While working on my next book, Un-kill Creativity, I reviewed all the work done towards my doctoral dissertation, From Startup to Maturity and found the diagram shown above. This diagram was the basis for explaining to my dissertation committee what I was about to research. The diagram never made it into the final dissertation. Maybe it should have. However, I recently used it as a starting point for many discussions, the result of which was that I slightly changed my mind on the reasons that startup companies are more innovative than established ones. Not by much, but still enough to share it here.
Innovation (be it product, service, process, or business model) is an organizational function. I refer to it as “product” for simplification, and because it is the product of everything that precedes it. Innovation comes from people. Specifically–from creative ideas that people conceive. Those ideas get implemented, and the result is the innovative product. However, the diagram shows a more complete illustration of all the elements of innovation, and contrasts the startup company (bottom) against the mature company (top).
We start with a “pool” of (more or less) creative employees. Companies then use hiring as a tool to get creative people in. Companies then create the climate that will allow the now-hired employees to be more (or less) creative than they were before being hired. This climate can help employees reach, and even raise their creative potential, but it can also prevent employees from reaching that potential. The results are creative ideas, to which the company applies an implementation mechanism that will result in innovation output.
When I began my research, I created three hypotheses:
Startups have no advantage over established companies in implementing a creative idea;
People with similar levels of creativity are hired by both types of companies; and therefore–
Startups provide a climate more conducive to creativity than established, mature companies.
If the above was true, it will support my claim that there is a stronger creative idea flow in startup companies, which will explain higher innovation levels. This is why the focus of my study (as illustrated in the diagram) was on the relationship between the organizational climate and the employee, affecting the flow of creative ideas. The findings of my research supported this third hypothesis.
However, in this article, I would like to challenge the other two.
Do more creative people go to startups?
I used to fight the idea that more creative people go to startups. It is an uncomfortable thought. There are four elements affecting individual creativity (see Creativity, the Fourth Element). I didn’t see any reason why people would choose startup over mature companies (or vice versa) based on their own level of creativity, but this is not entirely true. Creative people are willing to try new things and fail. They are not afraid of failure. They learn from it. Furthermore, creative people are not afraid of arguing, and are not worried that passionately debating an issue would induce personal conflict, and are willing to take that risk (see Why are we so afraid to argue and how does it affect our creativity? Finally, creative people know how to circumvent the implementation mechanism and beg, borrow, and steal resources to get their ideas implemented. Creative people would rather beg forgiveness than ask permission. Creative people are more willing to take risk.
Going to work for a startup company is risky, albeit the potential reward is higher. Most startup companies fail. Even today, the perception that established, Fortune 500 companies present “safer” employments and better job security still exists. Employees who are willing to take risk are more likely to accept the insecure startup employment over the allegedly safer established company employment.
It seems that the willingness to take risk affects both employee creativity and the preference to work at startups. The correlation between individual creativity and employment at startups exists, although there is no cause-and-effect relationship, but rather both are related similarly to the same root cause: risk tolerance.