunity, they have a certain entrepreneurial drive, right? So they want to go the extra mile, burn the midnight oil because they believe it's the future. At the same time, do have a strong eye in the eye shaped personal model, if you will, personality model, right. They do know their stuff and they Also have a big horizontal bar which makes them T shaped or what I just learned the other day. There's also V shaped people, right? So they're deeply rooted in the functions. But look beyond the limitations, the deliberate limitations of the business and operating model.

I've got to ask, soon as you mentioned it, what is a D shaped.

Person V like in victory? Okay, so you have some roots in here, but you're able to communicate on two domain areas, if you will. I just heard this. I still have to meet a V shaped person.

And whilst we're talking about sort of definitions and such like, go back to something you said right at the start, which I'd not heard before, which was pirate metrics. What are pirate metrics? Never heard that one.

Okay. Pirate metrics is when you think you have achieved product market fit. Tongue in cheek, maybe that's also a point for discussion then. It's about customer acquisition, it's about retaining customers, it's about growing the share of a wallet with your customers. So there are a set of five matrix that go by the acronym EAR that are called the pirate metrics. As you rightly pointed out, this is some sort of jargon. Think about the head of the manufacturing of an industrial company, right? And now come the innovators and say, well, look at our pirate metrics.

Yeah, you can see the eyes rolling, can't you?

Yeah, here's a story. I mean, I had once a project in the chemical industry and we were talking about innovation. And innovation requires experiments to validate the assumptions. He took off his glasses and he said, Dear Mr. Matthes, we're running processes here, we are not conducting experiments. So it's the mindset, right, but also the language. And since 99% of the people working now, I think the innovators are well advised to take on business language and to eat their own dog food. So to say, adapt to the customers, if you will, the internal customers.

In this case, completely by chance. That quite nicely brings us back to another question I had on my list here to ask you, which I picked up from the book you spoke about overcoming internal resistance to scaling. Like, what are some of the key ways that leaders can do that?

They usually get a good feedback on saying, let's take on the right perspective. I mean, you hear a lot of, say, unfavorable, disrespectful conversations because between the folks on the red side and the folks on the blue side, right? The red shirts say, well, the blue shirts, they're spending all our hard earned money just putting out post Its on the wall, right? This is not serious stuff, right? And the blue shirts say, the red shirts, they do not get it. I think it eases the communication and allows for more productive conversations. If we take on the perspective that we need to solve a system problem, right? Two value creation systems, both of them add value, right? The one more on the short term, the other one, if everything goes well, more on the long term, right? So if we look at the now system to cut through the resistance, if you say, and we take a more humble approach, a more appreciative approach, saying these guys, these ladies are working in systems that are fit for purpose, right? So it's the optimization for productivity and repeatability, if you will, then obviously their capacities and their mindsets are shaped to deliver on their mission. So start with that mindset. What I found very helpful and also missing in most companies is a clear innovation mandate, as I call it. So what is the mission of innovation? Right. Coming back to destroying the core business, the point that you mentioned some minutes earlier, what are their limitations and what does the companies give to those innovators so that they can fulfill their mission? I think good thinking model is if for the moment we assume you're MD of the bank that's also engaged in trading. So what you want to do to those professional traders is give them a clear guidance and clear limitations. Ben, you should be dealing in these kind of assets, you should not be dealing in those assets, right? You're allowed to take a risk position up so far, but not farther than that, right? And to make it work for you, here are the resources that you can build upon. So it's a kind of a contract, if you will, between those professionals. In the example, it was financial professionals. Now we're talking about innovation professionals and the company. Usually you only find kind of hazy statements. Yeah, we want to create new growth, which is the overall aim, but it's not specific. What types of innovation are we looking for, where should we search and what is that we need? What I found in my practice is that crossing the chasm thing applies to the outside market as well as to the internal market. Are you familiar or should I elaborate on crossing the chasm?

I am, but I'm not sure everybody listening will be so. Yeah, please do.

