Join Masterclass webinar: “Beyond-the-Pill” Disruptive Innovation within Pharma, Feb. 23, 2016

The pharmaceutical industry struggles with the fundamental changes of the healthcare systems worldwide. For many reasons, the traditional mindset and business models of the past are failing today. New approaches are needed for innovation “beyond the pill” to stay profitable and ahead of competitors.

But how to change a large organization bottom up and from within?

Sign up for the Masterclass: “Beyond-the-Pill” Disruptive Innovation within the Pharmaceutical Industry webinar hosted by the Intrapreneurship Conference at 5-7pm CET (11am-1pm ET) on February 23, 2016!

Intrapreneurship Conference

Why?  The pharmaceutical industry struggles with the fundamental changes of the healthcare systems worldwide. For many reasons, the traditional mindset and the business models of the past are failing. New approaches are needed for innovation “beyond the pill” to stay profitable and ahead of competitors.

But how to change a large organization bottom up and from within?

This session offers you a unique birds-eye and worms-eye view on pharma innovation and its shortcomings under the current paradigm, before diving into real-life case studies of intrapreneuring, disruptive transformation and strategic innovations within and beyond a Global FORTUNE 500 pharma company.

Join this masterclass and learn on how to bring intrapreneuring and transformation to life in a large pharma company.

Eyeforpharma interview “Taking the entrepreneurial approach”

Read this insightful “Taking the entrepreneurial approach” interview conducted by Eyeforpharma on the impact of hierarchy and how executive mindset inhibits adapting to the rapidly changing commercial landscape.  It outlines how “intrapreneurs” and internal “angel investors” can get large, mature organizations moving again!

Read Intrapreneuring Case Study “Leading Innovation” by Ivey Business School!

The prestigious Ivey Business School of the Western University in Ontario, Canada, published an insightful new teaching case study on intrapreneuring and corporate innovation titled “Boehringer Ingelheim: Leading Innovation” in which the case writers, Professor J. Robert Mitchell, Ph.D., and Ramasastry Chandrasekhar, follow the footsteps of the newly appointed innovation director.

Meant to raise questions and serving as a learning opportunity for graduate students in academic program around the globe, this case study lifts the corporate curtain a bit to show how innovation through intrapreneuring really happens and decision points along the way.

Outline (by Ivey Publishing)

The newly appointed director of Innovation Management & Strategy at Boehringer Ingelheim, a German-based multinational pharmaceutical company, is finding his way forward in his firm’s new, first-of-its-kind role, which is central to the company’s growth rejuvenation strategy. His job has a threefold mandate: to build internal networks, to establish internal structures and to leverage internal ideas. His biggest challenge, however, may be transforming the organization’s DNA. The blockbuster business model that has characterized the company for decades is no longer appropriate. Instead, the firm needs to develop healthcare products available to end users over the counter. This shift in strategy requires innovative changes in distribution, delivery and customer focus. To accomplish this goal, he needs to institutionalize innovation so that it becomes sustainable. But in doing so, he must also identify the metrics for assessing progress. The case provides an opportunity for students to step into the shoes of an innovation leader, to develop an innovation roadmap for the organization in the face of uncertainty and to understand how to engage in innovation leadership at various levels of a global enterprise.

Learning Objective

This case has two key objectives. First, this case provides students an opportunity to grapple with the difficult decisions associated with innovation in an uncertain environment. Second, this case highlights that anyone has the ability to cultivate an entrepreneurial mindset and to lead innovation. The case divides the attributes of an innovation leader into five components: observing, questioning, experimenting, networking and associating. It shows the real-life experiences of a manager doing seemingly routine activities, who evolved into a leader who transformed the DNA of a global enterprise. The case also provides a template of the tasks, responsibilities and value-added changes as an individual moves progressively within an enterprise from an operations manager to a senior manager to an innovation leader. This case can be used either toward the beginning or toward the end of any course that addresses innovation and creative thinking in a large organization. At the beginning of a course, it illustrates the challenges of acting in the face of uncertainty in a large organization. At the end of a course, the case provides an opportunity for students to apply what they have learned about innovation, entrepreneurial thinking and innovation leadership.

