One of the most discussed topics in innovation today is how to get large companies to behave more like startups when it comes to pursuing transformational or breakthrough innovations. There are books written on Lean Startup, conferences on Incubation and Entrepreneurship, classes on agile development and ‘test and learn’ approaches. All of this begs the fundamental question of how a company can think and feel like a startup. What is the mindset that enables the successful discovery, incubation and launch of a truly transformational new business?
A recent innovation project brought this question into stark focus and provided some clues about a mindset orientation that looks to be important enough so that large companies should consider ways to foster it within their innovation organizations.
Questions from the CEO
The final report-out of a 6-month innovation project had just been presented to the executive team of a 75-year-old company when the CEO asked some interesting questions. How did the just completed project compare to strategic innovation projects at other companies? How did their innovation team compare to teams from other multi-billion dollar, multi-national, corporations with many business divisions? How did the outcomes of the project, the opportunities they identified to pursue, stack up to the types of opportunities larger clients find attractive?
At the moment, I mumbled some platitudes about how the innovation project team was just as smart, motivated, experienced and cross-functional as any of the teams we work with in other companies, and how the project went smoothly following the same ADOPTS™ process used with other companies, and how the outcomes were just as interesting and novel as the ones identified by other companies. But when I later thought about the questions posed by the CEO, I realized that this project actually felt different from many of the others we do for some of the largest companies in the world.
If the process and project were the same as we use for other companies, then why did it feel different? It’s a question worth pondering.
The Outcome of the Project felt Different
In reflecting on the successful results of the project, I had to revise my blink assessment that the outcomes of this project were just as interesting and novel as ones we typically end up with. In fact, the outcomes were more interesting and novel. The two opportunities the company selected to pursue were entirely new businesses quite a distance from their core. Both new businesses were related in some way to the company’s core competencies but they addressed very different customer segments, technologies and business models. Thus, they required new and different competencies the company did not have. Instead of becoming reasons not to pursue the opportunities, they looked at it as an opportunity to build new competencies that would give them multiple options to expand their business.
In opportunity discovery projects done for every company we’ve ever worked with, big, transformational opportunities are identified on a regular basis. The iterative deepening approach used in the ADOPTS™ process virtually guarantees that big opportunities far from the company’s core will be found. But in many companies these opportunities are almost never selected as the ones that move on. The internal barriers and constraints are just too powerful. Even with a combination of ‘wisdom-of-crowds’ tools and deep analysis, when the final selection is done, the overriding evaluation is ‘it’s just not us’. In some cases, this is a valid decision. But not in every case. Too many opportunities that a company should and could pursue get rejected out-of-hand without even the opportunity to run an experiment to see what could be possible.
The key difference in the project just completed was that the transformational opportunities that would normally get filtered out by questions like ‘is it us’, or ‘do we have the right to win’, were made permissible. The creation of a permissible mindset was a critical factor in finding the ‘right’ opportunity to pursue.
Creating a Permissable Mindset – It’s About Behavior
One way to define what a permissible mindset looks like is to document the observable behaviors of the people and the organization before, during and after the innovation project. Here is a list of individual, team and company behaviors that were observed during this project.
- The CEO showed up and was involved throughout the project. The CEO wanted something very different – to really stretch the boundaries of the company and wanted to make sure this was happening.
- The team was allowed to go WAY outside existing business boundaries – far from the core.
- On a related note, there was no constraint or even expectation that the new opportunity had to fit into an existing business. As a matter of fact, the incremental and ‘natural’ opportunities that were identified were explicitly set aside for the core business to follow up on.
- The CEO, and all the senior execs, listened and learned. The default executive mode is usually quick, decisive judgment. Short summaries are preferred. Rendering judgement is obligatory. Imagine when the last time a C-level exec sat through a two-hour session without interrupting to render some opinion or judgement or making a request for further study.
- The people on the discovery team were very senior (and perhaps more skeptical than usual). They did not delegate. They allocated 50% of their time away from their day jobs for the duration of the project – approximately four months. In the short term, this was painful for the company because some things just did not get done.
- People were chosen to be on the discovery team who fit a specific mindset profile. The company administered an assessment to identify people with the traits needed in a front-end innovation project. The result of this was that the head of engineering, someone who was initially identified to be on the team, was selected out. The assessment revealed, to him and others, that he did not have the right mindset to be an effective team member (he was on the advisory team overseeing the project).
