In this post, it’s all about corporate culture and innovation, with co-founder of Collective Campus Steve Glaveski showing us the ropes.
With more than 50 per cent of S&P500 companies facing replacement in the next 10 years and one in five listed companies facing delisting in the next five years, large organisations, now more than ever, are looking for ways to navigate the minefield that is corporate innovation.
However, all too often what we’re seeing is the application of band-aid solutions amounting to little more than what Steve Blank calls “innovation theatre”.
Innovation is often being handled like a project – with a defined start and end date, which misses the point entirely.
What are your objectives?
Are you simply wanting to be seen as innovative, are you looking to change the culture, values and to educate or are you genuinely looking to deliver tangible, measurable outcomes that serve to generate revenue and grow (and create) market share?
Innovation efforts must go far beyond isolated initiatives and must be embedded and integrated back into the core business and corporate strategy, otherwise they will never amount to being anything more than just show.
So what are these isolated initiatives and how can we avoid theatre?
While these contests provide a great way to capture ideas, opportunities, challenges, threats, knowledge and so on, in most cases these contests lack a properly defined challenge or theme.
They usually fail to determine what kind of innovation the company is after (incremental, adjacent or disruptive) and the selection criteria is flawed and based on employee votes or senior management’s decision making.
Questions to ask of idea contests:
- Do we have money to explore ideas post a contest?
- Do people who submitted ideas receive feedback or are they left in the lurch, disgruntled at the lack of acknowledgment or feedback?
- Do we give people time and money to explore their ideas post an initial contest? For example, do we funnel them into a hackathon to validate the need, problem, solution and business model?
- Do we give people time to explore their ideas?
Hackathons usually bring people together to build stuff and that’s usually the end of it. It’s easy to succeed at this but much more difficult to succeed at identifying problems, coming up with compelling solutions and business models that are validated through the development of customer facing prototypes.
Speed is fundamental to success.
Companies seem to be investing loads in training their employees in design thinking, lean startup and running hackathons without addressing subsequent steps or the processes, culture and systems that really underpin the likelihood of successfully innovating in a large company.
So how do you go about changing the culture?
There’s loads of resources out there on this but you can start by asking the following questions:
- What or who is blocking innovation
- What cultural nuances are synonymous with the company’s employees?
- What do your people value?
- How can use these levers to influence and hack the culture?
Steve Blank gave a great example on my podcast of Sony having issues getting their middle managers to buy into a new company innovation program. Naturally, middle managers were reluctant to let their best performers participate.
So what did it take to change the culture at Sony?
After twisting the arm of one middle manager to go first and reluctantly give up one of his better performers, he was promptly presented with a letter of thanks from the president of the organisation, which in Japan, is a BIG DEAL.
Word spread, and soon everybody wanted a letter from the president, and they all got on board. In addition, once people’s basic human needs have been met they seek mastery, autonomy and purpose – if you can give them this you go a long way to satisfying their intrinsic motivations.
If you expect people to embrace programs, there must be incentivisation of some kind, be it intrinsic or extrinsic.
If you expect people to move fast then they can’t be wed to legacy infrastructure which is not only slow and clunky but costly, so much so that it doesn’t support taking lots of small bets or the rapid experimentation that underpins innovation.
We need to get our people using the cloud if they are to move at the cadence required to successfully explore new business models.
On Processes – what stands in our way?
How do we allocate capital to new projects? Is it based on market size, gross margin minimum, payback period/time to breakeven, performance demands, ROI, NPV, IRR? If so, it won’t support H2 and H3.
We need to use innovation metrics instead because H3 innovation in particular is fraught with unknowns – therefore applying definitive metrics which are based on known inputs and outputs, can only be done foolishly.
You are better off asking the following questions when assessing whether or not disruptive ideas get funded:
- what customer job are we addressing and are customers over-served or under-served by existing solutions?
- value proposition (are we actually solving a problem?)
- ability to deliver technology (can we build it?)
- existing competition (are we entering a treacherous red sea or a clear blue sea?)
- analogs and antilogs (has it been done before? are there stories of success and failure?)
- testability (can we test it relatively quickly, economically and effectively using our existing networks and ability to prototype?)
In addition, ongoing funding can be useful, as can an innovation options framework such as the one proposed by David Binetti here, which helps product speak finance’s language.
Performance reviews too don’t normally support innovation or the characteristics that underpin it in most large companies.
They tend to be tied to core position description competencies which in some cases haven’t changed in years – despite the lightning fast cadence at which the business world is changing.
Take a portfolio approach
On taking a portfolio approach, one idea won’t solve your problems. Venture Capitalists, whose job it is to invest in early stage disruptive startups, tend to be successful only 10% of the time – and that’s their full time job.
So what chance does a large company have at successfully picking winners when their entire investment philosophy has been built upon avoiding failure, taking safe bets and only ever investing in things where there is a predictable ROI?
This is why companies must take a portfolio approach and invest in many ideas. Using the lean startup approach of placing lots of small bets, companies can become adept at doing this quickly, economically and effectively.
On incubators, so you’ve put a team through an incubator. Now what?
There are countless questions to ask – just some of which include:
- Did you get enough validation to justify subsequent investment?
- Are you going to invest, partner, acquire or integrate?
- If building a spin-off, is it made up of independent people, employees or a hybrid of the two?
- What are your next steps?
If integrating the product back into the mothership, make sure it’s not done prematurely unless you want to avoid the benefit of maximising learnings that are generated and therefore limit the potential success of the product.
Know when to spin off and know when to ‘spin in’
If the culture of the parent company doesn’t align with the incubated project, then leave them be. If they do align, and they can fit within the systems, values and policies of the mothership, then integration makes sense.
Whatever the initiative, make sure it’s part of an integrated ongoing effort, has clear objectives and rather than just a band-aid, can become part of the organisation’s DNA.