This article was co-written by Philippe Cartau.
To explain physical phenomena, there are two sets of laws, one for the large scale world, and another for the world of particles. Likewise, could we not consider that different “laws” are required when managing large corporations versus smaller innovative outfits? Large companies can be defined by their inertia and that of their markets while innovative companies can be defined by indetermination (uncertainty). If this observation is correct, then wouldn’t we need to adapt our thinking and perhaps start building new theories that allow us to better analyze the startup “state”. In the following paragraphs we build on this logic to show how “quantum-inspired” factors such as determinism and probability may affect firms differently depending on their size. Building on this analogy we question if we should reconsider how innovative enterprises should be managed and studied.
In classical physics, you have determinism. With the proper data, you can anticipate where an object will land when thrown. This is what allows us to have a large degree of certainty that an aircraft will take off and land safely. In the quantum world though, you can only give an approximation of a particle’s position and speed and hence all the subsequent calculations are inexact. Bringing it back to the airplane example, this means that there are strong chances the aircraft will land before or by the side of the runway. The same goes with companies. In the world of large enterprises determinism is much more abundant. It is much easier to anticipate a corporation’s results than it is for startups, and predicting the market size for cars or for clothing is much less of a challenge than predicting a non-existing market.
This concept relates to a second important one; probability. In the classical world, the aircraft lands on the runway every time. In quantum physics, the plane can land on and beyond the runway. Here we can make a parallel to investments. Probability is the certainty that an investment will go as expected. While there is high sustainability in the stock of a major corporation, the same doesn’t apply to a startup. Angel investors are more likely to develop a very diverse portfolio of startup investments because they know that the likelihood of them being successful (that they will land ON the runway) is limited.
Acceptable levels of imprecision
Another angle of understanding of the concept of probability is how it imposes trade-offs. In quantum physics it is impossible to know precisely two types of information, from the same particle, at the same time. Worse still, an increase in knowledge (reduction in probability) of one parameter decreases your knowledge of the other. Imagine loosing precision in the speed of your airplane because you are trying to improve your understanding of your position. This would be a big dilemma for a pilot! Would you prefer knowing where you are going to crash or at what speed!
While large firms do have trade-off challenges, they exist at larger scale and not all trade-offs are mutually exclusive nor create disruptions for another business choice. Coca-Cola does not need to choose between large marketing investments and a new product line. Taking the analogy to a human resource level, these firms have sales teams supported by a marketing teams and also technical teams that rely on precious technical capabilities in the hands of researchers, engineers and technicians. Startups though, with their limited means, need to make trade-offs and find a balance, notably between the technical and the sales activity. They need to accept some level of inaccuracy in building their product and in leading the sales effort. If they insist on utmost precision in one field, it is at the expense of another, like having a great understanding of their whereabouts on the market, but no notion of their speed.
The effects of observation
A last specificity is observation. In quantum physics, when particles are observed, they actually change behavior. When no one is looking, they dance along minding their own business. But as soon as you look at them, they take on a more conventional behaviour and move in a very predictive manner. This would be very odd if applied to an aircraft. Imagine that by simply looking at a plane, it would change the way it flew. However, the phenomenon does exist when observing small entities. Startups are very sensitive to observation, whether by the press, investors or potential customers: the final outcome is often influenced by the observer. Is it for the best?
With these parallels in mind, shouldn’t we challenge, as it is the case in physics, the way in which we expect large and small firms to produce innovation as well as their fundamental management practices? Accepting a duality in management practices would then entail some form of differentiation among paradigms. New models and ways of studying startups could have strong repercussions in the way we manage individuals and projects, by defining for instance, the level of accuracy expected in a project to optimise chances of success. Many individuals underperform because of excessive observation. Many projects are abandoned simply because too much precision was expected from the very onset, or because of the weight of observation and the pressure from investors to follow an overly deterministic plan. By injecting a “startup” cursor in our management practices, maybe we could allow a much more adapted approach, thus considerably enhancing the overall efficiency of companies, whether big or small.