Much of the literature and thought-leadership around innovation paints a pretty picture about what it actually takes to create lasting change. It sounds glossy and nice, and always seems to end in success, but the real world experience is not always so positive.

Having worked in innovation for over a decade now, our friend and Global Head of Intellectual Strategy & Portfolio at Volvo Group Mike Hatrick has seen his fair share of attempts at corporate innovation going bust after a promising start.

“When a big corporation wants to reinvigorate their innovation process, they usually launch a big initiative, which generates a lot of enthusiasm and may have some great initial success before fading away a few years later,” said Hatrick.

“Questions then begin to pop up. ‘has this transformation failed?’, ‘what did we achieve?’, ‘Is this naturally how innovation works?’, ‘Should we look at this in a negative way or a positive way?’

Hatrick believes that the success or failure of an innovation program hinges not on how long it lasts, but what it contributes to the bigger and longer term picture.

 

 

“I had learned how innovation can be taught, enabled, and systemized while leading the innovation transformation program at Bombardier Aerospace,”

Originally a product designer and engineer, Hatrick made his first foray into the world of innovation when he and his team at Bombardier Aerospace entered a product they developed for an innovation award and received a runner-up certificate from Prince Phillip, Duke of Edinburgh.

“We were on stage and the photographers’ flash bulbs were going off, and I was thinking ‘how the heck did this happen? I got thinking about what we had done that had caused innovation to happen, and trying to understand how we can repeat the process” reminisced Hatrick.

“That was the turning point for me, moving from being an engineer to an innovator,”

Fast forward a decade, and he’s now cycled through Bombardier Aerospace, Swisslog and Volvo, while also serving as an advisory board member for the Front End of Innovation EMEA.

 

 

Having experienced first-hand how corporate innovation programs can go boom and go bust, Hatrick is now currently working on a book with the working title “The Search for Innovation”.

In the book, he explores the innovation journey from the practitioner’s point of view — the day-to-day hurdles to overcome, what to do in the face of adversity, what works, and what doesn’t.

He explains how innovation is often a cyclical journey, which can peak over  two to three years, and then drop off.

If an organization is to kickstart an innovation initiative and make the most of those two to three years, they must ensure these five key things are in place, according to Hatrick.

 

1. Starting Point

Where is the starting point?

When an organization decides they need more innovation, their first course of action is usually to start an innovation program. However, most of them tend to ignore the success factors surrounding it. It is quite often treated as an experiment — organizations start an innovation program, see how it goes, and cross their fingers hoping to create something positive out of it.

“It’s really strange because we don’t do anything else like that in big organizations. Everything else is usually well-planned. You wouldn’t start a Lean Transformation or Six Sigma introduction without a detailed programme and experts involved, so why would you for an innovation program?” said Hatrick.

Some key questions to ponder upon before launching your next innovation program:

  • Where is it we want to get to?
  • What does it look like when we’re finished?
  • What are the results that we really want?
  • Do we have the right team on it?
  • Does our team have the right skills and pedigree to deliver?

 

2. Organizational Resistance

When you work on any transformation initiative, such as an innovation program, it’s exciting and there is a tendency to think that everyone else is as excited as you and wants it to succeed.

Most of the time, that isn’t the case at all, and there is a hidden resistance, or even a solid brick wall blocking it.

“To the C-suite and senior management, the idea of something constructive or different that could potentially derail the existing business model is really, really scary. Many people in that situation may just wish it would go away and they can carry on doing what they’ve been doing successfully until now, and continue doing it for as long as possible,”

“This is one reason big corporations are often very slow to react to market changes — it feels very risky to imagine switching your business to something very different. You already have the factories, the people, the skills, distribution, networks for your current business and those are hugely difficult to change,” Hatrick explained.

Some questions to think about:

  • What kind of organizational resistance exists in our organization?
  • How can we confront that resistance or work around it?

 

3. The Handshake

Or simply, how well does your innovation process gel with the rest of the organization?

Many thought leaders often believe that innovation is all about execution. But Hatrick believes that’s only part of the equation.

