Building A Culture Of Entrepreneurship Inside Government

How To Apply Lean Startup In Government Or Any Large Organisation

Recently I was asked to present the closing keynote at the Future Government Summit in New Zealand. The overall theme of building a more adaptable and entrepreneurial modern Government featured many inspirational speakers, and good examples from the Australian Government on how they’re doing this.

My closing address, transcribed below, focussed on building innovation capabilities, mindsets, and cultures, and whilst targeted at Government, broadly applies to any large organisation looking for similar change.

For those who know my background, as you can imagine, this was a great opportunity to educate more people on doing things in a more entrepreneurial, startup-focussed way, inspired by much of the thought leadership of Eric Ries and his models of entrepreneurial management.

Steve Jobs had extremely high expectations — of himself and everyone around him. He challenged them to work smarter and harder so together they could accomplish everything they imagined possible.

He believed that the future was something we can all make our mark upon and famously said that “You can’t connect dots looking forward, you can only connect them looking backwards. You have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.”

One of the biggest reasons most of us don’t set out to achieve our goals is that we think we first need to develop a detailed grand plan, one where every step is plotted, every milestone detailed — where success is almost pre-determined.

But we all know that these plans are almost impossible, and because of this we often never start.

Jobs knew that only in hindsight do these plans seem perfect, and in reality they never start that way.

In my experience, most people who find success start by trying things — lots of things. They succeed at some. They fail at others. And they learn from those successes and those failures.

This ‘grand plan’ approach is exactly how I’ve seen most large organisations work and often fail; and the most successful entrepreneurs I’ve seen over the last 20 years, who use Jobs’ approach, have found the most success.

What gives me the right to talk about entrepreneurship?

Entrepreneurship and Innovation is in my DNA

Kia Ora Koutou, my name is Dan Khan and to say that entrepreneurship and innovation is in my DNA is an understatement.

For the last 20 years, I’ve worked in-, founded-, or built high growth, venture-capital driven technology startups and teams, including Europe’s largest pre-Facebook social network, selling over $10M diamonds online, and giving away luxury sports cars online too.

Since being in NZ over the last 14 years, I’ve built world-leading venture acceleration programmes for startups, and for some of New Zealand’s largest companies. Particularly having seen first-hand how some of these programmes don’t work when taken into large organisations.

Alongside that startup-life, I’ve founded and launched some amazing entrepreneurial programmes in New Zealand. And looking back, all of my experiences to date have been about discovering the future through a customers’ eyes; generating unique insights by building experiment-driven cultures; and moving fast to capture new opportunities and lead the market before mainstream customer adoption.

There’s many lessons I’ve learned along the way, and many of them are applicable to any large organisation thinking about the future.

I think they’re particularly appropriate as Governments try to figure out how to evolve to serve a rapidly changing, connected, and digital world.

Four Key Themes Around Entrepreneurship Capabilities, Mindsets, and Cultures

I’m going to talk about 4 key themes today:

1. Why the future of any large organisation, Governments more so, has continuous innovation at its heart
2. Why organisations and agencies like yours need to start considering the ‘startup’ as the atomic unit of work
3. Why entrepreneurship is the missing job function inside your agency or organisation
4. And how to start rewriting both your leadership’s and your teams’ entrepreneurial DNA

Some big topics, so let’s get stuck in!

What Makes A Modern Organisation?

What makes any company or organisation truly modern?

How do you know it when you see it?

If I selected any employee at random from your organisation, and that person had a transformative idea for how to 10x performance of the organisation as a whole, or create huge, brand new revenue streams, or completely remove a significant burden on the public sector infrastructure or customer engagement points — how would he or she get it implemented?

Do you have an automatic process for testing a new idea?

How do you know if it’s any good?

Does your agency or organisation have the necessary management tools to scale up this idea to have maximum impact even if it doesn’t align with current priorities?

For me, this is what a modern organisation does — it harnesses the creativity and talent of every single employee to create future value.

Today’s World Is Changing Fast, And As Organisations, We Need To Change To Keep Up

Every business leader I’ve spoken to knows that executing core business leaves little time and energy for looking at new ideas

But over last few years, the pace of innovation, technological change, and new customer expectations are forcing us to keep up not only with how and what those innovations can do, but how new customers entering the system demand us to evolve.

