Intrapreneurship and culture are the only effective ways to boost your innovation metabolism—and engender a transformation that eliminates the distinction between startup and incumbent.
That is the question posed in “From Incremental to Exponential: How Large Companies Can See the Future and Rethink Innovation”. How to unleash the potential to transform large business quickly. How to respond to new threats. And how to adopt the tactics and ideas of fast-growing younger companies. What are the acceleration mechanisms, what is the mindset that is needed? What can you learn from SpaceX, Walmart, Amazon, Netflix, Microsoft, Tesla, Xiaomi, IBM, Patagonia and 3M?
Startups are jealous
Because large companies have everything, a young company does not have. Customers, distribution channels, production capability, quality management capabilities, experience, scale, capital, branding, data, etc.. The argument to adopt intrapreneurship. We think it is faster and more focussed than innovation. Check it out here. You do not have a choice. Exponential is coming your way. The future is faster than you think. Faster development and improvement mean more rapid maturation, which in turn generates swifter adoption.
Innovation in a business model triumphs over innovation in products, and platforms triumph over business models. These new forms of industry disruptions make key business activities nearly free or incredibly cost-effective, enabling upstarts to quickly enter and capture market share or build entirely new businesses on the new economics these disruptions enable. Near-instant disruption. A company can fail much faster today: competition is fiercer and wider, technology is changing faster, starting a company even in a capital-intensive industry is less expensive, and customer tastes are more fluid—all leaving legacy companies without the luxury of time in which to figure out how to compete against startups more effectively—reducing the average life cycle of a company to 20 years. And reducing further in the future.
Here is your problem. The demand for constancy and predictability results in tight, top-down hierarchies, causing risk-averse companies to become painfully slow in decision-making and product development. You are too slow. The Hall of Toast is haunted by the ghosts of companies that once were hailed and later failed or shrank to a shadow of their former selves. Exponential trends can overwhelm even well-intentioned efforts to innovate. No longer the mythical frog in the pot unnoticing of the water’s rising temperature, legacy companies are the frog leaping about trying to understand how to respond to the boiling cupful of water from nowhere that has landed on its head.
We have a new innovator’s dilemma
- Technology development and product adoption are occurring so much faster today than even a decade ago that the nature of the innovation game has changed radically.
- The competition no longer comes from your industry alone; it may be two kids in a garage building an exponential technology.
- Companies that adopt technology sooner and more successfully gain an exponentially increasing advantage. Those that don’t lead the disruptions become their casualties.
- The information now available has shifted power from seller to buyer; intellectual capital and brand no longer lock in the customer.
- The very nature of trust has changed. It was formerly institutions whose trust mattered; now, it is individuals.
- When it comes to management, command and control no longer work.
- Innovation thrives in diversity, and it is your people who make it happen.
- Joining a startup rather than a large, established company is no longer regarded as risky; potential employees often perceive it as the fastest path to career advancement and the place for top performers.
Innovation as a muscle
The essential point of all these changes is that innovation is the key to business survival. Today, competition and disruption can come from anywhere: from below, from above, from adjacent fields, and totally unrelated companies. The new diversity of attack vectors dictates that companies must have new strategies for dealing with disruption.
Innovation fails a lot. The formula was always the same: pick a hot industry, build a science or innovation park next to a research university, provide subsidies and incentives for the chosen industries (say, biotech or semiconductor research) to locate there, and seek a pool of venture capital. It was an innovation catastrophe. Corporate innovation centres also fail most of the time. So do top-down corporate innovation teams. Assigning innovation to parts of an organisation limits possibilities and corporate buy-in and creates useless innovation bubbles. They are innovation outpost and not core to the organisation. They do not solve the sponsoring organisation’s core problems, and they remain disconnected from the organisation’s customers and corporate needs. They are counterproductive and bog down corporate innovation by poisoning the innovation efforts. The biggest problem that all these flavours of canned/siloed innovation face is one of recognising a change in the business model. Changing a business model is far more painful and harder to comprehend than bringing in a new technology.
Innovation is culture
The missing ingredients are culture, people, and genuine connection. There is strong evidence that creating an innovation culture or a culture that encourages and prizes key precursors to innovation will generate improvements. It is all about focusing on your people. The freedom to form relationships and share ideas is, more than anything else, what innovation requires.
Innovation is dis-organisation
Innovation is not served by perfect organisation or confinement to a program but by a little unpredictability, such as arises in talking with customers or in serendipitous meetings with other units. Apply principles of dis-organisation. Actively seek the unexpected.
A model of collaborative innovation
Where innovation is an integrated ecosystem, a new group of ratings intermediaries has emerged. Social networks have made it far easier to form groups and seek counsel from others with the insights and knowledge we seek, anywhere on the globe, at any time; they range from business-oriented social networks such as LinkedIn and enterprise-software rating and review sites such as G2 Crowd to the travel-rating site TripAdvisor.