“Take a company like Volvo. They’re fantastic at executing and have been doing it forever, so why should an innovation program spend any time thinking about the execution side of bringing the product to market?”

“They should instead be thinking about creating fantastic things that could be delivered to the right parts of the organization who are great at executing. Define where that handshake point is,” remarked Hatrick.

Some questions to think about:

  • What is the boundary between the front and back end of innovation in our organization?
  • For what we plan to create, does the back end capability (product development, manufacturing, and distribution) already exist?
  • What exactly is going to be delivered by the front end to the back end?
  • How can we make that handshake work as reliably as possible?

 

4. Culture

Drucker said, “culture eats strategy for breakfast,” and creating an innovation culture is crucial in any organization. However, if your window is only two to three years, expecting a large organization to change its internal culture completely in such a short time span is a bit unrealistic.

“During the two to three years, it pays to put total emphasis and focus on delivering some fantastic projects and transforming some key people so it becomes a lighthouse project. Demonstrate what can be achieved, who are the people who can do it again, and you will create a domino effect where project numbers grow as the years pass,”

Rather than trying to change a very large number of people, it is far more efficient to start off creating a special task force.

“If we look at companies that has truly transformed their culture — the ones like Whirlpool, P&G, 3M — they all took 10 years to achieve that. In order for that to be successful, they have to be really resilient, and have a CEO that is completely on board for the long-term. Most companies don’t have that luxury,” remarked Hatrick.

Questions to ponder:

  • Who should join the innovation task force?
  • How can this task force work in harmony with the existing company culture?
  • How can we evolve the company culture to be more conducive to innovation, starting with this task force?

 

5. Role of the Innovation Manager

As a relatively new job title, the role of an innovation manager is not well-defined, and it often changes.

Innovation managers are often tasked to deliver an innovation process right from the beginning to the end, when what’s required can change quite dramatically in the different stages.

In the early stages, they’re researching, strategizing, evangelizing, and pioneering the initiative. As the process transitions into the middle stages, an innovation manager becomes the change agent, designing the organization. As each stage requires very different skills and modes of behavior, it is not necessarily the same person that drives it from the start to the finish line.

“That’s another thing that makes it so difficult — the choice of who should be the innovation manager is really important. Maybe during the process this person changes as well. This is something organizations need to think about if they want their transformation to be successful,” said Hatrick.

Questions to ponder:

  • What should the role of the innovation manager be?
  • Where will they come from?
  • How does it feel to be one?

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Follow Mike Hatrick on LinkedIn.

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This is part two in a three-part series with Rowan Gibson, discussing how the world’s best innovators come up with breakthrough innovations, and how his clients – most of them not the typical tech darlings we’ve come to think of being great innovators – find new avenues for growth via business model innovation.

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In today’s rapidly transforming world, it is important as a leader to be able to spot and capitalize on the emerging trends that could revolutionize your industry as you know it now.

Not catching the right waves and changing at the right time can create very real problems later on for your business — just take a look at Nokia, Borders, Kodak. They did not keep up with market changes and now they are floundering or non-existent.

Knowing that you have to align your strategy with the current trends is one thing, but how can you identify new trends? How can you capitalize on them ahead of your competition? How can you tell the trends from the fads?

Author of The Four Lenses of Innovation Rowan Gibson shares from his extensive experience in helping large companies harness new trends and redefine their company.

 

To Predict the Future, You Must First Understand the Present

“Everything you need to know about the future, you can basically know,” says Gibson. “In today’s world, very little knowledge is actually proprietary anymore. It’s all out there to be found, if you’re willing to take the trouble to look and to join the dots. The future will be formed from trends that are already observable.”

The challenge is no longer so much about trying to imagine and predict or even invent the future. It’s more about being fully aware of what’s already going on around you right now, and then harnessing that knowledge to create the new value that customers will be looking for tomorrow.

That means we have to develop a deep understanding about the emerging trends and discontinuities across many domains, and then synthesize them into a   compelling vision and a strategy about what to do next. What’s important there is to distinguish between the big, industry-shattering trends and the passing fads that will fade away very quickly. You don’t want to be banking your company’s strategy on the latter.

