Corporate Innovation Theatre

Anyone working in the innovation economy will have come across Corporate Innovation teams from mega corporations (>5000 employees). These are teams within a larger corporate structure, tasked with ‘innovating’ — creating new products and services.

They will invariably fail. The theatre is real though.

There are multiple reasons for this. Let’s explore a few of them.

Orientation

Firstly, there is the issue of orientation. Most innovation in a large firm is front loaded — it happens in the earliest years of its existence. Thereafter, one can see tweaks and incremental innovation to sustain the firm. By its very nature, a large firm isn’t geared to innovate once it has a certain number of employees. Instead, it is really good at doing exactly what gave it initial success. In evolutionary terms, it would be like expecting an orca to also jump out from the ocean and run after seals at the beach.

Too Many Cooks

Secondly, just imagine the number of people involved in a Corporate Innovation team. Marketing, Legal, HR, Tech, the CIOs office, the CEOs office are all involved at some level. When we created Tribal, the number of people involved could all be fed with two large pizzas, with leftovers to take home. The whole process from idea to MVP took us one week. Egos, agendas, and risk intolerance can delay approvals at large firms putting them at a distinct disadvantage in the innovation olympics.

The costs of innovation have come down drastically. For most of the pre-Internet age, a significant portion of value created by an entrepreneur would be eaten up by middle men, including those within a firm. The internet, and its associated and enabling technologies have allowed the entrepreneur to capture most of that value for himself and the core team. Not so in the bureaucratic mega firm. This is why you see Startups beating established firms in their own industry.

Extremistan/Mediocristan

As Nassim Taleb writes in The Black Swan and in Incerto, we spend most of our lives in Mediocristan. Extemistan is where the range of outcomes is extremely wide. A startup will either run out of cash in a few months, or exit for a sum that’s about 8 to 10 years worth of a banker’s salary. In some extreme cases, the founders could end up being worth billions. The guts come with the glory.

Mediocristan is the typical large company, which is seemingly more stable. The managers have stable incomes, 401Ks, the works. That visible stability can be misleading, however, and it could be disrupted by an extreme event. Think Lehman Brothers, Bear Stearns, Enron, or even Century 21.

Large firms are Extremistani immigrants living in Mediocristan. Very few retain their Extremistani passports. Most have forgotten their roots.

Twin Propellers

And finally, disruptive innovation requires two concurrent processes. Think of them like the twin propellers on a turbo-prop. The first is innovation, the second being destruction.

Kodak filed for a patent for what it termed a ‘Electronic still camera’ in 1977. And yet, they were so addicted to their cashcow — film — that they refused to take a hard call on when to kill it. Steve Jobs’ genius partly lay in taking hard decisions to kill platforms that were cashcows, to focus on new ones. Luke Williams speaks about these events and more in his wonderful book ‘Disrupt’.

Possible Solutions

1. Increase the number of experiments: Innovation is a numbers game too. Paraphrasing Linus Pauling's strategy as quoted in Force of Nature: The Life of Linus Pauling,  you need to have a lot of ideas, and then throw out the bad ones.
2. The "Special Forces" approach: The NATO's definition of Special Forces is "Military activities conducted by specially designated, organised, selected, trained, and equipped forces using unconventional techniques and modes of employment". The whole army cannot be SF, and the SF units are not deployed for regular operations.
3. Get someone senior, with authority and social capital in the firm to head your in-house Special Forces team. Greg Larkin calls this senior person 'The Godfather'. I would say he needs to be at least a Clemenza. Build a small team around this senior person, that includes tech, design and marketing. The main idea is to validate your idea, not to build a polished product, and get it out rapidly before the beancounters and gatekeepers get in the way.
4. Build and Ship in 10 weeks: That's about how much time teams get to build while at an accelerator program. If you can't build in that time, you probably won't be able to build.
5. Be bold with your ideas. Remember that a two-person team at some college dorm room , cafe, or an accelerator is building the next product that will kill your business. Your incremental changes amount to putting lipstick on a pig. Don't fall into that trap.