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Summary:

Can you name America’s largest startup? It’s not Facebook or Amazon. It isn’t even a technology company. This giant startup is the Transportation Security Administration, and its massive scale offers a roadmap for entrepreneurs eager to turn big ideas into sustainable businesses.

takeoff_Roger Schultz

Can you name America’s largest startup? It’s not Facebook or Amazon or even Home Depot. It isn’t even a technology company. This giant startup is the Transportation Security Administration, and its massive scale offers a roadmap for entrepreneurs eager to turn big ideas into sustainable businesses.

The TSA was created in December 2001, just months after 9/11. In its first year of service, the TSA processed one million job applications, interviewed 125,000 candidates, hired 60,000 people, spent $1 billion on new security equipment and set up security at 450 airports.

All this was done under intense congressional scrutiny — and not without a few hiccups. You can imagine what a shoe bomber does to your business plan three weeks after opening the doors.

Startup versus enterprise

The secret to why startups innovate faster and better than enterprise companies isn’t just a clear mission or a risk-taking culture, though both are important. The startup environment is different on a fundamental economic level, not solely because founders are more motivated and focused than their enterprise counterparts. They are different because any time a startup does something big, the upside is uncapped and the downside is pretty small. If a company fails, an investor loses a few million dollars and the team goes on to get new jobs. You can only lose as much as you have.

Big companies, however, have a high cost of failure — very different than the startup model’s limited downside. When Netflix risked moving its brand from DVD sales to streaming video, not only did millions of users feel the effects, the change impacted the company as its market cap dropped dramatically. Netflix did the right thing by making this tough business decision and betting on the future, but the repercussions are still being felt and have led to its business value losing hundred of millions of dollars and an initial loss of thousands of users. This is a prime example of the risk paradigm being reversed with an enterprise company — for any significant innovation a big company has an uncapped downside and a finite upside.

Startup secret sauce

Entrepreneurs can build their organization quickly (maybe not at the TSA’s breakneck speed) by following these key directions:

Have a clear mission

When Transportation Secretary Norman Mineta launched the agency in the wake of the 9/11 attacks, its goal was obvious: to secure the nation’s airports — and fast.

Early in the development of the TSA, there were several hundred new hires that ended up taking on much of the responsibility of building the organization, effectively serving as the foundation for what the TSA has become. This collective ownership of the organization was formed by a common understanding and belief in the overall mission.

Startups need to articulate powerful reasons for being in a similarly clear and unequivocal manner. If that means posting banners on the wall, or having a credo such as Facebook’s “the hacker way,” so be it. Just make sure the message is as obvious and inspiring to your most junior employee as it is to the CEO. It is your rallying cry, and it should inspire innovation.

Gather support from key outsiders and top talent

The TSA quickly brought in experts from everywhere. For logistics they pulled from Disney, for technology from Intel and for service from Marriott. Additionally, they recruited information technology experts and security professionals from the Federal Marshals and Secret Service. For startups, the talent might be venture capitalists or angels. They might be advisors. What they do is encourage risk-taking and help set the direction for the core team.

Young companies should not underestimate the value top talent brings, and founders should be willing to write bigger checks than they might like for key hires. Startups also should consider hiring in unexpected places. Recruit hackers from the local junior college, or better yet from failed startups.

Monitor crucial tasks against overall goals

The importance of monitoring and adjusting can’t be overemphasized. Congress had estimated 3,000 screeners would be needed for scanning checked bags. The real number of screeners needed ended up being 10 times that amount. The TSA was forced to quickly reevaluate its hiring goals. Metrics for measuring success must be must be aligned with longterm goals, not rigid, non-negotiable commitments to areas that may require change with time. For instance, stay away from being too financially committed to infrastructure, technology or processes that will change as institutional knowledge of the business problem grows and technology evolves.

Conclusion

Of course, the TSA example is not perfect. The TSA had unprecedented funding, and organizational failure would have looked more like the enterprise examples I mentioned earlier. What the TSA has is a startup mentality and similar ground-floor principles. If an organization with such a critical mission and so much to lose can encourage people to take on risk, startup founders may want to follow suit by embracing risk and encouraging it 10 times as much on their teams. With proper motivation, a startup can be extremely versatile, quickly establish itself, scale and deliver a solution to an existing problem.