 

Amplifying Weak Signals

So how can you tell one from the other?

Gibson suggests an exercise called “Amplifying Weak Signals”.

Ask yourself, “If this small, rather insignificant trend – this ripple on the ocean – actually grew and became more important, what would the consequences be?”

Take something like the rapid increase in internet bandwidth, for example, in the early 2000s. That was something that quickly opened up the doors to file sharing, which led to music downloads and iTunes, and eventually to the downfall of the record industry as we had known it for decades.

“Basically, anyone could see that internet bandwidth was going to increase exponentially, so why did it take the record labels so long to react? They basically went into denial, and tried at first to fight the file sharers by threatening them with prison, rather than coming up with a new business model like iTunes, for example.” said Gibson.

“It’s the same principle with streaming media — Netflix and Spotify jumped on that trend, whereas Blockbuster clung onto their old business model based on physical retail outlets and DVDs.”

You can usually see the signs of the next big wave. They’re not necessarily invisible. It’s just that they may be more than a little unpalatable if that oncoming wave threatens the current way you run the business. It may even turn out to be a giant tsunami – a tide of history – that could wash your company away, if you’re not careful.

Here’s the good news: it’s entirely possible to react properly to these trends, although that doesn’t by any means suggest that it’s easy. Take Netflix, for example. Just like Blockbuster, their business model was based on renting out DVDs. In their case, of course, they didn’t have physical retail stores, but they did have big warehouses, and shipping, and logistics, and call centers etc. Yet they were able to achieve a complete overhaul of their business model to make the shift to streaming. And now they’re a major player in that space, while Blockbuster is dead. So it is possible to harness a huge industry-transforming trend, and to make the necessary transition, but it’s still very difficult. However, the alternative is to simply become obsolete and die. That’s not a good option B.”

Exercise:

Take a look at one or two trends, some thingsthat might be changing in a rather minor way at first. Try to scale them up and project them into the future.

Ask yourself:

  • What if this became really big?
  • What kind of difference will it bring to our industry?
  • What are the consequences?
  • Who would be impacted by those things?

 

Disruption in the Next Ten Years

With the pace of change rapidly increasing, it’s reasonable to expect pretty much every industry to be disrupted within the next decade. Today’s disruptors, too, will be susceptible to disruption if they do not continue innovating.

The question isn’t whether your industry will be disrupted, it’s when and by what, and by whom. Perhaps mostly importantly, it’s how to respond.

“Most people, when responding to surveys, say that they expect their industry to be disrupted in the next two to three years. So they’re aware of it, but they’re still very often stuck in their conventional business model. It’s one thing to recognize that there’s disruption coming your way, it’s a whole other thing to make the kinds of major changes that disruption may require,” notes Gibson.

His recommendation to companies is for them to not just understand what the trends are, but to figure out ways to incorporate them into the existing business.

“Let’s take the combination of autonomous driving  and ride-sharing, for example. If you scale it up and you look forward, in the future there is a big possibility that nobody will really want to own a car. They’ll probably just take the next Uber or whatever that’s going past the door. They won’t even have to learn to drive or own a driving license. What does that do to car sales? And to car financing? And to car insurance, and so on?”

“We know that we’re rapidly moving towards an era where it might not even be a car, but a quad-copter outside the door. If we’re in insurance, we’ll have to realize that we’re not necessarily insuring the drivers anymore, but the vehicle instead. If we’re a bank, we’d need to know that consumers won’t be buying a car or needing a car loan anymore. We’ll need to rethink the whole idea around insurance and loans.”

The most important takeaway is to take a good look at the various ways the world is changing and then make sure you change with it. The key is to harness the power of change to continuously rethink and reinvent your business model so that remains fit for purpose in the new ‘Transformation Economy’.

 

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Industry Shifts Map is powerful strategy tool you can use to help identify and map out the impending shifts in your industry and adjust your strategy to be ready for them. Download it for free here.

Last month, we were in Malaysia to run two very rewarding sessions of Business Innovation Bootcamp.

