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Blitzscaling at Scale: Be An Investment Not an Expense

Blitzscaling at Scale: Be An Investment Not an Expense

Author: Dr. John Sviokla

Continuation of “Blitzscaling at Scale: Or, Applying Blitzscaling to Large, Post-Founder Corporations”
Part I is HERE

Blitzscaling at Scale: aka Institutional Innovation

IXL Center in partnership with SIA Partners

We believe at scale innovation in existing enterprises that are no longer led by the founder
needs to consider the four key variables that could enable blitzscaling:

  – organization structure
  – decision rights
  – be an investment, not an expense
  – residual claims (e.g. who gets rich if it works?!).



Organization: Operate Apart, but Integrate at the Leadership Level

The best study of breakthrough innovation in large organizations that we know of was published in the Harvard Business Review article The Ambidextrous Organization.   This wonderful title gave a memorable name to the core responsibility of any executive at an established firm – run the existing business (e.g. one hand) while growing for the future (e.g. the other hand).  They look at three organization structures across dozens of companies to discover which works best to successful grow large innovation efforts inside existing organizations:

  1. within the operating unit
  2. a separate unit with separate management reporting to the CEO directly;
  3. an operating division which had its own ability to source, grow, etc, but the leader was part of the firm’s overall management team.

The third option – was the only structure that lead to success and it did so 90% (check) of the firms in their sample.  We believe that this combination of integration with the core through leadership but operational, resource and business model design flexibility, is vital to blitzscaling – because a key part of blitzscaling is being able to access new forms of scalable talent, infrastructure, market access, design, and to do it at a pace that is far faster than the month to month, quarter to quarter metronome of a mature organization.  Customer adoption is usually on a different time scale – happening faster or slower than you expect. 

W.W. Grainger did this arrangement when the venerable industrial distributor set up Grainger.com.  Their leader was part of the Grainger management team, but they had wide latitude on suppliers, management process, talent, etc.  As one executive put it – at Grainger the dress code is 25 pages, at Grainger.com it was two words: wear clothes.   After it was large and successful, it was integrated into the core business. 

Decision Rights: Avoid Death by a Thousand Paper Cuts

There was a fantastic shop one of us used to frequent called the Low Fat, No Fat Café.  It was started by health enthusiasts, in particular, bodybuilders.  It had perfectly cooked slabs of egg whites, steamed broccoli, bison meatballs, turkey tips, the world’s best air fries and more.  In short, it was a smorgasbord of healthy protein, and complex carbohydrates with tons of free fresh, well-filtered water.  All of this was served to you by one or more giant bodybuilders wearing skin-tight tee shirts or oversized sweats, some with the rust/orange glow of tanning booths, which only added to the ambiance.  Even if you were 30 pounds overweight, you felt healthier eating there. 

They were approached by an investor who wanted to scale the business by franchising.  In designing the franchise they reviewed the menu and decided that they needed to trim the menu to include things that were a little more shelf stable, so they substituted black beans for air fries, then they found that getting egg whites right was a little tricky, so they began to use egg substitutes, and small compromise after small compromise – including charging for bottled water as a way to increase revenues.  Of course, they could no longer attract the bodybuilders and they launched a franchise which not only did not serve the core audience but had lost its soul.  They lasted less than a year and the original store never re-opened. 

This was an investor story, but we have personally witnessed idea after idea which dies through a thousand paper cuts.  Small changes are made on the supplier to match an existing supply chain, or a design to be more compatible with existing manufacturing, or different promotion to work better with existing channel partners, or more timid claims so it does not compete with existing products or services.  Then the company launches the compromised product – as they did with the new Low Fat No Fat café, the market says ho-hum, and the company thinks the idea was bad.  Actually, the firm does not know if the idea was good or bad because it was crippled by the thousand paper cuts long before customers saw it. 

When trying to blitzscale in an existing organization, the leader of the effort must have the ability to drive all the variables that create the customer experience – even if they are at variance with the firm’s current approaches.  In the book The Self-Made Billionaire Effect: How extreme producers make massive value, one of the authors noted that innovative designs are a combination of interlocking factors which together create the differentiated experience.  Starbucks is not just about the coffee, it combined great labor practices, ambiance, eco-friendly coffee buying, focused menu design, payments, convenience, and other factors which together make Starbucks, Starbucks.  In fact, over 80% of the self-made billionaires on the planet make their money in existing, highly competitive markets – usually by combining a few important dimensions into a better experience.  If the innovator has to compromise on each of these pieces of the customer experience, they will never succeed. 

Be An Investment Not an Expense: Innovations live on a different time scale than existing businesses

Existing organizations hate two things more than anything: time and volume uncertainty.  Most organizations are more tolerant of losing money than making money at the wrong time or in the wrong volume.  Again, predictability is the key thing large organizations optimize around.  But the key uncertainty of any innovation is how quickly will it be developed and adopted?  They key unexamined uncertainty in any new product or service is to determine how long the sales cycle is.  Will it take a week, a month, six months? To get a sale? 