Is Disruptive Innovation a Myth?

When we talk about disruptive innovation, we can easily agree that going from the days of dim candle light and sooty oil lamps to electric light was one of these breakthrough innovations, right?  Its icon, the lightbulb serves as our symbol for a great idea today.

Lightbulb idea (www.istockphoto.com)
(source: http://www.istockphoto.com)

Who invented the lightbulb?

When you ask around “who invented the lightbulb?” the answer “Thomas Edison” first comes to mind – and the answer is wrong!  Truth is that we can give credit closer to 20(!) inventors of the lightbulb! – How so?

Thomas Edison patented the first practical and commercially viable incandescent lightbulb in 1878 and a revised design in 1879.  In addition, he  offered the first efficient electricity supply system for households and businesses, which laid the foundation and cleared the path for mass-producing light bulbs in 1880.  His design was an evolution from previous, inferior designs and enabled by improved technology.

Edison's Lightbulb (source: www.unmuseum.org)
Edison’s Lightbulb (source: http://www.unmuseum.org)

 

Sitting in the dark without Edison?

No worries, we would not stay sitting in the dark.  It appears safe to say that even if Thomas Edison was never born, the practical incandescent lightbulb would have been developed around the same time – by someone else.

Looking back in history, Humphrey Davy invented electric light in 1802; more than 75 years before Edison.  His “arc light” was unsuitable for mainstream application though it found specialty uses even today. Many more designs for incandescent light and lightbulbs were developed by several inventors, but neither were they practical nor suitable beyond demonstration stage. Prominently, Joseph W. Swan built a working prototype of a “light bulb” in 1850 – well before Edison.

Entrepreneurial Competition

Edison had access to improved technology such as a better vacuum pump for his breakthrough design. This technology was not available to previous inventors.  Edison also developed an efficient and economical way to distribute electricity when earlier designs drained batteries quickly.  (A nice example, by the way, on how a product can go a long way when bundled with a complementing service.)

On the flip-side, Edison knew of his limitation too.  He made carbonized Japanese bamboo glow as filament between two electrodes knowing that carbonized Tungsten was the superior material.  However, the technology was not available at the time to produce a thin Tungsten thread.  We had to wait for William D. Coolidge to produce the Tungsten filament for General Electric in 1910, which is still the preferred material to illuminate our modern incandescent lightbulbs today.

This situation is typical and comparable to many big ideas that entrepreneurs work on today.  There is much competition among entrepreneurs, so every good idea usually has a handful of teams working on it independently and head-to-head at the same time.  Thus, it is highly likely that, if not Edison, another inventor would have come up with the lightbulb design we are so familiar with today.

R&D as a Legacy

Perhaps, the even more impactful and lasting heritage of Thomas Edison are not his inventions, useful as they are.  His products such as the lightbulb, phonograph, quadruplex telegraph, mimeograph, etc., have been replaced over time by more advanced technology.

Nonetheless, Edison has changed the way we discover concertedly today. Until his time, inventors matched the stereotypical image of a lonely genius experimenting and inventing in their lair burning the midnight oil over some ambitious idea.  Edison established the first research and development (R&D) organization in his famous Menlo Park lab, where a large number of researchers worked together in an orchestrated way to find solutions to specific problems coordinated strategically and systematically concerted.  Edison has industrialized research!

Until today every research-driven company or organization worldwide follows in Edison’s footsteps!  What an impressive legacy!

Summary

Disruptive innovations tend to have their origin in incremental steps and competition among inventors. First working individually and now increasingly in teams or even distributed R&D organizations across country borders.
A key success factor here is building trust and incentives within the team in order for all individual contributors to share information and findings freely.