Throughout the week, we worked with large and small businesses across several different industries, from utilities, finance, oil and gas, to car manufacturing and logistics. Their one biggest question?

 

“We know we need to innovate. But how?”

 

The country has done well to weather the economic storms of recent years. From 2010 to 2015, the Malaysian economy has grown at a rate of 5.6%, with the economy forecasted to expand by more than 4.8% by end of 2017.

However, with two out of three of the country’s exports stemming from unsustainable sources like palm oil and fossil fuels, Malaysia is beginning to face growing sustainability challenges.

As the world moves towards a greener economy, there is now a stronger need to explore new growth areas that are sustainable, inclusive, and fit for future generations of Malaysians.

This vision is backed by the government’s ambitious Transformasi Nasional 2050 (TN50) initiative, a program that aspires to transform the Malaysia of today into one of the world leaders in economic development, citizen well-being, and innovation by the year 2050.

 

Companies noted down their largest innovation challenges. With the “soft” challenges on the right, and the “hard” challenges on the left.

 

Many long-established Malaysian companies are aligned on this goal, as they are slowly beginning to feel the cost of remaining stagnant. And while they face a growing need for transformation, many of them are stumped as to how they can re-position their businesses that has for decades remained their sole focus.

The biggest struggles brought up during the Business Innovation Bootcamp in Malaysia were not very much unlike the usual challenges seen among our corporate clients in other parts of the world. These could be broadly categorized into hard and soft challenges that include:

 

People, mindset, and culture

Teams lamented the lack of a innovative culture within the company, where they worked in an environment that simply wasn’t conducive to large, innovative projects. They were bogged down with their day-to-day work, and was not incentivized in any way to think beyond today’s core business.

 

Lack of Resources & Support

Another problem was the lack of resources funneled towards business model innovation initiatives. Good, or disruptive ideas get killed, and teams simply do not get the kind of funding, capabilities, or support they need in order to take an idea to market.

 

Lack of the Know-How

Steering your existing core business while rapidly exploring new business models in parallel is a scary, and often risky process. Corporations need to know how to remove the risk associated with innovation, while still devoting time and energy to untested waters in order to fuel growth from innovation.

 

While these challenges do add significant complexity to business model innovation, it doesn’t mean that it can’t be done, or that companies shouldn’t spend time on it.

 

Getting Started on Your Transformation Journey

Our friends at Innosight recommend the dual transformation path. We call it building your innovation strategy based on Core, Growth and Explore.

All the companies we met were struggling to explain their innovation strategy. We always recommend starting by using the Strategy Intro tool [Free Download Here].

First, decide on how much you should focus on your existing Core business. Next, define and decide your next Growth areas. But very importantly, decide on your Explore efforts, where you will be exploring entirely new growth areas and business models.

Based on your choice between Core, Growth, and Explore, every company’s innovation engine will look very different depending on ambitions on simply maintaining the core business as is, or exploring entirely new areas.

It might sound overly simplistic, but any innovation effort has to start with the basic understanding of the three areas — Core, Growth, and Explore.

Grethe Skundberg has played many roles throughout her illustrious career, from broadcast journalism, to PR, to sitting on different boards of directors, to her current mission at Nordic Unmanned as the Director of Innovation and Strategic Sales.

For the uninitiated, Nordic Unmanned is spearheading drone flight in Norway by bringing the latest unmanned systems and sensor technology to the Nordic shores.

Norway is perhaps one of the most forward-looking countries in Europe to embrace the technology.

It is one of the few countries in Europe that permits flights performed beyond the pilot’s line of sight, or BVLOS (Beyond Visible Line of Sight). This opens up a host of possibilities for both commercial use and government operations — including inspections, emergency preparedness, and marine use.

 

The Rise of Drones in Norway

Image credit: e24.no

Nordic Unmanned already has several agreements with governmental agencies for the usage of their drone technology, and the private sector is starting to recognize the scale of opportunity drone technology brings.

In time, Nordic Unmanned is predicting a savings of 40 billion USD annually through the use of drone technology. Drones will replace manned helicopters and climbers to make things safer and more cost-efficient.

