Innovation Lessons from the Startup Genome Report

Steve Blank wrote an interesting post today on the Startup Genome Project. The report is based on a survey of 663 startups. All of them are web-based businesses, and they are all early in their lifecycle. The objective of the study is to determine what factors drive startup success, and the report draws some interesting conclusions.

You can read the executive summary and also download the report through this page.

Several of the drivers of success jumped out at me as particularly interesting. While many of the conclusions are specific to startups, some of the ideas apply to anyone trying to execute innovation. Here are some of the highlights:

  • Listening is an essential part of innovating: here is how they summarise these findings:

    We examined whether founders learned in the following ways:

    • a) Learning from best practice
      Companies that follow startup thought leaders like Steve Blank, Paul Graham,etc. are 80% more likely to raise money. Almost all companies that raised moneyhad helpful mentors. Companies without helpful mentors almost always failed toraise funding.
    • b) Ability to listen to customer feedback
      Companies that are tracking metrics average a monthly growth rate that is 7xcompanies that are not tracking metrics and are 60% more likely to raisefunding than companies that don’t track metrics.
    • c) Ability to act on feedback
      Companies that fail to listen and act on feedback tend to scale withoutvalidating the size and interest of the market.

    The need to listen is essential in any innovation effort. You need to be sensitive to what the early adopters of your great idea tell you, and you need to be able to respond effectively to what you learn.

  • Innovators are motivated by a strong sense of purpose: when asked why they started up their firm, 68% said it was to have an impact, 27% wanted to gain experience, and only 5% did it to make money. This is very consistent with Dan Pink’s contention that to motivate creative people you need to give them autonomy, mastery and a sense of purpose. The desire to have an impact is very strong in innovators – much stronger than people usually think.
  • The more successful startups change their focus at least once, but not too often: in Silicon Valley language, this is referred to a pivoting – changing the focus of your business model. This is how the report phrases it: “Startups that pivot once or twice times raise 2.5x more money, have 3.6xbetter user growth, and are 52% less likely to scale prematurely than startupsthat pivot more than 2 times or not at all.” Changing focus too much is bad, but so is not changing at all. This relates to the first point about the importance of listening. You usually won’t have your idea exactly right on the first go, so you have to listen in order to figure out how to change. This is consistent with the little bets approach advocated by Peter Sims.

Innovation is a discovery process as much as it’s anything else. The Startup Genome Project shows that this is true for entrepreneurial startups, and it is also true for people trying to innovate in other settings.

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

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4 thoughts on “Innovation Lessons from the Startup Genome Report

  1. Tim, very nice summary of the genome project. I actually think that established companies should use these techniques to apply innovation in any department. But, it seems that they are not listening to the changes in the market. It will be nice to have something like lean innovation and apply it to how companies are operating now a days and how many opportunities they lost because living with different purpose and values.

  2. Thanks for the comment Roberto. I agree that these principles could be used more widely within established companies as well. Some of their observations are very specific to startups, but others are fairly general.