Rule 1: In all great innovation stories, the great idea is only Chapter 1. Building breakthrough business requires forgetting, borrowing, and learning. These central challenges demand more than just a talented and ambitious leader; they require leveraging the power of organizational DNA.
Rule 2: Sources of organizational memory are powerful. Organizations naturally cling to CoreCos’s orthodoxy, even when moving into new environments. But NewCo needs to operate in fundamentally different ways.
Rule 3: Large, established companies can beat start-ups if they can succeed in leveraging their enormous assets and capabilities.
Rule 4: Strategic experiments face critical unknowns. No amount of research can resolve these unknowns before the business is launched. Therefore, success depends more on an ability to experiment and learn than on the initial strategy.
Rule 5: The NewCo organization must be built from scratch, with new choices in staffing, structure, systems, and culture. This is the only way to defeat the powerful forces of institutional memory. Conversational awareness of the differences between NewCo and CoreCo business models does not suffice.
Rule 6: Managing tensions is job one for senior management. The health of the links between NewCo and CoreCo deteriorates easily. There are several natural sources of tension, driven by dynamic forces – particularly the changing demand for and supply of capital within the organization.
Rule 7: NewCo needs its own planning process. CoreCo’s norms for evaluating business performance will disrupt NewCo’s learning.
Rule 8: Interest, influence, internal competition, and politics disrupt learning. To ensure learning, you must take a disciplined, detached, and analytical approach to making predictions and interpreting differences between predictions and outcomes.
Rule 9: Hold NewCo accountable for learning and not results. You can achieve accountability for learning by insisting on a disciplined learning process. Accountability for results against plan, while simpler to practice, is counterproductive.
Rule 10: Companies can build a capacity for breakthrough growth through strategic innovation. Skills in forgetting, borrowing, and learning are the foundation. Managers must start building these organizational skills early in a company’s life.