To understand the rapidly evolving technology and how to lead in times of change, we got in touch with Skundberg for a chat.

 

Staying Ahead of the Next Industrial Revolution

Image source: The University of Sydney

The development of the steam engine drove the first industrial revolution, while electricity and mass production brought about the second. The third, we all know very well was driven by computerisation. And now the fourth is upon us — with disruptive technologies such as the Internet of Things, robotics, and artificial intelligence changing the way we live and work.

Being at the front lines of a new technology that is advancing at an exponentially increasing pace means that Skundberg and her fellow team mates at Nordic Unmanned has to be prescient and always ready to pounce.

“We need to be at the front end of the technology, understand the speed and complexity and constantly figure out which way we need to move to stay in front,” said Skundberg.

But how does she do it?

Be Open-Minded and Customer-Focused

“You always have to be open to new initiatives, new ideas, and be used to changes. When you are working in innovation, new initiatives and change is a big part of that,”

Skundberg believes that embracing change is the only way forward.

“But not change for the sake of change,” she cautioned.

“Instead, look at what your customer needs. Too many have brilliant ideas but did not test the market. They end up failing because they became too in love with their own technology and ideas without first testing or getting feedback from the market,”

She explained how Nordic Unmanned came about not because of a whim, but because they had observed that the technology had advanced to a point where it can be widely adopted. The fact that many countries were already embracing the technology was a solid sign that it would eventually make its way to Northern Europe.

“You need to be open-minded, discovery-driven, you need to be options-orientated. See which options could actually lead to something before you spend too much money.”

Never Stop Learning or Questioning

Skundberg spends most of her free time with her nose in a book or article about her industry and innovation in general. She surrounds herself with mentors and people “who knows more than yourself” to constantly grow as an innovator.

In fact, her first brush with the world of innovation was through co-founder of Engage // Innovate and X2 Inc Christian Rangen, during an innovation bootcamp for one of her previous companies.

“Christian made me understand that we were losing ground and needed to change. That we needed to try to see into the future. We were looking only at the core business when we needed to look beyond that at new initiatives.”

The bootcamp led to the formation of the company Nordic Smart Buildings, led by Skundberg and handed over as she moved onto Nordic Unmanned.

It was the catalyst that helped her see that there were more possibilities than there were obstacles. She realized that she needed to be well-read, and in-the-know in order to stay ahead.

“The fourth revolution is moving very fast. You need to stay on top of what’s happening in order to understand the shifts and be a part of it,”

And despite being the pioneers of bringing the drone technology to the Norwegian people, Skundberg and the team at Nordic Unmanned are constantly questioning themselves on when they will be disrupted.

“There will be a disruption. The point is to be part of that disruption. To see it coming, you have to constantly ask yourself questions like ‘can we do this better?’, ‘will there be a disruption to our business?’.”

Collaborate or Perish

 

One of the running themes during our talk was Skundberg’s passion about the magic of collaboration. She saw the many possibilities and opportunities that came with working together, and explained how the way to the future is through collaboration.

In the Rogaland region of Norway, competence and money is abundant. The problem is that companies are used to working solo and see each other as competitors instead of being a part of an ecosystem.

“There are so many possibilities for many companies if we exist as part of an ecosystem — and not only for Nordic Unmanned — we’ve got the competence, the enthusiasm, and the money in the region. It is entirely possible for Norway to be the leader of many programs and trends,” Skundberg enthused.

We’ve just begun to scratch the surface of drone technology, and its place in the fourth revolution. Will you be along for the ride?

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On our trip to Silicon Valley earlier this year, we had the luxury of discussing the intricacies of corporate innovation with globally-recognized innovation expert and co-founder and CEO of Mach49 Linda Yates.

Mach49 is one of few companies that has perfected the formula to helping large corporations innovate successfully from within — or as they say, “disrupt from inside out.”

“There’s no reason large companies cannot innovate to create meaningful growth,” Yates remarked in an interview with us recently.

“You have the capital, the resources, the channels, the customers, and great talent. Are you really afraid of startups?”