If you are operating within an existing operating budget, this uncertainty usually leads to an early death.  However, firms are used to uncertainty when they are spending the capital budget – in the investment space.  When Ray Ozzie was running Iris at Lotus Development corporation, he and his team were invested in by the board.  Ray was convinced that all office software was going to migrate from single applications like spreadsheets to office suites of many functions.  He was right, but it took him a few more years to develop what became Lotus Notes than he predicted.  Each year the Lotus board had to make a decision on whether or not to invest for another year.  If they did not invest, Ray and his team had the rights to intellectual capital – and could go and work with another company and/or set up shop.  Each year, the board decided to continue to fund the experiment until it got traction, and they committed to a massive marketing campaign to get it launched.  When IBM bought Lotus for $XB the reasons was to get Lotus Notes. 

Residual Claims: Who gets rich?

Nitin Norhia and Paul Lawrence in their book Driven, review research into compensation systems that shows that executives use only about 1/5th of the possible variance in their payment system. That is to say, if you could pay your people between $100,000 and $200,000 in pay for their performance – the actual band you will use will be only $20,000 apart – e.g. clustered around something like $140,000-160,000.  This is done because relative pay is a huge social status, social fairness issue and executives will only tolerate so much complaining. 

In blitzscaled innovation the leaders deserve outsized compensation if they deliver.  Google tried this, to no avail (check) in their multi-million dollar spot bonuses.  Private equity firms, and some conglomerates like Berkshire Hathaway do a great job on this issue.  A CEO or team who runs a division or one of the portfolio companies have an opportunity to make millions and millions of dollars if they add significant value to the acquisition.  At one PE firm one of the authors was part of, the incentive compensation went down to the top 300 executives and managers if they hit their goals.  The compensation was substantial.  We also think this is why PE firms are three times a likely to turn around a troubled company as a corporate is.  PE uses the structural variables of bliztscaling. 

We think there are two key actions to keep a sense of social fairness but allow the organization to pay hugely differential compensation.  The first thing is to create an opportunity to the executives in the blitzscaling unit to “buy in” – either through putting up capital or deferring compensation.  This “buying” process provides legitimation for me getting paid 10X as much as you did, without ripping the company apart.  The second is role-based compensation.  At PE firms they frequently pay someone for each of their different roles.  They can be CEO of one company, a board member on another, and an investor in a third.  These different roles also allow for differential compensation which is still seen as “fair”. 

Conclusion: Hack the structural variables to achieve blitzscaling at scale

You can pick your analogy: turning the aircraft carrier, teaching the elephant to dance, changing the engines while flying the plane – in any case, blitzscaling in large, post-founder organizations cannot win by copying startups – because that advice misses the vital fact that large organizations hate variance and innovation is, at its core, positive variance.  Our suggestion is to think about hacking the four structural variables of organization, decision rights, resource structure (e.g. investment not expense) and residual claims (e.g. who wins big?)  With these design variables in mind – the advice on how Apple did it or chasing blue oceans might actually lead to breakthrough growth and corporate reinvention – or what we call Blitzscaling at Scale. 

 

If you want to learn how to drive a digital transformation & scale it up, sign up for a business innovation webinar on Monday, May 13 at 12:00 PM EDT (9:00 AM PDT)
https://olympics.ixlcenter.io/digital-transformation-and-scale-up-innovation

 
 

 

 

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Blitzscaling at Scale: Or, Applying Blitzscaling to Large, Post-Founder Corporations

Blitzscaling at Scale: Or, Applying Blitzscaling to Large, Post-Founder Corporations

Author: Dr. John Sviokla

God made the world in seven days, but he did not have an installed base
– Anonymous

One of the most frustrating things to watch is when senior executives from large companies desperate for new growth listen to advice from pundits on how to create new and successful innovations by learning from startups.  If we hear one more pundit giving “HADIT” advice e.g. “How Apple Does IT”, – we’re going to throw up.  It is like when the World Economic Forum puts the US as the fourth most innovative country in the world behind Switzerland, Sweden and Singapore – each of which are not even as big as New York; it’s a silly comparison.  Such HADIT advice is incomplete at best – because it ignores the political and organizational realities of any established company – and at worst, it is simply innovation porn – e.g. a voyeuristic stimulant with no healthy reality.

In addition, the hyper-rational advice on transformation is just as useless.  Finding blue oceans or unserved markets in new domains and using those new segments to transform existing businesses is only successful in firms who have not been committed to strategic marketing.  Any reasonably successful executive team has looked for product, channel, geographic, technology, and customer adjacencies.  When IBM reinvigorated itself under Lou Gerstner it added more services to a company that already sold services to customer and channel partners it was already using.  It was a very successful execution of strategic adjacencies.  If these strategies reinvigorate growth – great, but it’s just executing on what executive teams are already paid for.  This is why studies show that the vast majority, over 80%, of companies do not change until they stall – and then only a minority of those make it through the transformation post stall.

Blitzscaling In An Existing Organization Post Founder

We are not sure that we have the answer, but we have some ideas that we believe at least acknowledge some of the political and economic realities of a successful, existing organization and the natural tension such organizations have with blitzscaling growth – and we share some design ideas on how you might create institutional innovation at scale.