Marketplaces and platforms are at the centre of many innovation breakthroughs.Almost any popular business can take on elements of a platform and a marketplace if it determines what parts of its business can be shared, resold, repurposed, or built onto. Read “The platform revolution”.
For example, Xiaomi puts out new phones monthly, a pace unprecedented for a high-end phone maker; Apple puts out a new version of its iPhone every 18 months to two years. Xiaomi also consults very closely with a community of millions of its customers in highly active and enthusiastic online forums; they constitute its most influential product managers. If you want to find out about innovation, follow Chinese companies.
Eight deadly sins
The eight deadly sins of stasis. Those sins are:
- Unwillingness to listen
- Lack of patience
- Lack of distance 4.
- Lack of resources
- Wrong people and wrong role
- Lack of accountability
- Inappropriate culture
- Lack of political support
Read “Pirates in the navy“.
Checklist: Decreasing innovation friction
- Can a team conceive and launch an innovation project quickly (in a few months or less)?
- Are your innovation project teams multi-disciplinary?
- Are people working on innovation projects excused from all the duties of their regular jobs?
- How frequently are innovation projects expected to make formal reports?
- How many meetings with project outsiders in each quarter must innovation projects attend in order to provide updates?
- Do innovation project teams have to go through the same procedures to procure equipment or services as the rest of the company does?
- Our innovation projects allowed us to freely collaborate with external parties?
- Are innovation projects’ members permitted to form a startup to continue their work if the company decides not to pursue the idea?
Here are some of the tactics of innovative companies. It is not rocket science:
- Challenges: Look at XPRIZE or DARPA Grand Challenges as examples.
- Crowdfunding, a growing number of organisations are using crowdfunding sites to economically test a product concept on a large audience and to simultaneously test their marketing messages for social selling.
- Apply design sprints or Lean.
- Borrowing ideas from competitors or others.
- Recruiting rule-breakers and dreamers.
- Introduce suggestion boxes.
- Write an innovation manifesto.
- Work with inventors.
- Introduce citizen development initiatives.
A growing body of research indicates that home inventors contribute massively to economic growth and new product initiatives. More than 5 per cent of the U.S. population is engaged in some form of creative invention or innovation. Tap into these backyard inventors when they are on their day jobs.
Your employees are the main source of ideas
So, for legacy companies to innovate and succeed as their startups do, they need to treat their people as Google, Toyota, 3M, and British Airways treat their workers: as fountains of ideas. Indeed, the innovative ideas of employees have done more to shape society than those of entrepreneurs. Only eight of the thirty most transformative innovations were first conceived by entrepreneurs; twenty-two were conceived by employees. Following logically along this path, companies that want to chase exponential innovation and massive self-transformation must facilitate and motivate employee activities in innovation and ideation. This cannot be window-dressing. At Toyota, it’s the regular team meetings. At 3M, it’s the idea fairs. At Amazon, it’s the constant tending of the digital suggestion box.
Checklist: How does your company give every employee a chance to innovate?
- Do you have formal innovation programs and opportunities open to employees to realise their ideas?
- Do you offer employees any time during the year to work on new ideas they may have generated?
- Does your company have a digital suggestion box or internal social media–type discussion network that is well-publicised? Does senior management read those suggestions?
- Do you have examples to hand out of products, features, or services whose origins lie beyond the product, design, and engineering teams?
- Do you have a formal recognition program for great ideas or successful innovation projects?
- Do your organisation’s innovation projects get ready access to internal domain expertise?
- Does your organisation have a dedicated innovation or experimentation program to ensure that the organisation holds resources in reserve to supply innovation efforts?
- Is your organisation’s brand a plus or a minus for innovation projects?
- What variety of people do teams on innovation projects include?
- How does your organisation publicly demonstrate clear support for innovation (excluding window dressing!)?
- What happens to the leads of innovation projects after they fail?
- How commonly do they attempt another innovation project?
- Do innovation projects have full access to any useful data and intelligence gathered by the larger company or organisation?
- What types of innovative marketing strategies do the innovation projects enjoy?
The old innovation texts teach companies to look in the wrong places for competitive threats and encourage them to separate the innovative disruptors from the core businesses and put them into new company divisions. In an era in which advancing technologies converge and allow industries to encroach on and disrupt one another, companies will need to embrace disruptive technologies and have all of their people working together to take on the new competitive threats.
Innovation should be at the heart of your organisation
As you can see from the dizzying array of developments, exponential disruption is no longer a narrow field that a new company division or department can handle. Companies that were born in the exponential era are leveraging new technologies to quickly move into adjacent or even totally novel industries. Companies that fail to embrace innovation culture and re-engineer their organisations for exponential technological advances will lag and wither.