And yet, even armed with all these resources at their disposal, large businesses are afraid.

Large Companies Fear Disruption

4 out of 5 executives fear being left behind as technology evolves faster than they can adapt.

In a Dell report from 2016, more than half of Asian company leaders believe their businesses will become obsolete in the next 5 years due to competition from startups.

The key finding from the Big Data Executive Survey 2017 showed that nearly half of the executives surveyed are worried about major disruption on the horizon.

Many believe that large businesses don’t have the agility or vision, and are too stuck in their ways to out-innovate startups.

Some give it a go, and dip their toes in what we call “innovation theater” — a massive call for ideas, a pilgrimage to Silicon Valley, an open floor plan. When none of these initiatives result in anything definitive, they throw in the towel and declare that they’ve given innovation a go but it doesn’t work.

Innovation is Not Rocket Science

Having had one foot in Silicon Valley, and one foot in the Global 500 almost her entire career, Linda Yates is one of those who are truly bilingual between the startup world and the corporate behemoths.

 

“People are now flocking to Silicon Valley, looking for that kind of innovation fairy dust to be sprinkled upon them, and we know that doesn’t work.”

 

“What we do know from our strategy, and from our work with large companies, is that they can absolutely innovate.”

Yates’ argument is that large companies have all the ingredients that startups don’t — which should give them the upper hand in innovation.

“It’s not fairy dust, it’s also not rocket science. If you think about what Silicon Valley is really good at, it’s fairly straightforward — we understand customer pains.”

 

Point #1: Understand Your Customer

Surveys are not the way to go.

“Surveys are statistically significant and strategically irrelevant,” chuckled Yates.

“All you’ve done is outsource your potential to understand your customer at a visceral level and develop empathy for your customer, to someone who’s just going to repackage what they learn and sell it to somebody you know.”

When presenting keynotes to global company boardrooms, a question Yates often asked was how many customers they have actually interviewed.

“90% of hands do not go up. 90% of board members have not actually spent time understanding their customers’ pains.”

“Nobody would say they wanted a DVR, a microwave oven, or a Mini. What they would usually express is the pain from not being able to get home to watch their favorite TV shows on time because they were stuck at work, not having the time to make a 4-course meal but still wanting to eat healthy, not having a vehicle that makes it easy to cart an ever increasing number of pets, equipment, kids to myriad places.”

 

“Our job is to understand customer pain, not ask customers what they want.”

 

Understanding customer pains is one of the core set of best practices when it comes to innovation.

“We teach companies how to actually interview customers, and understand customer desirability.”

If desirability is huge, then you identify the opportunity and move on to product, service or execution feasibility.

 

Where companies go wrong:

The mistake many companies make is investing too much time, energy and money into developing a product. At that point, they’re so invested in that product that they’re no longer interested in the customer pain.

“All they’re interested in is showing you the product and asking, ‘what do you like about it?’, when really, people are saying they didn’t want it, don’t need it, but are just too polite to tell you.” said Yates.

 

Point #2: Marry Customer Pain with the Art of the Possible

Startups are very good at understanding customer pain and marrying that knowledge with the art of the possible (both trends and technology) to come up with a solution. They then place a series of small bets to test their solution.

Understanding the art of the possible is why so many companies decide to visit or set up an office in the Silicon Valley, but innovation happens globally and you do not have to be in Silicon Valley to be successful — you just have to stay on top of the latest trends and technology.

While Yates is not a huge fan of “corporate tourism”, Mach49 does help curate visits for companies that need a Silicon Valley immersion experience to create the sense of urgency that now is the time to disrupt themselves before being disrupted.

Yates says, “We do these very differently, helping companies define a challenge, curating visits relevant to that challenge and wrapping up the week with a “Blitz” — our design thinking workshop on steroids — to ensure they go home with real action items based on what they learned during the week.”

 

Point #3: Place Small Bets

Many senior executives feel that fueling growth from innovation would be too expensive, risky and difficult. They’re afraid that devoting time and energy to untested waters could derail their core business that’s the cash cow today.