We believe we need to acknowledge at least two truths of large organizations:

  1. A successful founder can shape the business model, product/service offering, culture, incentives in a way that no successor can match unless he or she is a majority owner of a private company – and even then it is tough.  Put another way, only Steve Jobs, after he saved Apple could make a successful argument to the board for Apple to enter the smartphone business which was dominated by powerful channel partners (the carriers), foreign manufacturers (Norwegians, Germans, Koreans and Chinese) and offer a phone which was 2-5X as expensive as the existing phones.  At the time the iMac was selling like crazy and had almost 0% corporate penetration.  A non-founder CEO would have been told no!  No iPhone.
  2. The core expertise of any large organization is to decrease variance and increase the predictability of everything. Product creation, revenue forecast, earnings achievement, staff advancement – everything is aimed at being more predictable. This means the almost all (and there are a few exceptions) senior executives at Global 500 companies are smart, affable, hard-working, mentally tough and politically ruthless when they have to be.  With their products and services, they compete outside the organization, but with their careers, they compete inside.  They got to the top because they could predictably deliver and outcompete their peers.  A perfect innovation for them is one that is material to the business, is growing fast, and they can take ownership of it just when all the risk has been removed.  They may talk about failing fast, tolerating experimentation, learning from their mistakes, but it is the rare senior executive who really takes any material risks with the business (e.g. more than 10% of a cost or revenue base) in practice and the rare organization that rewards such risk-taking – with the exception of mergers, acquisitions, and divestitures – which are “acceptable bets”.

If you want to learn how to drive a digital transformation & scale it up, sign up for a business innovation webinar on Monday, May 13 at 12:00 PM EDT (9:00 AM PDT)
https://olympics.ixlcenter.io/digital-transformation-and-scale-up-innovation

Full article: here
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It’s the End of the World as We Know It

It’s the End of the World as We Know It

By Dr. Hitendra Patel

Change is coming to every corner of our lives. What’s more, it’s coming fast. It’s going to be thrilling, unpredictable, and bigger than ever before. Are you ready? Are your businesses ready? The amazing scale and scope of changes happening today mean that this is the end of the world as we know it.

If you’re waiting to adjust to new circumstances until you have no choice, it will almost always be too late. The alternative to waiting is anticipating “what’s next?” and imagining “what if?” when that future becomes real.

Despite this great promise, a world-in-flux can be scary, especially because of the unprecedented speed. In the 1980s, in Motorola, a company dominated by forward-thinking engineers, predictions made were ahead of the curve – thinking change would come sooner. But today most people are behind the curve, because the habits leaders developed when they were growing up didn’t include constant vigilance in the face of all-encompassing changes. 

To download the full article “It is the end of the world as know it”, click the button below

Download Article

 

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Dr. Hitendra Patel
CEO at the IXL Center

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Bionic Company: Disrupt Or Be Disrupted

Bionic Company: Disrupt Or Be Disrupted

Article published at Strategy+Business
Companies that manage all six forms of capital are what could be called bionic corporations: Some of them have gained immense value in very short periods of time. For example, five of the most highly capitalized companies on the U.S. stock market are bionic: Alphabet (Google), Amazon, Apple, Facebook, and Microsoft together account for about 13 percent of the capitalization of the entire U.S. stock market.
Join a webinar about Bionic Company on March 21, 12 PM EST: https://olympics.ixlcenter.io/digital-transformation-strategy
Full article: here
Singapore IXL Center
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IXL Center opens new office in Singapore

IXL Center opens new office in Singapore

IXL Center is scaling innovation in Singapore.

IXL Center is delighted to announce a new office in Singapore at Raffles Place, 20 Malacca Street, Level 14. A big thank you to all our friends in the Lion City, particularly at Singapore Management University, Infineon, UOB and the Institute of Policy Studies.

Contact IXL Center office in Singapore: singapore@ixl-center.com

 

 

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What innovation processes and tools are key to institutionalize innovation across all parts of your organization?

 

 

 

Volume II, Issue 5  November 20, 2018

What innovation processes and tools are key to institutionalize innovation across all parts of your organization?

A wise man once said, “Every basic story that people tell to make sense of the world has already been told.” Another wise man responded, “That may be true, but what happens to those stories when the world changes?”

IXL Center partners: Ronald Jonash and Hitendra Patel

Choosing the right story to understand the economic world today is especially important when we try to find the best solution to this persistent question in innovation practice: “What innovation processes and tools are key to institutionalize innovation across all parts of your organizations?” The first and unavoidable step to answering this question is: Leadership must make a very visible commitment to innovation and ensure that all innovation efforts are connected to clear business and/or strategic goals.

This truth about innovation will never change for business. Nevertheless, over and over, companies mistakenly skip this necessary step to successful innovation. Why? Executives today are so often distracted by the accelerating marketplace that they can confuse speed with strategy. Because of this, they tell themselves (consciously or sub-consciously) the wrong story about the world: because speed is essential, tools like crowdsourcing or artificial intelligence will solve my company’s strategic problems.[1] This is a nice story, but it’s totally false. It is true that being speedy is important in today’s economy; in fact, one might add that the ability to innovate or change quickly is becoming table stakes for any company playing in the global marketplace. But being speedy means nothing without having a strategic direction in mind.[2]

“On average it takes 4 years for a company to benefit from the ideas that it has invested in” – Dr. Hitendra Patel.