Today, in a globalised world, new products and services can be conceived and built anywhere, and customers can discover them at an unprecedented rate — many with regulatory hurdles across jurisdictions that have to keep up.

Whilst we can never be sure what the future holds nor where disruption will come from (look at the perceived threat and subsequent flop of blockchain in the financial services sector over the last year as an example), I firmly believe that the best way to defend against the future is to create it, by constantly searching for new and improved business models, disrupting ourselves if needed to stay ahead of the market.

The Best Way To Defend Against The Future Is To Create It

I’ve spoken to many large organisations about what they’re doing about the future, and sadly, many of those organisations that have an innovation function don’t really understand why.

In my opinion, the only reason to have an innovation function, is to defend against the future — by having your head there and building what’s coming.

But creating the future, looks very different whether you’re a startup, a large organisation, or supporting player like a Government agency.

• If you’re a startup, you’re usually looking for one key innovation, that you can lead the market in, before being acquired into a larger company’s innovation portfolio.
• If you’re a large organisation, you’re usually looking for a number of new areas of growth to remain relevant and competitive. Ideally repeatedly finding new sources of innovation to fuel new growth areas.

But even large companies come and go.

• If you’re a Government, I believe you’ve got it worse — rather than finding one or two, or a small portfolio of innovations that can sustain enough over the short term, a future-thinking Government has to predict what’s coming, so it can enable developments or predict how the public want to engage, before they do.
• This means predicting that two years earlier so your products and services are tried and tested, before mainstream adoption.

How prepared is New Zealand for digital citizenship? Or eVoting? Or Digital identities? How about protecting citizens’ privacy in a world where once favoured technology companies like Facebook, Google and others now have overview of almost every aspect of a digital citizen’s online and offline life?

Tomorrow’s Organisations Today

Organisations of today are all about steady growth, prescriptive management and performance based on the short-term, usually with a quarterly focus

But the organisations of tomorrow are thinking more about sustained impact via continuous innovation, and focussed much more long term results.

I contend that Governments of the future need to focus less on one or two shiny new innovative projects, and focus more on building a system to allow them to find breakthrough innovations repeatedly and at scale, so as to create an engine for long-term sustainability and support or defend against whatever comes next.

I believe, therefore, that the biggest skills we will be recruiting for tomorrow are those who can build the capabilities of continuous innovation in our future leaders, in our processes, and in how we approach our theses of what the future will look like.

Entrepreneurship Is The Missing Job Function In Future Facing Organisations

Let’s talk a little about entrepreneurship (and I use this interchangeably for intrapreneurship too).

There’s been lots of talk about digital and innovation in Government, but I want to shift that focus to talking not about innovation, but entrepreneurship.

Why?

Because entrepreneurship is the task of creating the future.

Who “owns” entrepreneurship in your organisations or agencies? Who in your organisation is charged with overseeing high-growth potential initiatives that could one day become new products, services, or agencies of the future?

Who’s role in the team is it to infuse everyday work across the organisation with an entrepreneurial, experimental, and iterative mindset (not just in their team), but organisation wide?

When I talk to most large organisations, people either point to one person with no real resources to affect these changes, or they point to nobody.

I don’t know about you, but I don’t want nobody in my organisation being responsible for creating the next generation of entrepreneurial leaders, and defending us all from disruption!

For some these are top priority commitments, but only paid lip-service to.

I’m amazed when I visit companies who have innovation as one of their four core strategic pillars, some turning over hundreds of millions of dollars a year, and who say they see disruption being a major threat to their business within five to eight years, and then allocate often less than a 100th of a percent of their operating revenues to innovation!

But sadly, for most organisations innovation isn’t even a top level priority.

This is why I insist that entrepreneurship is the missing job function inside modern organisations.

Great entrepreneurs can come from anywhere in an organisation, so the entrepreneurial function has to be carefully inserted.

But modern organisations need something more than just an innovation lab or accelerator programmes.

The historical failure of these things isn’t that the programmes weren’t good or they weren’t run by good people, it’s that the organisation failed to adapt to effectively manage the process of entrepreneurship — what comes next post-programme, how to incentivise that talent in new ways, and how to build a repeatable, and scalable system to build, measure, and learn what the future looks like again, and again, and again.

