8 Secrets for Internal Startup Success

by Robert B Tucker

Secrets of Internal Startup SuccessLately, I’m hearing about more and more organizations establishing internal startups — separate units to build new business models, pursue new markets, create whole new divisions. 3M has one. General Mills does too. Because you’re a reader of Innovation Excellence, chances are good that you could be asked to lead one. Are you ready? Earlier this week I explored the finer points of leading a startup with Pam Moret, the driving force behind brightpeak financial, a startup that provides affordable financial services to young Christian families in the United States. When the call came, Pam was ready.

In 2011, Moret was senior vice president for strategic development at Thrivent Financial, a Minneapolis, MN based Fortune 500 affinity organization and one of the largest insurance companies in the United States. In 2011, CEO Brad Hewett asked Moret to set up a new division to pursue the Generation X and Millennial financial services market, which was grossly underserved by the existing industry. In addition, the Global Financial Crisis had made some young people very wary of the entire financial services industry.

Pam felt ready to take on the challenge. During her 30 year corporate career she’d acquired advanced innovation skills through her many and varied roles. Individuals with I-Skills are in demand today as never before, as more and more industries face sudden changes in customer behavior and there is a need to rethink no longer viable business models. Here’s a look at some essential qualifications that you’ll need, to insure success in the new venture assignment.

1. Broad-based experience and willingness to take risks.

A self-described “maverick personality,” Moret had always been eager to take on new challenges. She’d built a reputation as a player who delivered what she promised to deliver, and was willing to take on new challenges. A licensed attorney, she had risen to become CEO of IDS Life Insurance, and SVP for the retail financial product lines at American Express Financial Advisors, a large subsidiary of American Express. Moret also held a variety of positions at American Express in products, marketing, public affairs and legal. The varied background and solid track record of execution gave her a unique perspective, but something more: the fortitude to persevere through setbacks.“This is by far the most intense assignment I’ve ever taken on,” Moret told me in a phone interview. Her reputation for “getting new things done” preceded her. “People find me direct, and even demanding. This is a fast-paced, mission-oriented environment and not the slow-paced, risk-averse environment in many larger organizations. Colleagues apparently respect Pam for the risks she is willing to take on behalf of the organization and its future.

2. Proven ability to envision and implement an innovative strategy.

Profit margins are thin when you are selling small, simple products to a younger market. While Thrivent Financial continues to be very successful selling to pre-retired and retired Christian families, the business model is too expensive and person to person selling was not being embraced by younger generation couples. Other for-profit carriers, such as Metlife and State Farm, had set up special units to target the millennial market and shut down their operations. “We couldn’t employ a copycat strategy,” says Moret. “We had to start from scratch and test and learn as we went.” brightpeak embarked on an omni-channel strategy, with a heavy digital emphasis, something few life insurers have done.

3. The clout to negotiate structure and budget first before taking on the role.

Before she accepted the new assignment, Moret obtained assurances from CEO Hewett that he would have her back in what promised to be an arduous journey. She gained commitment for a substantial start-up budget and three years to aggressively test and learn, hoping to find a new model. She insisted on setting up operations in a building several miles from Thrivent, rather than imbed her fledgling team within headquarters. Why? “Because the core organization can kill you with ‘kindness and help’,” Moret explained. “We even insisted on having separate IT,” which was the first of several battles she and her staffers had to fight in order to establish an entrepreneurial culture in the brightpeak unit. Next she insisted on recruiting her own team, with most staffers coming from outside Thrivent, and in some cases from outside the insurance industry entirely. “We needed ambidextrous people with a strong commitment to our mission and a willingness to try and fail. Many new employees had previously worked in start-ups or small companies.” For the first year the team was small– fewer than 10 people.

4. Willingness to build ties to the main organization.

The unwavering support of her CEO, as well as Pam’s well-honed innovation skills, were critical to launching the new unit. And while she insisted on building a new culture away from headquarters, she also knew she needed to maintain ties and relationships with the core business. Pam created a new governance structure with CEO Hewett and several of her senior management colleagues on an internal board. Regularly scheduled meetings, which were open and transparent about successes and failures, helped build support. Startup champions realize they must build select partnerships with the main organization. Moret calls these “tethers.” This means selective support from key partners of the organization: HR, Finance, Facilities and the like. Yet the new culture within brightpeak also had to be non-hierarchical, risk tolerant, candid, lively — in short all the things that the main company culture is not.

5. Willingness to study and examine other start-up examples, no matter how much you think you know.

For several months, Moret and her founding team researched and talked with other big company startup practitioners to hear their key lessons learned. Among them: hire with great care, because the kinds of people who tend to be successful in big corporate environments are often not like those of a start-up. Three years on, the team has grown to 65, and is still “ever so careful about every person we bring on.” Ongoing study of other start-ups ensures you keep an outside perspective and it’s worthwhile to study successes and failures. Communicating with other innovation champions is motivating, in and of itself, and it reminds you of the necessity of not compromising on critical structural issues.

6. An understanding that the corporate anti-bodies will sooner or later attack your unit.

It’s nothing personal, you understand, but it is almost a certainty that “corporate antibodies” will arise and attack your unit. They may question your lack of results, funding, strategy, business model, and most hurtful of all, your leadership. Because she was both experienced and alert, Moret began anticipating this day would come from the very beginning. Pam worked closely with Hewett, who had led a start-up himself in a former position. His active coaching was critical and he ran interference when needed. Setting up the unit away from corporate headquarters was “the best money we ever spent,” says Pam. Units inside headquarters are co-opted from the beginning with “this is how we do the business here” thinking. As every veteran of big company startups will attest, there are fundamental incompatibilities between the core business and the new business and there always will be. Reason: organizations are not designed for innovation. Quite the contrary, they are designed to stamp out variance and execute operationally. Humans being humans will err on the side of safety and conservatism, and will undermine – even with the best of intentions – anything new and risky.

7. Willingness to stay the course after repeated “failure.”

In the Innovation field we often romanticize about how exciting it is to be working on a project where we get to be part of something new. And indeed it is. But what we often don’t talk enough about are the dark days, the setbacks, the emotional and physical toll. Instead, we fast forward to the beer bust celebrations of victory. “When you’re experimenting and something you think will work doesn’t, you feel crushed,” Moret explained. Innovation leadership, similar perhaps to any battlefield, requires self control and what Moret terms “actively managing your own emotional competence.”

8. Readiness to enjoy the rewards of success?

“We’re now at the hockey stick stage where we’re starting to increase the number of customers,” Moret told me. “Heavens knows we have a long ways to go, but we have begun a path to future rapid growth while not neglecting future innovation.” The first phase success now gives the unit a new leadership and business challenge, how to run what is essentially a small business while ensuring they have the budget and resources to innovate. Moret calls it “a tough new balancing act” but one the team can handle. “The core business has begun to accept us as something worthwhile,” Pam says. “We are no longer seen as simply ‘wacky’.” When I ask Pam if she’d do it all over again or take a pass, she pondered the question silently for a moment before answering. “My dad gave me a book called The Disputed Passage, and in it I came across a quotation from Walt Whitman that has stuck with me,” she said. “Have you learned lessons only of those who admired you, and were tender with you, and stood aside for you? Have you not learned great lessons from those who braced themselves against you, and disputed the passage with you?”

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Robert TuckerRobert B. Tucker is the President of The Innovation Resource Consulting Group. He is a speaker, seminar leader and an expert in the management of innovation and assisting companies in accelerating ideas to market.

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