According to a 2013 McKinsey survey, over half of US executives would willingly and knowingly pass on a viable project that could deliver long-term value to their customers, if not disrupt a market.
The reason? Because the project would cause the company to even marginally miss it's quarterly numbers.
A slavish devotion to earnings reports and Wall Street analysts is the norm in modern corporate culture. And it takes a toll on organizational culture and employee engagement. If you've ever been in a leadership meeting where quarterly targets are announced -- often with all the forced fun of the birthday party scene in Office Space -- then you know what I'm talking about.
Given the fiduciary duty to shareholders that corporate officers must take seriously, this is understandable. But it works against the long-term interest of customers and discourages exactly the kind of innovation companies spend millions of dollars every year trying to create.
There is a significant cost to this situation. It wastes resources, discourages creativity, and pulls focus away from things that truly matter.
There is a crucial lesson here for every entrepreneur just starting out.
It's tempting to blame the greed and avarice of individual executives for short-sighted, counterproductive behavior. But most are doing their best to play the hand they've been dealt, and they're doing it pretty well.
Innovation efforts are often dead well before they begin. If we want to find out why, then like Woodward and Bernstein, all we need to do is follow the money.
Doug Rushkoff, author of Throwing Rocks at the Google Bus, likes to point out that Twitter is viewed as a failure by Wall Street, even though it makes $500,000,000 per quarter. That's right -- a $2B/year business that delivers value to millions of people around the world is considered a failure. Why? Because it doesn't measure up to the expectations of investors.
These expectations are set by an investment community that primarily values continuous growth in stock price. Paying dividends to shareholders, based on a stable and sustainable business, is seen as a sign that the company has lost its way.
There are many root causes of this grow-or-fail mentality built into our economy and tax code, but as an entrepreneur you're not able to impact those. You need to be aware that once you're publicly traded, you must grow or die.
Once you take venture capital, the options to build your business become limited. Capital can help, of course, but the conditions of that capital also dictate how you grow and scale. In most cases you either need to become a public company or get acquired by one.
Anything else is seen as failure. This includes creating a business that consistently delivers value to its market, but doesn't continuously expand.
What Can You Do
As an entrepreneur you need to ask yourself what enough looks like for you, and what saturation looks like for your business model and product.
If your goal is to hit it big and exit, you're playing the same game as an actor who gets into the business only to become a star. Nice if it happens, but also unlikely -- and rather empty.
To innovate you must imagine a different kind of business (most likely built on a different kind of funding model). One that will help you create a business that is the right size for you and your market.
An added benefit is that you can also operate at a different pace. The breakneck pace of rapid scaling is not the only option, and it's probably most appropriate for adrenaline junkies anyway.