You Need To Become An Ambidextrous Organisation To Navigate The Future

To build the future, an organisation who is adept at operational excellence and executing today’s business, needs to turn that into an ambidextrous culture of execution and creation of new future business models.

This is where most organisations and agency efforts that I have seen have fallen down.

You can’t buy this off the shelf in a nicely packaged programme — this is a core systemic change of people, culture, and of leadership over time to support a different way of working.

Using Startups As The Atomic Unit of Work

Let’s look at startups for a moment as a possible way how to introduce entrepreneurship into your organisation.

I don’t mean turning your organisations into Uber or AirBnB or Facebook. I mean startup in a more classic sense.

A startup is a temporary organisation, operating in conditions of extreme uncertainty, whose sole job is to search for a repeatable, scalable, and sustainable business model to create value for it’s group of users or customers

It’s temporary because when all the unknowns become known, they’re no longer a startup.

Why are startups so interesting?

Because startups live and breathe uncertainty whilst looking to the future.

So when you’re thinking about what the future of Government looks like, the biggest change that leaders need to understand is using the ‘startup’ as an atomic unit of work, distinct from other kinds of project teams that they typically employ.

Whilst not everything an organisation does requires a startup, in Eric Ries’ words, the concept of a startup is the type of organisational unit that performs best in conditions of extreme uncertainty.

The type of projects that startups undertake are best understood as experiments. They blend the scientific rigour of R&D, the customer-focused fields of customer experience and marketing, with the process discipline of engineering.

And they traditionally don’t fit into any org chart because they require such a diversity of skills and management styles.

Startups Confound Traditional Management Structures So Need Different Models Of Execution

Now the first obvious observation is that most startups fail, that’s a given, but in most organisations, failure is not an option, public sector even more so where every dollar is often tracked and failure called out publicly.

The job of the entrepreneurial leader therefore is how to manage the problem of success.

The hardest part is knowing when a new initiative is going to succeed or fail.

Failing ventures aren’t that much of a threat, but what if you’ve gotten something that’s turning into a big success?

How do you allow the organisation’s existing middle managers to go along with success and take over that success whilst they’re busy running their own business unit?

Every unit is already doing some of this to some degree, in trying new things, and so each unit can already be seen as a portfolio, some doing a mix of experimentation, and some doing execution of known business.

As startups mature, they move along a continuum from mostly experimentation to mostly execution.

The idea is not as alien as you think, but most people apply the same management models based on risk and financial predictability across this continuum and that doesn’t stack up for early stage ventures.

A Few Issues Arise When You Think Of Adding Startups To An Organisation

Startups need a new leadership style.

Anyone who’s worked with entrepreneurs, can certainly tell you that entrepreneurs are not the easiest people to manage! But traditional management tools that focus on forecasting and planning don’t work for these type of managers.

How do we identify those people, how do we train them, and how do we manage their progress?

Entrepreneurship isn’t just for products

Most startups we talk about are often about new products — but entrepreneurship isn’t just for product ideas.

There’s startups hiding away in most organisations they just don’t have the lexicon to call themselves that.

The concepts of experimentation, testing, scaling, and changing practice applies to any function from testing new ways to recruit and manage performance, to allocating and appropriating funds, to promotion of new services.

How do you rapidly test something new with a small group of users before scaling to the whole organisation or public?

How do you treat funding new projects the same way a venture capitalist would, using metered funding against risk-reduction and proof objectives?

How would you treat something intangible like your organisational culture as a startup, with user needs, testing requirements, and led by experiment-driven continuous improvement?

Entrepreneurship is not just for entrepreneurs

There’s a belief in the startup world that entrepreneurs like Richard Branson, Elon Musk, or Larry Page are born under the auspices of some ‘cult of the genius founder’.

But that’s not my experience. In my experience, entrepreneurs can be created just like teaching a person any other skill.

The more and more people you expose to these new methods of working, and the more functions you get involved — eventually everyone realises that benefit of this new way of working

Especially the impact it can have on non-entrepreneurs in the organisation.