While no one can deny that new ventures are risky business, staying stagnant and not growing in times of constant change is a surefire way to cement a company’s irrelevance and future demise.

There is however, a systematic way to remove the bulk of the risk associated with innovation — a process that most innovation experts call “placing small bets.” This helps remove the greatest amount of risk on the least amount of capital.

“It’s important to place a series of small bets and then unlock additional rounds of funding as you remove the layer of risk — the risk can be market risk, financial risk, it can be a technical risk. All those things have to be thought through.”

 

Where companies go wrong:

Placing too big a bet.

 

“Big companies, when they do innovation, they try to boil the ocean. They want to shift the whole oil tanker. But you know, large scale intervention just doesn’t work.” said Yates.

 

Doing too much at one go, spending too much money without validating the process and risks involved is usually what gives innovation an expensive price tag with no significant returns. Companies that do this end up ticking the “innovation” box, decide it doesn’t work, move on and head towards their own Kodak moment.

 

Point #4: Make the Shifts You Need for Transformation

Many new ventures face almost certain death when shoved into the existing systems, processes and culture in a corporation. The legacy structure has been fine-tuned over years, even decades, to ensure the success of the established business, with financial and operation models that get in the way of the emerging business.

“There are very significant from-to-shifts that large scale companies have to make to ensure that these new ventures reach escape velocity, that they don’t suffer from the inertia, the antibodies, and the orthodoxies and get killed by the organization,” explained Yates.

Mature corporations have to think about what’s going to get in the way of their innovation initiatives actually becoming successful.

 

“Is it the metrics we use to measure it? Is it the way we compensate people? Is it the way we resource? Is it our procurement process that takes 6 months to get a new vendor through?” she questions.

 

Xerox built the world’s first personal computer but failed to capitalize on it, partly because they tried to sell it through their existing sales channel, which in the end resulted in failure because the customers that bought the copy machines simply weren’t the same customers that would purchase the new products.

Ask yourself, “What are the from-to shifts that your departments would have to make to help the new company reach escape velocity?”

 

Where companies go wrong: 

Many corporate leaders complain that their business units have great ideas but just won’t make any investment — but they forget to take into account the limits of their existing structure.

“I ask them ‘how do you pay them? what are their metrics for compensation?’ Like zero for innovation, 100% for making the bottom line and rolling that up.”

Yates remarked that by nature, innovation doesn’t have any net profit attached to it, so it’s unrealistic to ask people to commit themselves to it unless there is an incentive to make that happen.

 

You need different goals and operational metrics for the teams running the new business ventures.

 

At Mach49, they help companies create, build, and launch new ventures by applying a very robust set of methodologies during a 12-week incubate process that includes customer desirability, determining product / service execution feasibility, and ensuring business viability.

“We also work with the mothership to help them think about the from-to shifts they will have to make to ensure the new venture can be a success. The goal is ultimately to help the company build the capability to create a pipeline and portfolio of new business opportunities on their own, ideally building their own internal incubator with their own team.” Yates explained.

“During the customer desirability phase, we work with the company’s new venture team to do 100 to 200 customer interviews. We conduct a very robust market assessment to ensure that there is strong customer interest. One client had 10,000 people sign up for a product that didn’t even exist yet, at that point we knew there was a market,” noted Yates.

 

Point #5: Unleash Your Internal Talent

Sometimes we get caught in the legacy trap. Afraid that something new might alienate our existing customers and threaten our net income levels, and possibly even render our jobs irrelevant. But Yates believes that fear is unwarranted.

 

“The people running the core business don’t want this innovation to happen because they feel that it threatens their existence and eliminates their reason for being. In fact, the opposite is true.”

 

She pointed out that there are three types of people in any organization — each serving very different functions, yet complementing one another.

 

The Internal Entrepreneurs

Internal Entrepreneurs aren’t the people running the core business, but instead are the idea-a-minute person who are close to the customers, have great ideas and just want to be given the opportunity to test them. These people are like startups, or in Silicon Valley terms, early stage founders. Many of these people are not experienced enough, and possibly don’t have the attention span or interest, to run their companies long-term. They stay in the incubator and launch the next thing while handing over the venture they’ve been working on to the next type of people typical in a company.