The broader, cross-functional approach to research helps to identify ideas and technologies from other disciplines that can serve as stepping stones.  Edison used a better vacuum pump, which made his design possible.  Later, the capability to manufacture a thin Tungsten wire allowed General Electric to take the lightbulb the next level.
As the saying goes, “innovation happens at the intersections of disciplines.”  The development of the lightbulb serves as a nice example proving it to hold true once again.  Thus, innovation benefits by drawing from advances in other disciplines.

So, is disruptive innovation a myth?

Back to our original question, the story of the lightbulb is a great example for a breakthrough innovation with vast ramifications that disrupted and shaped the we live and work around the globe.

It can, however, not be seen as just one big and isolated scientific step but rather a series of many little steps in combination insights from other disciplines including manufacturing, economics and marketing leading to broad adoption that changed the world.

Lightbulb evolution (source: www.thewirelessbanana.com)
Lightbulb evolution
(source: http://www.thewirelessbanana.com)

Only when it all comes together you have a disruptive innovation like Edison’s famous design.  And it was still not the end.  The journey continued to evolve with a Tungsten wire and later fluorescence, halogen and LED lights.

In this light, every disruption seems as yet another incremental step, doesn’t it?

Innovation drives Diversity&Inclusion 2.0

The traditional world of corporate Diversity and Inclusion (D&I) is being disrupted by a new take on D&I and combining it with innovation and talent management.  What some perceive as a threat to the D&I establishment may just be the next step of evolution that could invigorate and drive D&I to new heights.

Though not an entirely novel approach (see also How to create innovation culture with diversity!) the new thinking gains traction.  As this could play out in different ways and only time will tell what worked, here are my thought on where we are heading.

Struggles of the  Front Runner

Many traditional D&I programs, let’s call them “version 1.0” of D&I, struggle transitioning beyond a collection of affinity groups, tallying corporate demographics and competing for D&I awards to post on their webpage.  In these traditional D&I programs ‘diversity’ is often understood to be reflected by more or less visible differences among individuals at the workplace while ‘inclusion’ translates to supporting defined sub-populations of employees through, for example, establishing affinity groups.

The United States is seen as the front runner of the D&I movement.  D&I has been around in the U.S. corporate world for decades.  For historic and demographic reasons it hones in on removing obstacles for minorities at the workplace supported also by strict legislature and execution; exercising Affirmative Action, for example.

This legacy in the U.S. lends itself to an inside focus on organizations that became the backbone of the traditional D&I programs.  It comes down to the question ‘what can or should the organization do for specific groups of people’ defined by ethnicity, gender, age, sexual preference, faith, disability, war history and so on.  Apparently, it still is work in progress as, for example, Silicon Valley just recently got on the public radar, which stirred up the debate afresh along the lines of D&I 1.0; see Google releases breakdown on the diversity of its workforce.

Stuck in the ‘Diversity Trap’?

The inside focus and minority messaging of D&I 1.0, however, can be limiting when D&I erodes to a process of ‘doing things right’ by pushing for quotas, ‘checking boxes’ and inflating variations of terminology perceived as ‘politically correct’.  This can in fact be different from ‘doing the right thing’ for the company overall, its employees as well as the affinity groups and their constituency.   It should not surprise that Affinity groups can be (and often get) stigmatized and perceived as self-serving and self-centered social networks without significant and measurable business impact.

Under this paradigm these D&I 1.0 programs struggle to get serious attention, support and funding from executives beyond operating on a minor level to ‘keep the lights on’ more for public image purposes than business drive.  The fundamentals seem to get forgotten: in the end, a business exists to generate a profit, so less profitable activities are likely to be discontinued or divested.  It’s a symbiosis and to say it bluntly: without healthy business there is no D&I program and no affinity groups.  When this symbiosis get lopsided, D&I 1.0 gets stuck in the trap.