So if we proceed without the fairy tale that speedy tools are a substitute for innovation strategy, we can make better decisions about the processes and tools we need to make that strategy real across all parts of an organization. In today’s economy, this usually means deftly attaching machine processing power (i.e., increasing speed and scope) to strategic thinking (i.e., direction). So, once we’re clear about strategic direction, it would be helpful to keep the next two steps in mind.

 

1) Gather, Categorize and Share Initial Insights. The first step in this process is generally referred to today as “crowdsourcing.” There are many ways to gather ideas, from in-person case competitions to online systems that connect disparate teams. With all of our online tools and connections, gathering ideas is not a problem. The real problem that arises is the challenge of organizing or “curating” the ideas into meaningful categories. This can be done on a large scale with, for example, natural language processing. These categories can then be more easily aligned with business priorities.

In addition, tagging ideas and innovation with language processing capabilities can be helpful in creating taxonomies that can be used for innovation in the long-term. In addition, taxonomies can allow companies to incorporate data from other sources easily to further inform and enhance findings developed from their own crowdsourcing. Tagging also can perform an important internal function as a means of advertising or sharing ideas that might otherwise remain unnoticed in companies. This is especially helpful for organizations with offices spread throughout the globe.[3]

 

2) Funnel Ideas into Nuanced Categories of Innovation Efforts. There a many specific tools and approaches, but what is important is that multiple complementary approaches be used. That is because innovation initiatives can (and often do) develop unexpectedly and are targeted towards a business landscape that can often be in flux. Opportunities and emergencies can arise at any moment and priorities can change. Keeping that need for flexibility in mind, there are some reliable questions you can use to understand and prioritize all your innovation efforts:

  • How big is the opportunity in terms of ROI?

Innovation can make money for you in big ways and small. These are all net positives for your company, but you should try prioritizing opportunities by estimating where the biggest bang for your buck may lie – and what that “bang” is. These could range from greatest investment to revenue ratio to increase in market share to simply pure revenues.

What’s the big opportunity? Innovation Management tool – Business Opportunity Map (IMBOK)

  • How quickly should you get this done? This is a question to follow an ROI estimate because planning speed to market often depends on other factors. How might you prioritize between a process innovation costing $500k and yielding $2 million in savings in six months and a new service costing $1 million but promising to yield $5 million revenues in three years. If your company is strapped for cash, for instance, the first option may be slightly more important to start than the second.
  • How will you get this done/get on the right track? Depending on your needs and your capabilities, your company should make an effort to define and plan how to get an innovation project finished, which can include these approaches: 1) “Just Do It” yourself and do it now; 2) Incremental Product or Process Development; 3) Innovation Platform Development; and, 4) Venturing.
  • How much investment or partnering is needed? Investing your own resources or working with the resources of others should be planned for multiple stages of the innovation process, from ideation to production and finally to launch / rollout activities.

While there is a lot of planning and a lot of complexity that goes into choosing the processes and tools of an effective innovation program, one should always remember that the final business concept does not have to be complex at all. Innovation can lead to groundbreaking revenue generation with a simple new product that just hasn’t occurred to anybody or to an attractive, easy-to-use service that finds new ways to generate revenues. Disciplining the use of tools with a clear strategic vision will help illuminate opportunities that are complex and simple, big and small – all of which contribute to the growth of your company.

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[1] Recently, Thomas Davenport observed that because “the hype surrounding artificial intelligence has been especially powerful, […] some organizations have been seduced by it.” See Thomas Davenport and Rajeev Ronanki, “Artificial Intelligence for the Real World,” Harvard Business Review vol 96. 1 (2018): 108-116.

[2] For an enlightening discussion about executives being distracted by the latest technological “shiny objects,” look for our Game Changers innovation podcast with GIMI board member and CEO of IdeaScale, Rob Hoehn, that will be published in December.

[3] These points are also derived from my conversation with Rob Hoehn that will be shared in our upcoming Game Changers podcast.

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ABOUT THE AUTHORS

Mark Rennella. Senior Editor at IXL Center

Mark Rennella is a writer, editor and teacher who uses a historical perspective to examine and unpack today’s complex business trends. He has authored popular Harvard Business School cases on a variety of topics as well as a book on leadership, Entrepreneurs, Managers and Leaders, co-written with Nitin Nohria and Anthony Mayo (Palgrave Macmillan, 2009). Mark’s many books, articles, business case studies, and collaborative writing endeavors have garnered him critical praise from historians, academicians, and business leaders alike. In 2001, Mark earned a PhD in American History at Brandeis University.

Dr. Hitendra Patel. Managing Director of IXL Center

Dr. Hitendra Patel is the Managing Director of the IXL Center and Chair of the Innovation and Growth Program at the Hult International Business School. He has coached new emerging leaders and managers of new and fast growth businesses.Hitendra was a senior leader and co-founder of Monitor Group’s Innovation Practice and was responsible for Asia and Latin America. Prior to Monitor, he was a senior manager at Arthur D. Little. As a management consultant, he has made lasting impact with all types of companies by helping them identify new engines for growth and develop their own capacity to innovate.

Work with 5 MBA and PhD teams to explore new growth opportunities!

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How Do You Find the Big Bold Ideas that Matter in the Market and to My Company?: The Need for Focus?