Yeah, so this is a concept that is already 30 to 40 years old and it originated in the question, is there a way to predict which technological driven innovation will become a success and which will not become a success? And the study that was done found that if you segment your market by Their attitude towards buying new technology. There are five or so distinct segments. First come the pioneers. These are the people, the companies that do scouting what is new in the world, which technology can we use to improve? And they got also the capability to integrate what they have found there, right? And then comes the next segment when they see that it's actually working in practice because of the pioneers, they say, okay, I'll jump on the bandwagon too. But here comes the point. After that there's a big chasm because the majority segment, 2/3 of the market, buy new technology, completely different, right? So they're expecting not just only a piece of technology, right? Because they do not have the resources to integrate it. They want to have the full package, including the pre sales consulting, including the training, including implementation support, support and a hotline that is available 24, 7, etc. That kind of stuff. So the aim for an innovator must be to win those two thirds of the market that buy technology not for the technology's sake, but because it solves a defined business problem with all the services and bells and whistles that you need to make it work. So coming to internally, my experience is if we look at technology adoption inside the company, you also have the same situation. There will be pockets out there, islands of entrepreneurial ambition, if you will, that basically would be more receptive, would be your first application areas inside the company where you can start and success breeds success. But then to cross the chasm you need a lot of management support.

That's really interesting, Frank, especially the bit you where he's given the example about banking where you said, went on to say, here are the markets to play in, here are the ones to avoid, here are the resources you've got. What really struck me listening to you, there is a framework used in the certainly the British army, the US as well, called mission command, which is really about how to delegate. And in many ways it's the opposite of how a lot of delegation happens in the workplace in terms of so submission command. Like when I was in the military, if I was being given a set of orders to go and conduct a particular mission, I'd be told what to achieve and then I'd be given my boss's intent and the intent two levels up. So my boss is intent. So I know the context to your point, I can contextualize it. I know how what I'm doing fits into the bigger picture. So I'm told what to achieve and I guess why I'm then given some guidelines or a framework in the military it normally would have been, don't go east of this grid reference west of that road, because there's other operations going on. And beyond that I was given the freedom to get on. And what that does is it speeds up execution because if the situation changes, I can work it out a plan myself because I know what I'm trying to deliver and I talk about this a lot in my work. But it really strikes me that it's exactly the same principle, whether we've got a very junior team, first line manager giving a task to somebody, or an executive of a massive business trying to drive innovation, that the framework and structure is key. Right. And again, if I think about some of my clients and businesses I've worked in, innovation quite often seems to be very unbounded. It doesn't have a clear purpose and mission. There aren't those clear boundaries. Almost go and see what you could do and then come back and ask me what resources you want. It suggests your work says flip, that it needs to be very focused.

Yeah. There's one more point in the end to end innovation journey where I observe what you just shared, Ben. The question is that how do you organize for scaling up when you do the validation and they do the business design? Well, you typically have a small team, four, five, six folks or so, right. And using the corporate resources, you build that initial product that will hit the market if you're large, large scale up there, maybe even sizable like Amazon some 10, 15 years ago. Well, if they've got ironclad principles, what they call a single threaded leadership, right. You have one leader that is basically owns a business with a business business and the business is not just say the Kindle platforms to come back to that Amazon example, but it's hardware, Kindle hardware, right. You have an end to end responsibility with all the factors that pay into that. It's not just the technology but also the finance and then the connection then to marketing and the value, the benefit, the features, that kind of thing, et cetera. And another team only runs Kindle Software, right? But, but they meet at one high ranking officer. So where the coordination takes place, the problem is in the messy middle, right? When the space between the five and the six folks at the beginning of the scaling up journey and the sizable organization that you build up when your scale up has achieved a certain size. What I found to be working in that space is exactly mission focused teams. Exactly. Same principles. Because if you go into scaling up, right, if you go from a first one or two customers to hundred to thousands of customers. The complexity explodes. What I also see a lot of corporate scale up, tapping into the trap of trying to solve to heal that complexity with say past command and control kind of approaches in here, structures, defined processes. But then you only find that development times get longer and miscommunications between the go to market and the tech folks increase. So fully support your point. It's a powerful instrument that's also a.