D&I 2.0

“Diversity” is catching on beyond the United States in Europe, for example, where many countries do not have share a highly heterogeneous demographic composition, for example.  Here, companies can start with a fresh approach jumping straight to D&I 2.0 – and many do!  It reminds me of developing countries installing their first phone system by skipping the landlines and starting right away with mobile phones.

The 2.0 internal focus corresponds to hiring workers that truly think differently and have different backgrounds and life experiences some of which overlaps with D&I 1.0 affinity roots.  In addition, there is also an external focus putting the staff to work with a clear business proposition and reaching even beyond the organization.  So here a candidate would be hired or employee promoted for their different thinking (2.0) rather than more visible differences (1.0).

While need remains for affinity groups to tend to their members needs within the organization, the “new” D&I 2.0 opens to shift focus to go beyond the organization.  It goes along the lines of a statement President John F. Kennedy became famous for and that I tweaked as follows: “Don’t ask what the COMPANY can do for you ask what you can do for the COMPANY AND ITS CUSTOMERS.

D&I 2.0 gears towards actively contributing and driving new business results in measurable ways for the better of the employees as well as the organization and its customers.  A visible indicator for D&I 2.0 affinity groups helping their constituency beyond company walls is affinity groups identifying and seizing business opportunities specific to their constituency.  They translate the opportunity and shepherd it trough the processes of the organization to bring it to fruition.  For example, affinity groups are uniquely positioned to extending and leveraging their reach to relating customer segments in order to identify ‘small elephant’ business opportunities; see How to grow innovation elephants in large organizations.

The D&I 2.0 approach demonstrates sustainable business value which is why D&I 2.0 sells much easier to executives. It makes a compelling business case that contributes to new business growth, the life blood of every company.

Challenging Transition

U.S. companies stuck in D&I 1.0 are hard pressed to keep up with the D&I 2.0 developments and overcome their inner struggle and resistance.  With decades of legacy, D&I 1.0 programs in many organizations lack the vision and ability to make a compelling business case, to develop a sound strategy as well as capability and skill to implement it effectively.  This is the requirement, however, to truly see eye-to-eye with senior executives and get their full support.  This can become a serious disadvantage in the markets relating to products and customers but also in attracting talent.

In the end, the saying holds true that “talent attracts talent” and all organizations compete over talent to compete and succeed.  Therefore, a D&I 2.0 program combines business focus and talent management while tying it back to the core of diversity and inclusion: Fostering diverse thinkers and leveling the playing field for all employees.  This requires a level playing field that offers the same opportunities to all employees, which is the real challenge.

How do you level the playing field effectively in a large organization?  How this will be implemented becomes the differentiating success factor for companies transitioning to D&I 2.0!

Here is a example 2.0-style for a level playing filed that has its roots in the D&I affinity group space yet opened up to include the entire workforce.  It empowers and actively engages employees while leveraging diversity, inclusion and talent management for innovative solutions with profitable business outcomes.  It may take a minute or two to see the connection between D&I, talent and disruptive innovation but it is at work right here in the School for Intrapreneurs: Lessons from a FORTUNE Global 500 company.

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Previous posts relating to innovation and employee affinity groups / employee resource groups (ERG) / business resource groups (BRG):

Innovation Killers: The Corporate Immune System Strikes Back!

Parallel Universes

Our immune system protects our health and defends us against threats entering our body.  It identifies intruding germs, isolates them from the surroundings and flushes them out of the system to prevent further harm. Our immune system also keeps track of intruders formerly identified to reject them even more effectively should they ever reappear.

Large organization consist of humans who tend to follow behavioral patterns not unlike their inner immune systems when it comes to evaluating new ideas brought forward by an aspiring intrapreneur. Especially, if a new idea comes with a ‘wishlist’ of demands is needed from us to make it happen; typically, time and money.