 

 

 

Volume II, Issue 4  October 17, 2018

How Do You Find the Big Bold Ideas that Matter in the Market and to My Company?: The Need for Focus

In previous editions of this The Innovator newsletter, we’ve noted that maintaining energy and productivity around innovation often requires a balance between opposing forces – forces that both spur creativity and can cause friction (with both internal and external stakeholders). The same applies to today’s question, “How do you find the big bold ideas that matter in the market and to my company?” The main balance in this domain of innovation is focusing on a significant unmet need or problem while at the same time being open to unexpected new opportunities or changes of course.

Some people might react with skepticism to this question: “If we knew what the big opportunity was, we’d already be insanely rich.” In answer to this, we would certainly confess that we don’t have a crystal ball to predict the future; however, we do have an approach that will increase your chances to find that big idea. This goes hand in hand with having a well-functioning innovation portfolio, which is the mechanism to keep a wealth of ideas flowing so that the market sees that your company is consistently finding new ways to meet unmet needs. In this newsletter, we’re going to drill down into that innovation portfolio and look more closely about how a few ideas – or sometimes just one idea – comes to fruition.[1]

To find big ideas requires following these steps:

1) Have a clear goal, which is the unmet need or problem

2) Have a method – some repeatable method – that will simultaneously

  • grow the number suggestions and insights about ways to satisfy this need and
  • find ways to group the suggestions into meaningful categories[2]

3) Test the categories of suggestions and determine what should be done with them

The first and by far the most important step in this process is having a clear goal. We might better understand why this is important if we recall this criticism of Aaron Burr in the recent musical Hamilton: “If you stand for nothing, Burr, what will you fall for?” Essentially, having a clear goal to work towards gives participants in an innovation process parameters and reference points concerning what is germane to satisfying a customer need. Those parameters allow insights to accrete instead of becoming dispersed and incoherent. For example, if the goal for a yogurt company was a vague mandate “to increase sales,” then just about any and everything related to the existing company’s efforts might be included in that goal. Better salespeople? (Sure.) Bigger containers? (It might work.) Lower prices? (Why not?) But if the goal is more specific, like “how can we increase and broaden the ways consumers think about to using yogurt,” then the insights connected to that goal have far more potential to be related and to grow into something like a meaningful idea.

In accomplishing the second step in this process, we don’t advocate any one method over another: it depends on your company and its culture. Whatever the method, you need people or systems (or some combination) that have responsibility for gathering and assessing ideas. A couple of brief examples may help visualize this step.

People-oriented example. A company may task large cross sections to be on the lookout for new ideas and emerging or disruptive trends in the business environment. Teams or individuals are then in place who are specifically accountable for sourcing and managing emerging trends in their fields of endeavor. Eventually, these teams or individuals assess these insights and decide whether or not they should be terminated, undergo more testing, or should enter the pipeline of new offerings or product development.

Systems-oriented example. To start generating insights, you can hold workshops and ideation events, invite online submissions and talk to customers. In processing these new insights, you should cross-reference them with existing and past efforts. By doing this you can avoid reinventing the wheel by eliminating “new” insights that have already been assessed. You can also find current innovation efforts that might be given an extra boost of energy by a connection to a new insight.

 

The final step is to test your categories (or “bundles of insights”) and come to one of four conclusions about them:

1) The category will not satisfy the unmet need.

2) The category will satisfy the unmet need (maybe with some minor modifications). This is the foundation of the big idea.

3) Testing of this category might yield insights into another way to satisfy the unmet need.

4) Testing of this category reveals a new unmet need – which requires beginning this process again.

This approach represents an efficient way of processing insights. While relatively simple and straightforward, the process is made robust and coherent by being consistently measured by its ability to satisfy a specified unmet need. Meeting that need in a way that leverages different parts of the value chain will likely yield a big bold idea. Almost equally important is to be on the lookout for surprises and new insights that can lead to the discovery of a second unmet need, which was found (somewhat ironically) because of the focus on the first. This brings us back to the first step of the process and the beginning of another potential blockbuster.

We all know that big bold ideas don’t come easy and that innovation (especially for internal stakeholders) is more a marathon than a sprint. Outside stakeholders may marvel at the speed and quantity of business concepts emerging from your company, but insiders know that those new entries into the market represent a fraction the overall effort and insights that their company was investigating and testing over a long period of time. Helping employees to run that innovation marathon is a big challenge. One answer to that challenge is the appointment of a Chief Innovation Officer. Examining the pros and cons of having a CIO is the subject of next month’s newsletter.

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[1] We should take one moment here to explain what is meant by the word “idea” in an innovation process. An idea that is worthy of the name in an innovation process usually comes towards the end of that innovation process because it deals with the interlocking parts of the value chain that have to work together to create an innovation that’s successful because it is hard to imitate. Smaller insights or incremental improvements within a link of that value chain are better understood as the younger cousins of a fully-fledged idea: suggestions, insights and hunches. We often call them “idea fragments.” For instance, an R&D researcher at a food processing company might have a hunch that making a richer version of an already existing brand of yogurt might satisfy a segment of their customer base. This incremental step may indeed increase the loyalty of existing customers and perhaps attract a few new ones, but it doesn’t represent the creation of a new business concept that grows from new set of interlocking links on a value chain. In the example above, competitors could imitate the creamier version of this yogurt relatively easily.