Nice lead in Frank, what about the role of leadership within scale? And if we go back to your analogy of the red shirt, the ones who have been very successful in the now versus the blue shirts, who are leading the charge on the new, Are there any particular characteristics, skills that you've seen stand out in successful blue shirt leaders?

Yeah, definitely. So maybe we can look at the profile of these people, at least the ones that I consider to be top notch. To give you one example, one of the corporate startup scale ups that I worked with grew 400 times in three years, 10x10x4x. So this lady in that case obviously did some things right and actually managed to build a business that was on the corporate radar screen then, which caused corporate X meaning corporate risk, corporate compliance, corporate sustainability, da da da da, showing more interest in what is going on because he made a few percentage points of the turnover after that growth. But that is basically, I guess, a different story. So when I look at people like this lady, they do have a deep understanding of now. I see too many silos then between the red shirts and the blue shirts, right? It seems like they're not only two different value creation systems, but two different tribes, if you will, in the one company. Deep understanding of now and why now is the way it is and a deep understanding how to nudge, not beat, not destroy that system in here, right? The good thing is if we take on the systems perspective and try to understand how this system works, right? The role that incentives play and the role that structures play and how to run the matrix organization and where to find those pioneers crossing the chasm inside the company. It's possible. I don't say it's easy, right? So especially if you have a multinational company, don't say that it's easy, but it's easier to elicit because this is the way the now system is defined. Much harder to say how can we create a new business, grow the new business from 20 to 100 million because there are so many question marks still evolve new markets, how to streamline the organizations, the internal organization of the scale up, etc. So deep understanding of now I also observed is in particular since you mentioned the founder driven companies, These scale up CEOs need to learn to make the switch from leading by example to leading through others.

I'm so glad you mentioned that. Something I'm very passionate about helping leaders understand. Go on.

Just one interesting story that learned when I was researching for my book. Amazon has leadership principles. Used to be 12, now they are 14. You know how large Amazon was when these leadership principles were established?

I have no idea actually.

161 60.

Wow.

So Jeff Bezos recognized at that early stage we need to be able for other folks than himself to lead the organization. Right. And as you may know, this is embedded in where the leaders get their bonus on that they demonstrate these leadership principles. Third point that I would like to make is culture is mandatory in many corporate startups and scale ups. You see technology in the foreground, right? We've got this cool stuff and now we put the AI sticker on it and it's going to be a huge success, right? I mean if you have a growth like the one that I mentioned or even the successful. If you read the research reports, successful corporate scale ups have a growth rate above 100% per year, right? They double, double, double in size, etc. And obviously this trickles down into the people that you need and how you design. We already touched on this point, the organization, etc. So we need to bake culture into every single step of the employee life cycle. If you leave it open for the people to figure out what the company stands for, what is acceptable behavior, what is not acceptable, you will not be able to sustain such a growth. It's not possible. And so I think understanding the domain, the customers, the technology, but these factors that are made are on a completely different level that a scale up CEO needs to have.

That's an interesting point which I've mentioned on this show myself in the past. I think it's often the case and actually I've fallen into the trap of doing this with a previous boss when I was his head of hr. You can pick up a business book that tells the story of a really successful organization or even a sports team, right? And it lays out the methodology and all the things they've done in terms of strategy and culture to become this amazingly successful business. And then business leaders can easily pick up that book and go, ah, great, this is the roadmap. We're going to use this, we're going to apply all of this and you try and do it all really quickly and sort of a Year down the road you're not really seeing massive results and it peters out and loses momentum. Whereas you forget. And your point with Amazon is a brilliant example. Like when we read those books, we're reading the story of 10, 15, 20, 30 years and we expect to change the culture in a year when really it takes a lot longer. I think it's just a really important point to hang on to when we're looking at any of these stories. Right.

But culture, as I said is mandatory. So we need to think about and I start these culture discussions from the angle of behaviors. So how would an ideal behavior look like and how can we measure it and where do we have examples that it works and the results that it produces and how can we spread it throughout the scale up or maybe even nudge the interface to the now if I were a corporate scale up leader, I wouldn't even try to change the corporate culture because it's designed for different purpose. No reason to do so, no chance of success. But the interface, now a new interface, this is where you in your own interest should be working on to naturally.