 

The Growth Experts

These are the ones who are really good at growing businesses. They’re not really the idea people, but they’re the ones who can take an idea and understand how to grow it 15-20% a year. They know how to recruit people, how to manage people, and how to run the business.

“Some of the best startups in Silicon Valley resulted when brilliant, but perhaps less experienced entrepreneurs knew they needed help growing the business and brought in a more seasoned veteran to both lead and teach them.”

An internal entrepreneur is lucky, they are already surrounded by experienced veterans who can take their venture and grow it.

 

The Efficiency Experts

The third type of people are the ones who knows how to manage a business like no other. They can operate efficiently, they know how to reduce costs without reducing quality.  These are the type of people typically running the core and legacy businesses.

 

“If they’re smart, they look at the entrepreneurs as the people who are going to basically fuel their pipelines for years to come, because as big as the business is, it’ll fade a la Kodak, a la Motorola, a la the printing business.”

 

Where companies go wrong: 

Believing that they do not have the capacity to innovate. Having worked with corporate innovation since 1994, Yates strongly believes that all companies have the resources, internal talent, ideas, capital, and customers needed to pursue innovation without having to waste millions or billions on a potential failure.

 

Point #6: Leverage Your Resources

A big argument for several companies is that they do not have the budget or resources for innovation.

Yates begs to differ.

“If you’re paying dividends or cutting costs, that just tells me that you have the money to invest in innovation. And the beauty of it is that it does not have to be expensive.”

It can start small, it doesn’t have to be a massive overhaul, but it helps sow the seeds for the future. The key (as mentioned above in point #2) is to methodically test and remove risks before channeling more money and resources into the project.

If we look at startups, they’re typically funded with a minimal amount of money to kick off — $50,000, $150,000, $500,000 etc. And then they go through a process, proving their hypotheses and market feasibility to unlock more funding to build upon the business.

“As long as you have a rigorous and robust methodology for doing that, then you’re on the right track,”

 

Where companies go wrong: 

Doing “innovation” without any conducive measures or systems in place. Examples include setting up an innovation unit that still has to adhere to organizational constraints, appointing a Head of Innovation who doesn’t have power, and not defining any metrics on corporate venturing.

 

Point #7: Run both the Core and New Business Concurrently

The whole point about investing in innovation isn’t to push your existing business model aside, but to build on it and expand it for the future.

 

“You know your product is going to have a lifetime and it’s ultimately going to fade. But it doesn’t matter as long as you are continually reinventing yourself,” said Yates.

 

In the context of the Norwegian economy, which relies a fair bit on the oil & gas industry — it’s understandable to want to keep optimizing the efficiency of its core business. But while doing so, it also makes sense to leverage the vast amount of data and knowledge they have built up over the years from running the business, and see what they could be doing with that from a business standpoint.

“What could you be doing in terms of alternatives? What could you be doing in terms of digital disruption? What could you be doing about enabling small, medium-sized businesses around energy or consumers around energy?” asked Yates.

She aptly analogized the oil industry as an oil tanker.

“You send out a series of speedboats and tugboats that are tethered to the oil tanker. Ultimately, you’d have sent out enough of those that you can shift, if not, you can continue to run your core business, but they have to simultaneously be thinking about what’s next.”

 

Where companies go wrong:

Being overly protective of the core business and not keeping up with the pace of change, instead of adopting a methodology that works to help you develop a portfolio of new ventures.

 

__________________________

Linda Yates is the co-founder / CEO of Mach49. Working under the motto “Disrupting Inside Out”, Mach49 helps large organizations create, build, and launch new ventures generated from within. Based in the middle of the Silicon Valley, Mach49 works with a host of global companies, including a handful from the Nordics.

Engage // Innovate collaborates with Mach49, and will bring its first Norwegian client to Mach49 later this year.

Do you want to learn more?

Contact Christian Rangen, partner at Engage // Innovate today at christian@engage-innovate.com

 

Kuala Lumpur