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.
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.