Corporate Innovation Approach
None of the successful company CEOs I’ve worked with seek out innovation for innovation’s sake. They are after something else instead.
In an uncertain environment, with pressure to grow their business, how should they evaluate opportunities?
The last 20 years have left us with new tools and frameworks to evaluate opportunities for business growth. You probably know many of them…
Understanding the customer, future customer, potential customer. Studying Disruption Theory and Blue Ocean Strategy. Determining whether you are (or will operate) in an existing market, resegmented market, or new market. Understanding your business model type, such as direct, indirect, or marketplace. The way you look at trends. Even learning from copycats…
Then there are common ways to bring innovation in house in order to grow. Companies organize hackathons around their industry or tech. Longer-term efforts include the launch of an internal accelerator or incubator program. There are many flavors of these programs. I should know — I’ve operated three different accelerator programs, with three different focus areas, on three different continents. An internal program done well can support early-stage teams, provide access to high-level contacts, access to customers, and expertise. It can also be a distraction and produce minimal results.
What these in-house programs also can offer is a portfolio approach to new projects. But running in-house accelerator, incubator, or innovation programs can be difficult to do at scale. What other approach could we use?
I think in terms of maximizing “shots at goal.”
Dilemmas and distractions
Years ago when I worked in a new group at AT&T that was operating a new service to displace legacy business lines, we needed to operate separately from other divisions. We were culturally and financially at odds with the rest of the legacy business run by other parts of the company. Our main competitors were actually other departments of AT&T. I used to think this internal competition was an anomaly, but after time at other large organizations, from financial services to a university, I see how common it is. My own winning strategy for dealing with this: ignore the competition and focus on customers.
Most do not take that approach. One company I know has run over 30 innovation projects without gaining a single customer. Each project was the brainchild of someone in-house. Each project had a budget. And none of them spoke to customers before spending on R&D and production. Result: years wasted, millions wasted, and jobs lost.
As a friend mentioned, his Fortune 100 company has his team wear jeans and play foozball once a week in order to encourage creativity… I may be too quick to dismiss this behavior. Sometimes good things come just from getting people together in a low-stress environment. But the good things that come may be haphazard and not replicable.
What has irreversibly changed
In the last 20 years since the dotcom bubble, the cost to build a startup or new business has fallen by 100x – 1,000x due to fewer upfront costs, commodification of common processes, and better ways to test concepts. Speed to build has increased by 10x – 100x due to commodification of common tech components and processes and new programming languages. While it’s always going to be difficult to build a big business, getting the small ones started is easier. These changes are here to stay. But in spite of the above changes, if startups themselves don’t work out most of the time, why should we expect corporates to be significantly better?
If we take a process-driven approach, there are new ways that larger companies can test new business concepts and opportunities at scale.
Improve your odds of being right. Reduce your cost of being wrong.
As with the decreased cost and time to build mentioned above, the cost and time to gather useful insights from potential customers has also fallen. Over the past 15 years we’ve come to understand and apply customer discovery interviews as a way to learn. What’s changed beyond customer input in more recent years is the ability to test in rapid iteration, for example by going off-brand and testing multiple product concepts through targeted online ads. The speed of data collection and ability to make modifications is orders of magnitude beyond what earlier versions of this method could achieve years ago. This is rapid experimentation. Start with customer insight, generate five concepts, expand those into 50, test those with ads or low-fidelity MVPs, look for early metrics of success, double down on the more promising ones, and only then short-list the most promising handful for prototyping. Depending on complexity, this rapid experimentation process could take as little as three to six months and be significantly less expensive than betting all on a pre-selected small number of concepts from the start. More shots at goal. Lower cost.
You never eliminate risk, but what is risk after all? Risk is the cost of being wrong. If you are able to lower your downside by decreasing your upfront investment and also increase the odds that you make the right bets, then you have decreased your risk. If you take a portfolio approach to testing concepts and move quickly, you can also improve your odds of building something big.
After my experiences working at Fortune 100 companies, and more recently working with hundreds of startups, I want to bring what I’ve learned to larger organizations. Let me know when you’d like to talk.