- The percentage spend on the project was felt. It was a real commitment, not just a minor budgetary line item. The executives knew that this money could be spent in other ways that would result in faster, less risky (but not nearly as large) returns.
- A high priority was placed on potential partnerships that could jump-start a new business. financial criteria for the existing business were put aside.
These tangible and observable behaviors are both important and noticeable. They are what foster a permissive mindset.
Being Existential – Betting the Future
Samuel Johnson famously said “When a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.” When a company knows that its future depends on the outcome of the innovation initiative being undertaken today, it focuses the collective mind. This is the existential mindset.
If we expand the definition of existential just slightly, beyond just merely existing to ‘having an impact’ then it becomes useful to leaders of innovation. The two forms of this existential mindset are:
- If we don’t do this, our existence is threatened.
- If we do this, we will have real impact and influence – our existence will be transformed.
It is existence with influence that is desired. Moreover, it is influence derived from something new and important, not just from being big. Both forms of existential mindset are powerful motivators. When your existence is at stake or your existence could be transformed, motivations change. Both situations are often difficult to instill within large companies.
Large companies, even when their leaders voice the words, have a difficult time fostering an existential mindset. The importance of strategic innovation projects is often professed but as a practical matter, the success of any one innovation project is rarely critical to a large company’s immediate survival. Moreover, the projects are often viewed as negatively effecting quarterly or yearly financial results.
Within a multi-billion dollar company the tacit belief is ‘if this initiative works out, that would be great but if it doesn’t, we can always try something else’. A few million wasted dollars and a few years going down a dead-end path, while not good, is not an existential threat to a large company. Deep down, individuals know that the company will continue just fine whether or not the innovation project succeeds – at least for a while.
Make no mistake, large companies do big things and successfully innovate all the time. But talk to people who have successfully shepherded an opportunity far from the core of a large company and they will tell you how difficult it is and how much it depends on timing, luck, circumstance and persistence (read constant battles). Large companies do not naturally undertake these types of projects. Their natural response is rejection.
Is it possible to create an existential mindset within a large company? Perhaps something close. One of the things that motivates individuals is knowing that what you are doing is important – that it will affect both their and the company’s existence. There are people within your company for whom this motivation is a powerful force. These are the people who typically are the champions and leaders of these projects and these are the people who need the motivation that comes from the leaders in the company exhibiting this existential mindset themselves.
Big companies have certain advantages. They have more resources to apply to the opportunities they identify. They often have a permanent innovation group staffed by experienced people running front-end projects. But these ‘assets’ may actually be a detriment when it comes to ‘acting small’. It is difficult, but not impossible, for large companies, who have the built-in safety of size to foster an existential mindset. The following are some things that could potentially make projects permissible and existential instead of just important.
- Get the leadership involved – the highest level executive responsible for the business.
- Train the leadership and other executives to develop an existential and permissible mindset.
- Have the leadership sit and learn for 2 hours.
- Give an individual innovation assessment and use it to select people for the team.
- Choose people who are influential in the company to be on the team.
- Take the people on the team away from their ‘day job’ during the duration of the project
- Explicitly set aside the incremental, the easy and the ‘natural’ opportunities – push the boundary far from the core.
- Create a vision of the risk/reward equation – how bad it could get if nothing is done and how good it could be if the right thing is done.
- Let the people involved directly experience the potential pains and gains.
Many of these are things that occur naturally within smaller companies. Recreating this environment within a larger company, while difficult, is possible.
Mindset needs to be a Priority
So what can be done to create a permissive and existential mindset within a large company whose immediate existence is not threatened and whose core culture and processes resist efforts perceived to be outside the core?
Creating a permissible and existential mindset is a leadership and a cultural task, but it is also one that can benefit greatly from new people policies, new governance rules, new operational paradigms and new organizational structures that are outside a company’s standard operating procedure (SOP).
These can all work together to enhance the necessary mindset, or they can work at cross purposes to that objective. It is therefore imperative that transformational innovation efforts pay attention to leadership and culture but also specifically focus on the design of the new business being nurtured – its people, governance, operation and structure.
For the company that posed the original question ‘how did our innovation project compare with other companies we work with’, their transformational journey is still in progress but is looking promising. The permission given to the innovation team, and the knowledge that what came out of this innovation project was critical to the company’s future existence, resulted in new opportunities that the company would never have considered in their normal course of business. The task that is now in front of them is to maintain this mindset as they go about incubating and launching their new offerings. Mindset alone is never enough, but without it, the task would be immeasurably more difficult.