Tag Archives: strategy

Corporate Innovation – Back to The City

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I recently attended a Chief Innovation Officer conference in New York. My goal in attending this event was to learn more about how corporate ventures manage their innovation processes and what tools they currently use to develop and attain innovative processes and new products. I was glad I attended because I learned a few useful pieces of information. However, I felt that there were some concerns I have about managing innovation that were not covered in the conference.

Let me start with what was addressed:

Culture is a key tool to creating an environment of innovation success. Many of the speakers talked about the difficulty in moving that big ship called bureaucracy and focus on innovation.

Many of the speakers felt that not everyone in the company needs to focus on being innovative. I, personally disagree with this. Everyone in any company can always add value to his/her job, department, and processes. Just make it easy to suggest change, and allow employees to play with new ideas and concepts. This should be rewarded not punished in both success and failure.

Open innovation is still daunting to many companies, but it is beginning to gain acceptance. The basic tenet of open innovation is the use of external ideas to advance their technology. A number of issues inhibit open innovation: intellectual property issues, ownership, field of use, and confidentiality issues all play a restraining role. However, I was intrigued with the use of crowdsourcing to help with project work. One of the speakers found success through competitions that are external to the organization that uses gaming techniques to entice experts to compete and help the organization find the best solutions. This helps to provide “A” level talent, including workers that prefer not to work steady hours, to help companies solve problems faster and cheaper than a hiring process might provide.

Failure as a long-term learning strategy was not celebrated, nor discussed much because there still is a strong focus on short-term achievements. In the corporate world, companies are seeking 3-5 year payouts from innovation. This means that incentives and reward structures are geared toward execution on known outcomes rather than a focus on a disruptive or even iterative innovation.

Corporate opportunity recognition is still a struggle. How far innovation can successfully deviate from current strategy into adjacent markets is a difficult decision for many large companies.

One of the more interesting points the concept of focusing on a “quest.” Quests are driving forces for firm’s strategy that allows for innovative ideas and adjacent marketplaces. It is the aspirational mission of the firm. This could even allow for an oddball type of product line. One example provided was Redbull, which is clearly in the refreshment market but also important in arranging airplane racing competitions and other high-powered sporting events, such Formula One racing and other sports ownerships, and partnering with game companies (such as “Call of Duty” and “Destiny”), the HALO jump, and web marketing. The quest is that, “Red Bull helps more of us live our lives to the extreme” uses storytelling combined with action to illustrate their quest. Red Bull’s quest brings their entire product and brand lines together.

There was also a focus on data-driven innovation. This attempts to make use of big data so that intrapreneurs in an organization can become experimental. This was quite the opposite of what I might expect. Strategic innovation doesn’t necessarily have data, but rather ambiguity and uncertainty.

One of the better concepts reminded me of a Kodak moment. Kodak invented the digital camera and its failure to adapt and take on this innovation led to its downfall. The lesson: innovate or die and don’t have that Kodak moment.

The Kodak moment is also about understanding opportunities. That is where the Alex Osterwalder model in lean startups models is key. Even large companies need to try to understand how to better evaluate when an innovation is key to their strategy.

Here is what I would like to see or wished was on the agenda.

For the most part, I was disappointed in how little the large companies appeared to understand how to create an innovative culture. No one talked about learning from failures, and no one really discussed that innovation is a process that must be ingrained into the culture with a reward system for trying.

The goals of many of the Chief Innovation Officers were mostly short-term and revenue driven. I heard ROI on innovation too often. This translates to small incremental wins, no home runs or disruptive innovation and most importantly, the unwillingness to take risks. I personally don’t like the term risk when talking about innovation. I prefer the term “reducing uncertainty.” Risk can be measured and may fit the mindset of a large company, but the real goal is to reduce the uncertainty that cannot be exactly measured. However, uncertainty can methodically be calculated within a statistical range of probability. I concede that there are perils in trying to predict the future. Although we can’t forecast the future, but we can work the means and ways to get to a better future.

Jeff Bezos said, “Advertising is a tax you pay for lack of innovation.”

A Meditation on Entrepreneurial Strategy

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Most of contemporary strategy literature is based on big company strategy. Larger companies focus their strategies on a cost based model because costs are within their realm of control. They almost never think about the revenue side of the equation. After all, one can control costs, but the customer controls your revenue. This is where entrepreneurial training differs, and provides a winning strategy.

If you think of strategy in terms of costs you can win only half the battle. A recent Harvard Business Review Article by Roger Martin, calls this The Big Lie of Strategic Planning. Martin clearly sees the entrepreneurial view, to focus on the sources of revenue, i.e., customers as the key element of strategy.

Henry Mintzberg called this differential—intended strategies versus emergent strategies. Entrepreneurs work in the emergent section, because they are very opportunistic about revenues. Good entrepreneurs learn quickly that you cannot control the future, but you can try to reduce the uncertainty in getting there. Strategists would call this the resource-based view of strategy.

Resource based strategy states that an organization should use the strongest competencies of a firm to determine a strategy. Entrepreneurs think about what they could be doing with the resources in hand in order to find the opportunities. The planning school holds the thought about what the organization “should be doing” corner of the spectrum rather than the “could be doing” corner. Other strategists might view this as the Blue Ocean strategy. Swim to where no one else is playing; find a niche where there is no competition. Entrepreneurial strategy might also fall into the Michael Porter School of Positioning strategy, which is very analytical.

For information of the various schools of strategy read Henry Mintzberg’s book Strategy Safari. Unfortunately, the entrepreneurial school has changed dramatically since the book was published and it shows less relevance for entrepreneurs. However, this book is recommended as a great summary on the various strategic schools of thought and it is still relevant today as a great primer on the major thought patterns in the strategy discipline.

A good strategy (or whatever term is used – mission statement, mantra, culture) communicates behavior to employees. This strategy communicates what decisions should be made and the boundary limits for what should be the focus of the organization.

Another way to determine and validate a strategy, entrepreneurs may prefer the VRIO framework as popularized by Jay Barney. Are you building something Valuable? Is it Rare? Can it be easily Imitated? And can your Organization implement on the concept?

Possibly, the most important considerations for a startup concern (1) whether a strategy is necessary, and (2) at what point does a strategy become necessary for an organization. Should every company act like entrepreneurs and be opportunistic? Early stage startups do not necessarily engage in long-term strategies. For them, it comes down to tactics and execution. Execution trumps all organizational strengths every time.

The bottom line is that entrepreneurs should talk to their customers. Entrepreneurs have a venture. A business is created when the product or service of the venture can reach at least twenty customers who will make a purchase at a price that provides sufficient margins. If the entrepreneur doesn’t have a product and a price then they don’t have a business…yet.