Ben T. Smith IV is CEO of ShopCo, a startup focused on reinventing circular shopping with a social experience. He is also a venture partner at Accelerator Ventures and co-founder of MerchantCircle.com and Spoke.com. Smith blogs at btsiv.com and is on Twitter at @bentsmithfour

Victor Belfor and Justin P. Oberman contributed to this article. You can find them on Twitter @vbelfor and @justinpoberman

Image courtesy of Flickr user Roger Schultz.

  1. Chad Wittman Sunday, July 15, 2012

    Wait until the government creates your business and then mandates that you have a monopoly in your industry?

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  2. TSA is too notorious and violent towards own citizens and guests of US to have even 1% sugar poured by author.

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  3. Wow. Ben, I hope you aren’t looking for a consulting gig. If TSA were a private company their stock would be trading for a nickel a share and their CEO would be facing criminal charges. It’s not a model I’d recommend.

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  4. Clinton Mclain Sunday, July 15, 2012

    I am sorry but i disagree. TSA should not be viewed as ‘buisness’ rather a successful government program that managed to infringe on American freedoms. TSA is simply an extension of “BIG Brother.” A start up is a buisness. A buisness is trading a service or product for another of equal value. How can TSA be anything other than a new way the FBI can monitor and molest its citizens.

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  5. Charlie Wood Sunday, July 15, 2012

    Is this a joke? How the hell does starting a startup have anything to do with creating a bureaucratic malignancy given limitless money in a climate of existential terror free from any sort of accountability? Get real.

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  6. Bill Fisher Sunday, July 15, 2012

    This is nothing more than pandering TSA propaganda.

    Does anyone doubt that they would have been gone in days if people actually had a choice between TSA and another option? People drive long distances or avoid travel altogether to avoid dealing with these degenerates.

    Travelers loathe this agency and there has been mounting pressure to replace these creeps with private screeners or another agency entirely.

    Last month TSA screener reached inside a 73 year old woman’s bra at a checkpoint in Bozeman, Montana and saw footage of a TSA screener purposely smacking a Congressman in the privates and the screener is still on the job.

    A month ago, TSA molested an elderly couple and robbed them of $300, molested three children, a ten year old with a diabetes pump, a four year old who hugged her grandma and a seven year old with cerebral palsy, twice! Also in May TSA closed two terminals for security errors and four TSA screeners were arrested for smuggling drugs through LAX.

    There were a total of 91 TSA workers arrested in the last 18 months including 12 arrested for child sex crimes, over 25 for theft, ten for smuggling and even one for murder. Crime, abuse and incompetence are so widespread in TSA that even Kip Hawley, the last TSA Director, has called for its overhaul.

    CBS reported last month that a pedophile ex-priest who has been a TSA screener in Philadelphia for ten years and he’s still on the job.

    TSA management should be indicted for allowing these travesties to happen.

    Prove that this agency that has not caught a terrorist or even an explosive after over a decade and $60 billion is keeping anyone safe. People with cowardly opinions like this do great harm to our liberties and those of our children. While no one disputes the need for airport security, defending the current absurdity is disgraceful.

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    1. Robert Hollis Weber Sunday, July 15, 2012

      Bill, Mr. Smith seems like little more than a troll looking for attention but I’m glad you took the time to say this. Everyone needs to be reminded, as many times as it takes, that, far from being a model to emulate, TSA is a national embarrassment and disgrace.

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  7. What a bunch of baloney! Comparing the TSA to a start up is about as useful as comparing building pyramids to the corner lemonade stand. Name one start up you know that had an open check book, the full weight and legislative advantage of the US congress, zero competition for services, and forced “customers”. I can’t imagine how this excuse-for-an-article made it into GigaOM – a trusted zine that ordinarily has high grade news and insights. Maestro Malik must be on vacation again! (and what’s all this non-stop lessons for entrepreneur business – seems like everyone these days is dispensing 10-cent silver bullet advice on building a business. Give it a rest!

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  8. whereishawkins Sunday, July 15, 2012

    “Lessons on how to start a startup with an unlimited bucket of money, untalented people and massive scope creep.”