The second ever startup weekend we ran we hosted at MYOB’s premises in Auckland. They had some of their staff attend and help out and the amount they learned by proxy being part of- or close to- the event was amazing. Many reported the new found skills were great to take back into their their day jobs.

But this is a brave new world of capabilities that most people in Government or corporate world have never seen or have no idea how to implement.

But take heart, there’s an incredible amount of latent talent and energy to work on entrepreneurial initiatives in most organisations, just waiting to be unlocked.

How To Think Like A Startup

There’s a couple of attributes it’s worth surfacing about how entrepreneurial teams work to understand how they approach the world.

It’s all about the team

In accelerators, there’s five things we look for in a great startup:

1. Team
2. Team
3. Team
4. Market
5. Idea

Notice how idea is last. Why’s that? Because a great team can turn a mediocre idea into a great company, but a lousy team can mess up even the best idea.

They are mission- and vision- driven

Way more so than most organisations. But this is where public service and startups are most aligned. They both exist to serve a greater good, with a mandate to make something better and fix gaps in underserved markets or populations.

Startups have a focus on leading indicators of progress

Many organisations I’ve dealt with assess progress using trailing indicators of revenue, profit, ROI, market share, but a startup or early-stage venture has none of these.

Instead they need to find ways of measuring progress using predictors of future success such as engagement, satisfaction, unit economics, conversions, and repeat usage.

They understand that no business plan survives first contact with customers, and that they need different models of innovation accounting and funding that work at early-stages versus later stages of risk.

Their culture is experimental and iterative

Startups have a hunch about the future, but only limited information about whether those hypotheses are true.

So they build a culture where they make decisions fast on small amounts of data, then they experiment and test to find the truth, then use that data to double down or change strategy.

This is the converse to much of the risk, planning, big strategies and justification of public spending culture I’ve seen in New Zealand Government.

If you don’t know what the future holds, you don’t need a plan and evidence before making a case, you need vision and a culture of experimentation to build small things, measure your results, and learn the direction that’s going to take you there.

Entrepreneurship as a career path

The offshoot of thinking about entrepreneurship in your organisation is how to make that a career path.

Entrepreneurial thinkers aren’t just the ones that head up those ventures, it crosses the whole entrepreneurial team.

People who excel in the early-stage entrepreneurial process are what I call ‘general specialists’ and cross functional at their cores. They are t-shaped — in that their background or expertise has given them deep speciality in one or two areas, but ask any of the people on my entrepreneurial teams to knock up a financial plan, go hire new people, build a strategy, talk to the board, or get out on the street and recruit new customers — they all not only embrace those jobs, if they don’t know how to do it, they’ll surround themselves with people who do, until they can.

Like modern motivation theory tells us, they know adaptability, agency, and autonomy comes with the territory.

So how do you build an organisation where these people can excel, rather than be forced to leave?

My summary here is that to both work in and lead these kinds of high -performance teams requires particular skills.

And they don’t come naturally to everyone, but critically, they are absolutely distinct from most other business skills that lead to success in traditional organisations.

But as I said, entrepreneurship, isn’t about building products, it’s touches all areas of the organisation with a particular focus on people, management, and leadership.

Entrepreneurial Management As A Leadership Framework

The outcome of all of that discussion is that “entrepreneurial management is a leadership framework designed specifically for 21st century uncertainty.”

It’s additive, not a replacement for traditional management.

It’s a discipline to help leaders become as rigorous about their entrepreneurial parts of their portfolio as they are in their general management part.

Just because innovation is unpredictable and often de-centralised doesn’t mean it can’t be managed.

Whilst the skills, processes, and culture need to live across an organisation, when you realise that entrepreneurship requires a specialised set of skills and different practices, you realise it needs it’s own home in the organisation chart, alongside engineering, marketing, sales, IT, HR, legal, etc.

Entrepreneurship lives across your organisation where people are innovating horizontally across disciplines, and vertically across functions. Where new policies and initiatives are constantly being tested in agile ways. And at a top level you’re investing in- and incubating entirely new functions and whole new future agencies or business units.

Adding An Entrepreneurship Function To Your Organisation Isn’t Easy, But Its Benefits Outweigh The Pains

The offshoot of all of this thinking means that the types of people you hire and recruit, and the culture of the company will likely change.