[2] Categories could represent groupings of idea fragments that meet an unmet need. If an unmet need for yogurt consumers was finding more ways to integrate the health benefits of yogurt with other foods, the categories of suggestions could range from seeking ways to partner with other food companies and restaurants to educating consumers on how to use yogurt in a variety of foods and meals. Because the categories are related to a goal, they can sometimes be combined in a final idea.

 

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ABOUT THE AUTHORS

Mark Rennella. Senior Editor at IXL Center

Mark Rennella is a writer, editor and teacher who uses a historical perspective to examine and unpack today’s complex business trends. He has authored popular Harvard Business School cases on a variety of topics as well as a book on leadership, Entrepreneurs, Managers and Leaders, co-written with Nitin Nohria and Anthony Mayo (Palgrave Macmillan, 2009). Mark’s many books, articles, business case studies, and collaborative writing endeavors have garnered him critical praise from historians, academicians, and business leaders alike. In 2001, Mark earned a PhD in American History at Brandeis University.

Dr. Hitendra Patel. Managing Director of IXL Center

Dr. Hitendra Patel is the Managing Director of the IXL Center and Chair of the Innovation and Growth Program at the Hult International Business School. He has coached new emerging leaders and managers of new and fast growth businesses.Hitendra was a senior leader and co-founder of Monitor Group’s Innovation Practice and was responsible for Asia and Latin America. Prior to Monitor, he was a senior manager at Arthur D. Little. As a management consultant, he has made lasting impact with all types of companies by helping them identify new engines for growth and develop their own capacity to innovate.

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How do you involve all units within your organization and partners & networks to assist with driving innovation from idea to market?

 

 

 

Volume II, Issue 3  September 4, 2018

How do you involve all units within your organization and partners & networks to assist with driving innovation from idea to market?

 

For Successful Innovation in the Long Term, Find Ways to Integrate New Initiatives with Existing Systems

Companies need innovation because they all need new products, new business models and new value propositions – which offer novel opportunities for growth as well as some unanticipated challenges. Innovation does require change and because of that innovation initiatives are similar to change initiatives within a company.

At the same time, if any company is going to remain a company (i.e., remain largely intact for some number of years), there are long-standing systems and relationships it has to maintain in a stable manner. Internally, the executives and employees and the company culture they form can’t be completely changed and overturned every time a new business concept might be pursued. Externally, there are partners and suppliers whose skills, resources and good will are often needed to be available in a predictable and steady manner. This need to balance between the new and the old means that, while change is inevitable, repeated revolutionary upheaval is impractical and unsustainable.

Diverse innovation team. IXL Center, Sao Paulo, Brazil.

Align Innovative Initiatives with the Existing Organization and Existing Partnerships

The way to strike this balance between change and continuity is to effectively integrate innovation with already existing business processes internally as well as with external partners (while attempting to make changes to existing systems only when they become a consistent impediment to innovation). That means paying attention to communication between innovation leaders with all company stakeholders at the beginning, middle and end stages of nurturing an innovation from an idea to a fully-fledged business concept. Without this clear process of finding buy-in across the value chain, innovation initiatives often devolve into a battle between process leaders within an organization, resulting in dissention, chaos and inaction. With it, you can leverage the energy and efficiency of existing systems and cultures to lift innovation initiatives.

The three stages we will look at are innovation processes and procedures that occur at upstream, midstream, and downstream stages of innovation development. As an example of integrating these stages with existing systems, you might think of aligning innovation initiatives with these different parts of the organization:

1) Innovation insights with marketing and strategy
2) Innovation resource allocation and manufacturing arrangements with strategy and financial planning
3) Commercial launch of the innovation with sales

Upstream Stage

At this stage you want to encourage as many ideas as possible (as we suggested in the last newsletter concerning an innovation pipeline). To ensure that all sorts of stakeholders buy into an innovation initiative, you need to solicit ideas from all parts of your value chain – from the most conservative to the most audacious teams and organizations whom you’ll need to work with. In addition to getting buy-in to your project, you will also maximize your efforts by leveraging existing systems. All of these sources of ideas and resources potentially all have something to contribute to your efforts. In addition, by welcoming and valuing their input, you may encourage them to think even more creatively and contribute to the ideation process.

Communication is key to coordinating efforts at every stage. At this early point, leaders should articulate how different stakeholders will contribute to the overall innovation effort. This has the added value of demonstrating leadership commitment. And if innovation leaders hope that all stakeholders will truly share all their insights – including those that might challenge the innovation initiative itself – leadership must support healthy debates. People should know that it’s not impolite to challenge others’ ideas; instead, it should be considered to be the best way for all to improve ideas and to contribute to success.

Innovation Portfolio as a generic pipeline process. Created by Alice Chung, Senior Manager at Genentech Business Operation.

Midstream Stage

Once the innovation initiative gets started beyond the early ideation stage, it needs to coordinate with strategy and planning and seriously factor in future uncertainty and potential risks. Those running the innovation initiative should go out of their way to understand priorities, concerns and address challenges of all stakeholders, especially those in the more traditional or conservative parts of the value chain because they may get cold feet once the challenges of the initiative become clear. (In that case, get them excited about all the new opportunities they may encounter, too!)

