Gigaom Q&A with Howard Love: What large organizations can learn from startups

As he entered his third decade as an angel investor, Howard Love noticed something. Across the sixty or so companies he had been involved in, a number of patterns were evident. The companies seemed to go through a predictable set of steps he named the “J Curve.”
bookCoverAccording to Love, although most entrepreneurs believe that their start-up journey will be something of a linear journey, a straight line from the beginning to the exit, the truth couldn’t be more different. He identified six different phases that, if graphed, resembled the letter J.
We caught up with Howard to ask if our readership, mostly enterprise companies, could glean anything from these lessons.
How can the J Curve be relevant in a corporate environment?
As large corporations struggle to remain innovative, you need a tool to facilitate product innovation in an environment that may not be conducive to innovation. The good news is that the J Curve can be exactly the tool you need to overcome the corporate obstacles that stand in your path.
The J Curve predicts exactly what happens in the early stages of innovation and explains why innovation often struggles in larger organizations. There are specific actions that you can take that can protect innovation, and indeed encourage it.
How so?
Well, whether you are a corporate employee or are working with a large organization while still a start-up founder, recognize that the factors affecting your success are different than if you are operating as a small, independent entity. These factors can be both positive and negative, but it’s more likely that they’ll be positive if you are aware of them and are sufficiently agile to shift your approach to take advantage of them.
New projects need strong sponsorship from the leadership. They need to be protected when they are in the delicate phase of trying to figure out exactly what the new product is. There is a lot of natural uncertainty involved in the messy process of birthing a new product. The team that is spearheading the innovation needs the time and flexibility to make it through what I refer to as “the long cold winter.”
Once they are through that, then larger organizations actually have many advantages over a raw start-up and these advantages need to be leveraged.
Can we include the checklist from your book in the interview?
By all means.
[The following is excerpted from “The Start-up J Curve“]

  • Is the large organization with which you’re associated hamstrung by a slow-moving approval process, bureaucracy, and difficulty accepting any type of failure? Are there ways you might incorporate aspects of J Curve to facilitate the speed, flexibility, and innovation that characterize the best start-ups?
  • In the Create phase, can you form a small team that is insulated and protected from the pressures, bureaucracy, and procedures that can make it difficult to come up with truly innovative products?
  • In the Release phase, are you able to speed up the process of getting a product out there by either creating a beta product, releasing it under a different brand name, or committing to come out with different versions of it quickly—or doing all three?
  • In the Morph phase, are you able to overcome the innate organizational resistance to making major, wholesale product changes by having your effort fly under the corporate radar or by operating as a company within a company and not subject to the typical corporate oversight?
  • In the Model phase, are you able to capitalize on the large organization’s infrastructure that the company may already have in place?
  • In the Scale phase, are you taking advantage of the organization’s people, process, and money resources? Can you leverage the existing customer lists and marketing infrastructure?
  • In the Harvest phase, are you drawing on the corporation’s extensive experience with using excess cash for investing, new products, growth, and so on?

[End of excerpt.]
In your experience, what are the areas where large companies excel the most?
Scaling is where large corporations really shine, and they have huge advantages over a start-up because they possess three primary ingredients: people, process and money.
When you’re the size of, or partnering with, a larger enterprise, you gain the advantage of speed in the Scale phase as you can leverage existing people, process and distribution to expand externally at a fast pace.
Also, unlike start-ups, corporations operate in a continuous Harvest mode. So they have real experience with this phase and can deal with the opportunities and major financial questions without missing a beat. Large companies are so used to the Harvest stage they can do it blindfolded!
The Start-up J Curve is available at howardlove.com.


HLove-Headshot-1Howard Love is a life-long entrepreneur who has founded, co-founded, funded and managed startups for over 30 years. He has founded or co-founded over 15 businesses and invested in over 50 startups.
Love was born in Detroit in 1960, and attended Phillips Exeter Academy (1974-1978) and Colgate University (1978-1983). He completed his first Ironman competition at the age of 51 in Lake Placid, NY.

What do cloud consolidation and disruption have in common?

One thing is for sure, we can expect to see much more of cloud consolidation and disruption happening in the IT space over the coming months and years. Recently, Cisco, EMC, HP and IBM have all acquired startups from the cloud space. And each of these acquisitions was disruptive in their own way.

Cloud, in theory, should not be that disruptive. However, the essence of cloud actually presents a compelling disruptive story that is intoxicating to those whom fully understand the potential. That being said, enterprise IT organizations will leverage a combination of traditional IT services and cloud-based solutions.

Not surprisingly, the recent cloud acquisitions sit closest to the current state of the traditional enterprise. Key to this strategy is to 1) expand the portfolio by offering new solutions and 2) evolve the enterprise (and provider) toward a cloud-based strategy.

Keeping score

For those keeping score, Cisco acquired Metacloud. EMC acquired Cloudscaling. HP acquired Eucalyptus. And IBM acquired SoftLayer. Based on the momentum, one could look toward IBM to make the next move. On the other side, with Cisco, EMC and HP going after private cloud solutions, there is a position to take that it is these three to watch. An additional factor to consider is that a startup may have a great solution, but not enough runway (money) to keep them afloat until the market is ready to adopt. Watch for more of these situations, as the overall IT market takes longer to adopt disruptive solutions such as cloud-based solutions.

Shifting the incumbents

Regardless of who moves first, second, third or fourth, the act of acquiring cloud-based solutions will create a shift in the provider’s overall strategy. For the enterprise CIO, one key to watch will be momentum among the cloud startups. Which solutions are up-and-coming and getting quite a bit of attention by early adopters? Two that come to mind are Docker and OpenStack. If OpenStack were a company, this would be the one to watch. In any case, enterprise IT organizations need to keep close watch of this area.

As enterprise IT organizations shift from traditional IT infrastructure to converged infrastructure and onward to cloud-based solutions, the incumbent provider must have an answer to the shift. Let it be noted that the incumbent need not provide all parts of the solution. This is where the ecosystem comes in to create value and fill the gaps in the strategy.

Leveraging innovation

Many ask why the incumbents do not innovate internally and build out their portfolio like they have in past years. With a vibrant industry of up-and-coming potential solutions, there are easier paths to success. Why take the risk and invest significant funding into a number of different strategies only to have one pay off? Instead, watch the space and acquire the right solution that has a proven technology and fits the model well. The key is finding the point when the solution is proven, but not so successful that it demands paying a premium.

For the CIO, this means keeping close tabs on how the cloud space is evolving regardless of the stage of adoption they are at. Cloud solutions impact organization, services, and processes in addition to technology.

Divesting leads to Consolidation

The big breakups of 2014 are leading to further cloud consolidation. Many of the large IT providers have simply gotten too big and too diversified. Divesting is essentially a healthy way to trim their portfolio and refocus the company in leading areas within their industry. Divesting also opens the door to an interesting side effect of acquisition opportunities.

Intersection of cloud consolidation and disruption

Each of the acquisition targets is disruptive in their own right. The market as a whole is also very fragmented with solutions solving a similar problem, but in very different ways. And each company does one thing and one thing very well. The opportunity to explode the solution comes with building out the ecosystem. For the startup, what better way than to sell to a larger organization that has several of the building blocks already integrated and productized. Plus, the alternative of heading toward IPO is just not as appetizing of an equity event as it used to be.