Yeah, love that Frank. To wrap up today's conversation, which feels a shame because I've enjoyed it so much I could sit chatting to you for another full hour. Based on all your experience of sort of advising scale ups within the corporate setting from the book, what would you say are two, maybe three if there's a third one you're desperate to share like non obvious but critical pieces of advice you would give to either the MD or CEO or a senior executive who's been put in charge of the sort of scale up operation within an organization.

So the first non obvious would be to buy the book. Right.

And we'll make sure there's a link in the show notes to help people. And they can get a free chapter, can't they?

From your website. Exactly. So if you want to share that, otherwise it's leanscaleup.com book, there's a free chapter that you get there, there's an AI generated podcast, there's a client case study on how this always implemented, etc. So feel free and make use of these resources. But coming back to the point, first of all, I think culture is underestimated. The typical company has a lot of engineering approaches in there, right. Be it in diverse industries. I mean if you speak to innovators in fast moving consumer goods, they also look at it with an engineering mindset. And obviously if you try to create new growth using new technologies, there's a lot of Engineering that culture is mandatory for the reasons that we already alluded to. So it needs to be baked in. It needs to be defined also what kind of culture we want to have. The second is if you embark on that journey being on the red shirt side or on the blue shirt side, there are so many moving parts and you cannot make sure that every moving part, from the people profiles to the technology that you're creating, to the new market that you're embarking on, how to make sure that certain legal standards that corporate has said are being applied on that business, to the reintegration perspective that we briefly touched on so many moving parts, you cannot put out all of the fires at once. So I think the art for sea level on the blue side or the the CEO of a corporate scale up is to identify which fires could be burning. Right? Because there are other pressing issues, the wisdom to recognize them. Deliberate but heavy prioritization.

I really like that point you make there. More broadly people often talk about firefighting and putting the fires out, but actually which ones do we just allow to.

If you figure out Ben, let me know. Maybe last foreign is coming. Also to back to a point that we discussed is the crossing the chasm thing, right? I think has little chance of success to treat every new customer that you want to win outside or every unit that you need to win inside the organization evenly. You always find a more openness to adopt new things in certain pockets, certain islands and you work with there to create the success stories and then you take it from there back to the.

Crossing the chasm thing and also linking it to overcoming some of the internal resistance to scaling. Would it be fair to say that the crossing the chasm theory, crossing the chasm numbers applies equally? Do you need to get a certain percentage of people within the organization, some of those working within the now to buy into the scale up, coming out of the innovation space for it to really, really fly. Is that something that we should be focused on?

When I was involved in my first change projects, whatever it be, right, be it project oriented work style or technologies come to that, my mentors always said to say Frank, there's the rule of thirds, right? One third will follow, one third will standing by, watch what's going on and join the ship later. And one third will you need to move them with some heavy motivation, let's call it like that. But if you break it down, the segments add up very nicely. So you've got one third. This is the pioneers and the oil early adopters. You got two thirds in the middle, the majority that want to have the full package right, and then some laggards. So I would say it's not far off brilliant.

Frank, thank you so much for your time. It's been a fascinating conversation. It's gone in all sorts of different directions. Really appreciate it. It's been an absolute pleasure having you on the show. Thank you.

Thank you for having me, Ben.

I hope you enjoyed that conversation as much as I did. I think Frank's clarity and practicality around innovation at scale is second to none, and I love how grounded his ideas are in real world business leadership. If this episode got you thinking about how your own organization approaches growth, then now is the perfect time to check out my free Leadership Capability Scorecard. It gives you an instant snapshot of how your leadership team performs across nine key areas and shows you where the gaps might be that are holding back.

Your scale up success.

You can find the scorecard via the.

Link in the show notes.

And finally, if you found this episode valuable, I'd be incredibly grateful if you shared it with a colleague or a fellow leader. It helps others find the show and ensures more organizations scale with success and not stress. Thanks again for listening and welcome to.

Leading the Scale Up.