Because innovation requires internal and external stakeholders to do something new, it’s probably wise to over-communicate to partners and networks. Because they are often significantly removed from the centers of decision-making in the central group running the innovation initiative, they can easily feel left out or shunned if the details of the innovation initiative become murky. To stop these awkward moments before they happen, innovation leaders should request a “point person” for every contributing group or significant team. That person can both meet regularly with other group leaders to share information and have the responsibility to be responsive to questions from outside.

Downstream Stage

Toward the end of the innovation process clear triage points of innovation initiatives should help to focus efforts and resources. Priorities should be determined and initiatives should be assigned to different tracks: high, medium and low priority tracks with appropriate funding and personnel allocations. This should also be the time to determine which innovation projects should be definitively shut down.

One factor that can keep these various business functions coordinated and confident that they’re pursuing the right path is innovation metrics. While we will discuss this issue in more detail in a subsequent newsletter, it’s important to recognize that establishing metrics are crucial because the big payoff of innovation is usually in the future and its processes (involving creativity and emerging intellectual property) can often be less tangible than the incremental improvement made by conventional R&D. Metrics help teams understand where to direct their efforts; metrics also help disparate teams communicate across the value chain because they allow the work of individual teams to be understood more easily by outsiders.

It’s one thing, of course, to create processes to ensure buy-in within an innovation process. It’s another to make sure that those processes are truly valuable. How do you find the big bold ideas that matter in the market and to your company? Answering that question will be the topic of the next edition of The Innovator.

We’d like to thank Alice Chung for her contribution to this edition of The Innovator.

 

_________________________________________________________________________________

ABOUT THE AUTHORS

Mark Rennella. Senior Editor at IXL Center

Mark Rennella is a writer, editor and teacher who uses a historical perspective to examine and unpack today’s complex business trends. He has authored popular Harvard Business School cases on a variety of topics as well as a book on leadership, Entrepreneurs, Managers and Leaders, co-written with Nitin Nohria and Anthony Mayo (Palgrave Macmillan, 2009). Mark’s many books, articles, business case studies, and collaborative writing endeavors have garnered him critical praise from historians, academicians, and business leaders alike. In 2001, Mark earned a PhD in American History at Brandeis University.

Dr. Hitendra Patel. Managing Director of IXL Center

Dr. Hitendra Patel is the Managing Director of the IXL Center and Chair of the Innovation and Growth Program at the Hult International Business School. He has coached new emerging leaders and managers of new and fast growth businesses.Hitendra was a senior leader and co-founder of Monitor Group’s Innovation Practice and was responsible for Asia and Latin America. Prior to Monitor, he was a senior manager at Arthur D. Little. As a management consultant, he has made lasting impact with all types of companies by helping them identify new engines for growth and develop their own capacity to innovate.

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Why is a good innovation portfolio important and what does it look like for a company?

 

 

 

Volume II, Issue 2  August 1, 2018

Why is a good innovation portfolio important and what does it look like for a company?

An innovation portfolio maintains the delicate balance required for companies to remain viable years into the future by creating change today. While survival through adaptation / innovation has always been the law of the economic jungle, corporate cultures (and many of the C-level executives who shape those cultures) often prefer (through choice or inertia) to put off change and the news that might prompt change for as long as possible. If your company has chosen to adopt an innovation portfolio, it’s made the adjustment to this fact of modern business life: today’s timelines and dizzying market churn are moving too quickly to allow innovation to bubble up by chance or to be put off until some smart person in the C-suite has an inspiration. The way to plan for innovation is to develop an innovation portfolio.

Dr. Hitendra Patel at the IXL Center, Miami.

Why is Innovation Portfolio Important?

Having an innovation portfolio means that you’re being realistic about planning for a prosperous future. This portfolio has both short-term and long-term implications for business concepts and processes. For products or business concepts in the short-term, the portfolio allows companies to entertain many experiments at once, moving them towards a stage-gate process or other form of evaluation system that anticipates inevitable failures in experimentation. In the long term, an innovation portfolio allows companies to sustain energy over time by planning years in advance to maintain customer loyalty and interest in the company. New, innovative business concepts from the portfolio are staggered over time because imitations and substitutes to your new offering can emerge quickly. In short, your innovation portfolio helps you to sustain energy in the marketplace through changing times.

That energy and dynamism also can be spread internally through innovation efforts. Successful innovation efforts can encourage good business habits/processes that keep the company open to using the latest effective tools and approaches to all of their work. If the operations department conducts successful experiments using artificial intelligence, for example, this innovative approach should generate new values such as increasing efficiency, looking for deeper insights to support decision-making processes, and getting new offerings more quickly to the market. Benefits to the company of these new processes can be measured and implemented at scale much faster than before.

All of this energy is channeled to productive ends by making sure that innovation efforts large and small are somehow aligned with an important strategic goal. This scrutiny is not meant to straightjacket innovation too narrowly or to make potential innovators wary of breaking a company rule. Instead, imagine this alignment like a sail on a boat catching the strategic wind just right.

Making Innovation Real: Strategy, Capacity and Discipline. IXL Center Model. 

Organizational Considerations in Getting the Innovation Portfolio Started

In keeping an innovation portfolio robust and productive, a balance has to be maintained in channels of communication and allocations of responsibility between upper management and the rank-and-file. The portfolio has to be shaped primarily by management who should develop criteria for funding of initial innovation efforts with some seed money (efforts that are aligned, of course, with the company’s strategic priorities).