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  9. John Dickenson Sunday, July 15, 2012

    I’m shocked that this author gets to write a paid post on GigaOM whose standard is usually pretty high.

    I see no analogy between the TSA and a startup. Unless the author suggest we leave the business of startups to the fed govt?

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  10. meaningless, pointless article. TSA is niot even a valid example, for that matter, you can consider anything instead of TSA.

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  11. Tac Anderson Monday, July 16, 2012

    Obvious shortcomings of the analogy aside, this was a very clever article. It does make you think about the TSA in a different way and to their credit, they’ve always used social media brilliantly.

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    1. The average salary of TSA PR flacks is 103K. This is publicly availabel info and should outrage taxpayers. Their responses to criticism are unvarying BS about “multiple layers of security” etc etc ad nauseum. And Blogger Bob is a buffoon. No brilliance in evidence.

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  12. Mr. Smith, I know an awful lot about the TSA, having written about it for 7 years in publications such as the Christian Science Monitor and Barron’s. Nothing the agency’s perverts do surprises me. But your article…wow. You take shilling and propaganda to new lows.

    Abolish the TSA.

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  13. A little early for an April’s Fool article. I travel constantly and the TSA in every major airport I’ve gone through are routinely officious, discourteous, arrogant, and often times go out of their way to be downright cruel. Just perfect advice for a start-up

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  14. The TSA is a terrible example to use for this story. The operate a monopoloy to start with so there is absolutely no competition. They have zero customer service skills and there is absolutely no consequence (reference monolpoly), and they hi-jacked an existing business entity when the job was federalized. And last I checked, they still have security breaches on a regular basis. Terrible comparison. Totally apples and oranges. Sounds like Bo’s comments yesterday regarding business owners and how they owe their success to someone else. Pathetic.

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  15. What a crock. If TSA were a business, it would gone bankrupt years ago. GAO routinely lambastes this bloated bureaucracy for gross inefficiency and insiders refer to it as the Terrorist Support Agency. It should be disbanded and the money spent on intelligence, law enforcement, and incident response.

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  16. I have been traveling to a series of meetings for a couple of weeks so I never got a chance to read the responses to my post.

    And yes that means I experienced the difficulties and discomfort of TSA no less than 20 times in the last 2 weeks; including a few extra times one day when planes were cancelled and I had to leave and return to an airport a few times.

    When GigaOm ask me to contribute this piece (unpaid I assure you), I was aware of the disagreements with the TSA and its policies. I have not only read every book there is about it that I know of; I get the opportunity to hear first hand opinions everytime someone hears I was there after 9-11. The last time I had to discuss it was with a 80 year old still active iconic entreprenuer in the Southeast who hates taking his shoes off. I also got the opportunity to tell him at least this changed, little kids and “old” entreprenuers don’t have to take thier shoes off anymore.

    In fact, I am a big believer that while the process of creating the organization from scratch was a momumental startup task and something I definitely learned from during my modest experience being part of it 10 years ago; there are just as important lessons about how an organzation must refocus its mission and “grow up” as over time.

    Kip’s book Permanent Emergency is one of the most honest and accurate books not only on the early startup period but over the whole TSA story and its successes, failures and fundamental challenges. It is very worth taking the time to read.

    In terms of the lessons: no not everything applies to a start up anymore than the ideas in Moneyball all apply or for that matter some of the other experiences people often apply. But I did feel there were useful lessons. I certainly took a few away as did a number of other people involved early who went on to or returned to the entreprenurial world. I find lessons as an startup guy and investor all over the place and I hope to keep learning new ones until I am 80.

    In the meantime, please consider that most any American in those weeks after 9-11 wanted/needed to do something that helped and alot of them ended up filling that need by helping do things like create the TSA. And while based on a emergency flawed bill and full of mistakes as it grew up (what start up isn’t); the quick start up of the TSA did get people flying again.

    I appreciate the thoughtful comments and no I am not a big believer in government controlled systems with no competition. If there is going to be something approaching monopoly out there I hope is is some commercial enterprise I am lucky enough to invest in when it is just a grand idea and a few people with some passion.

    Sorry for the typos and grammar. I wrote this on a small screen where it was hard to review and besides that everyone knows my spelling is terrible.

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