And you’re right- that’s not easy.

But no change ever came without ‘the struggle’, and I guess that’s why you’re here reading this article: to embrace the struggle and not be the one who retreats back to doing things the way you always did.

From looking at organisations who have made that transition, I feel the benefits are worth the pain.

• It provides better opportunities for leadership.
• It keeps innovative people in the organisation, instead of incentivising them to leave.
• It reduces wasted time and energy.
• And it’s a much smarter way to kill projects.

Many startups who have successfully transitioned from startup to growth to sustainable continuous growth talk about a ‘second founding’. Where the company grows up and adopts a new culture. How do you do that and maintain your ‘startup DNA’?

The Future Of Government Needs A ‘Second Founding’

The future of Government needs a ‘second founding’ of leadership, people, and culture to successfully make this transition too.

This is the scale of the change required to migrate your organisation or agency into the future.

It’s about changing gatekeeper functions like HR, legal, and IT, into enablers for the entrepreneurs in the organisation.

It’s about creating new ways to incentivise and recruit staff to make them feel like owners or stakeholders not employees.

It’s about changing the culture a little bit at a time, until you have a grassroots movement inside the building to create an organisation wide entrepreneurship culture at scale.

It’s about daring and visionary leadership who have a commitment to vulnerability, risk, and emotional self-awareness that makes startup teams so successful.

So I implore you, when you go back to the office…

• Give the entrepreneurship function to somebody.
• Give them real operating authority and budget instead of calling them futurists as many chief innovation officers are.
• Build a career path and specialised performance development process for entrepreneurial talent in your organisation.
• Give entrepreneurship a seat at the table when other gatekeeper functions are setting company policy.

Finally, start forgetting about innovation job functions and think about entrepreneurship as the enabling function for all (even over and above being an ‘agile organisation’, which is just one facet of being more entrepreneurial).

Challenging The Status Quo Needs A Special Sort Of Leadership

Whilst many best practice structures inside organisations fall under the general heading of change management, I believe this type of transformation requires something different.

It requires a special sort of leadership skill to pull it off as you’re challenging the status quo and the way things have always been done — and no one likes to be constantly be challenged.

Experimentation is the antithesis of traditional management models, anything that can’t be quantified traditionally has no fit, especially in a public purse.

But risk, uncertainty, and the unknown is at the very heart of innovation whether that’s building-, partnering-, investing-, or buying- it.

Entrepreneurship, like Government, is just management in another guise.

To Exist In The Future, You Need To Predict It, And Then Build Towards It

My three final takeaways:

If you want to build a system to allow your teams to find breakthrough innovations repeatedly and at scale, to create an engine for long-term sustainability and future growth to support and defend against whatever comes next.

I believe you need to be actively building the future ahead of the mainstream public before it arrives.

You need to think about building the capabilities and processes of continuous innovation in your leaders and have them dedicate system, process, and people to your thesis of the future (writing one if you don’t have it already).

You need to be thinking about the startup and the management thereof as the atomic units of work best suited to manage future uncertainty.

And finally, you need to implement entrepreneurial management techniques and give thought to how to enable entrepreneurship as the missing job function and career path throughout your organisation.

So that you ultimately rewrite the DNA of your people to excel at executing today’s Government whilst finding tomorrow’s.

Like any culture change, you can either let it happen to you, or you can take the lead.

Most people hear this stuff and think they can’t do it or I’m talking about someone else. But as Steve Jobs reminds us:

“Life can be much broader once you discover one simple fact: that everything around you that you call ‘life’ was made up by people that were no smarter than you. Once you realise that you can change it, life will never be the same again”

As Governments, you’re either at the centre of this change for society as a whole, or we’ll all be left behind as it happens around you.

Don’t live your lives looking backwards — live in the forward.

Put entrepreneurship to work for your organisation, so you don’t end up being a consequence of the future, you end up being the cause.

Thank you.

Download slides as PDF.

I give thanks again to Eric Ries, for inspiring a large part of this talk with the models, the thinking, and the evolution of lean startup into modern management theory. I’ve been an active proponent of his models and have brought this lean thinking both to startups and large organisations in New Zealand for years.