While the overall character of an innovation portfolio should be shaped from the top-down, the fielding of ideas should happen from the bottom-up, or from “the grassroots.” There are two major reasons for this. First, there are too many changes in the marketplace for upper management to know everything that’s important to their company; therefore, there must be some delegation of innovation initiation and implementation to the middle and lower tiers of the company. Second, this arrangement allows for further penetration of entrepreneurial spirits at the front line, which gives energy for more sustainable change in the long-term.

There are a few ways one might encourage and sustain the gathering of ideas for an innovation portfolio. One might be careful to make sure ideation is multi-sourced – from internal and external partners. (The earlier this process starts, the better, to ensure that partners can start thinking about execution as ideation begins.) Internal partners could be cultivated through, for example, an online system for the input of ideas and concepts. This online system could communicate ideas that apply across the organization while also unearthing valuable ideas that sometimes have trouble emerging from an originating group.

To ensure that employees actually participate wholeheartedly in these kinds of ideation projects, management has to make sure that employees trust that these efforts are sincere and not just charades to make management look like it’s interested in employee input. To build this trust, companies need to create a transparent and credible review process that makes ideators feel that their suggestions are being taken seriously. This means that their ideas are reviewed critically and evaluations are adequately explained and eventually delivered in a timely fashion. The end result of this process should be that some of these grassroots ideas are actually taken up in some form by management or entrepreneurial units.

What Should an Innovation Portfolio Look Like?

 While every company has organizational and cultural peculiarities that may shape their innovation pipelines in unique ways, there are some general approaches that can be applicable for most companies.

• A good innovation portfolio looks like a “drug pipeline.” After qualifying each idea as worthy of some company resources, each idea can advance, start, or stop when appropriate. (These decisions are usually determined by feasibility, market demand and alignment with a company’s strategic vision.)
• This portfolio is very fluid in nature and should not be too rigid in the early stages of ideation. At the same time, innovation initiatives and activities should all have clearly defined stages with a strong endpoint to measure success before advancing to the next stage.
• As in a pharmaceutical pipeline, the goal in cultivating the innovation portfolio is overall success for the company, not the individual success of any particular project. One way to cultivate this cooperative ethos is to have employees working on more than one major innovation project at any given time. If they are focused on just one project, they may hide flaws or shortcomings they may discover in that project because they could risk losing their jobs.

Innovation Portfolio as a generic pipeline process. Created by Alice Chung, Senior Manager at Genentech Business Operation.

The Serious Fun of Maintaining an Innovation Portfolio

Coaches of high-performing sports teams understand that winning consistently requires that the athletes feel motivated not by pressure but by the love of the game. To win a championship requires effort, of course, that might be measured in many ways – a number of miles run during a soccer game or rebounds gathered on a basketball court. But the effort truly pays off when a well-practiced team is able to execute on-the-fly with open minds and optimistic spirits.

Likewise, for companies seeking to win through maintaining an innovation portfolio, executives need to teach the rules of the game and the details of execution while allowing their employees freedom to express their individual talents in their own ways. This translates into complementary responsibilities for management and employees in maintaining an innovation portfolio. On one hand, management must ensure that the innovation portfolio align with strategic goals without being too stringent, which could discourage creativity. On the other hand, employees should feel free to think “out of the box,” but should know that their efforts are only worthwhile if they eventually help to grow the company in some way. Both management and employees may find the greatest freedom can be actualized within some defined set of rules so that individual teams working within an innovation portfolio find that their work meshes strategically and does not end up working at cross-purposes.

While the content of this edition of The Innovator newsletter focuses on important general principles that help to keep an innovation portfolio robust, the next edition will focus a little more on the practical considerations in executing on any particular innovation. While we have extolled the virtues of gathering ideas from internal and external sources, the proof of the pudding is in the eating: How do you involve all units within your organization and partners & networks to assist with driving innovation from idea to market? We’ll find out next month!

We’d like to thank Alice Chung and Alessandro Rimassa for their contributions to this edition of The Innovator.

 

_________________________________________________________________________________

ABOUT THE AUTHORS

Mark Rennella. Senior Editor at IXL Center

Mark Rennella is a writer, editor and teacher who uses a historical perspective to examine and unpack today’s complex business trends. He has authored popular Harvard Business School cases on a variety of topics as well as a book on leadership, Entrepreneurs, Managers and Leaders, co-written with Nitin Nohria and Anthony Mayo (Palgrave Macmillan, 2009). Mark’s many books, articles, business case studies, and collaborative writing endeavors have garnered him critical praise from historians, academicians, and business leaders alike. In 2001, Mark earned a PhD in American History at Brandeis University.

Dr. Hitendra Patel. Managing Director of IXL Center

Dr. Hitendra Patel is the Managing Director of the IXL Center and Chair of the Innovation and Growth Program at the Hult International Business School. He has coached new emerging leaders and managers of new and fast growth businesses.Hitendra was a senior leader and co-founder of Monitor Group’s Innovation Practice and was responsible for Asia and Latin America. Prior to Monitor, he was a senior manager at Arthur D. Little. As a management consultant, he has made lasting impact with all types of companies by helping them identify new engines for growth and develop their own capacity to innovate.