Joining the Dark Side

It’s our human nature: we approve ideas we like or that further our objectives while we tend to reject ideas that don’t match our liking, beliefs, commitments or that cause disruption to our equilibrium or budget. Disruptive ideas come with uncertainty and may require uncomfortable or additional efforts on our side. The outcome may appear risky, could waste precious resources or have other undesirable repercussions for us.  The fear of losing something is stronger than the incentive of gain. And often enough, we just don’t fully understand the idea or its implications, don’t take the time or find the impetus to look into its details, so it seems safe and convenient to reject it.

This way, as managers and coworkers, we act as a part of the organizational immune system. We become part of the reasons why mature organizations can’t innovate – we join the ‘dark side,’ so to speak.

Our body remembers a previous intruder in order to respond even faster the next time – and so do we. Interestingly, though, we tend to remember better who presented the idea that we rejected rather than what the idea was about. So when the ‘quirky guy’ shows up again after a while with the next idea, our suspicion is already kindled, and we more easily reject this next idea too.

Facing Defeat

For intrapreneurs it is crucial to avoid the “No,” because it is hard to turn it into a “Yes” again later on. This is why we teach How Intrapreneurs avoid “No!” at the School for Intrapreneurs: Lessons from a FORTUNE Global 500 company, a highly effective talent and leadership development program.

Too often an intrapreneur lets their enthusiasm take over and confronts us straight on with their ideas bundled with a request for resources of sorts. Most often, this discussion ends quickly with a “No,” when we perceive this ‘frontal attack’ as a threat to the status quo, the establishment, and the well-oiled machine that the manager runs; and so it triggers the ‘corporate immune system’ leading to rejection.

Stepping Stones to Success

So, just short of having “The Force” of a Jedi, how should an intrapreneur seek support for an idea from managers, potential sponsors or coworkers? While not ‘one-size-fits-all’ and there is no silver bullet, here is a selection of tried approaches for consideration:

  • Seek support: The trick is to ask in a ways that build support for driving the idea forward – and not necessarily for the whole implementation project at once. Even a small step is better than none. For example, supporting evidence can help to raise curiosity and deflate resistance. Find out if a similar approach worked out in another company or industry; it helps to emphasize validation elsewhere. It can help to frame and position your offer to a potential sponsor.
  • Build trust: Additional ‘selling tips’ I picked up from Gifford Pinchot III., the Grand-Master of intrapreneuring himself, suggest a more social approach that includes building a personal relationship first: It is much easier to connect from a position of mutual trust and openness to find support building the supportive network by asking for advice or references before you ask for resources.
  • Just a test: Cautious managers may open up when they hear the intrapreneur is not intending to change anything, just ‘trying something out,’ so not to threaten their established processes, investments or power-structures within the organization. Emphasizing the ‘experimental’ and non-threatening nature of the idea helps to prevent triggering the immune system at this early stage.
  • Gathering Insights: Successful intrapreneurs listen very closely to what the responses to learn from them. Rather than asking a closed question that puts them in a Yes-or-No cul-de-sac, it is much more insightful to carefully phrase questions in a way that the gate-keeper already solves the problem, or provides an answer or approach to the problem the intrapreneur is trying to solve.
  • Know the Goals: The larger a support network an intrapreneur can built for their idea, the better. Rather than the direct manager, it may be more informative to work with people who have insights into the goals and priorities of the organization, which may be sources of resistance. This way, the intrapreneur can learn about possible conflicting goals (for example, “do more with less” or “stability versus creativity”) that need to be known and understood in order to be addressed and dealt with constructively.
  • Show Gratitude: And finally, it is important for intrapreneurs to pay respect and express gratitude no matter what the outcome is of their conversation. A ‘thank you’ goes a long way and keeps the door open to talk more and possibly receive support in the future.

SOX for Snowden?

Quick Recap

Edward Snowden, a former member of the U.S. intelligence community, released classified government data to the public in 2013.  He faces prosecution under the U.S. Espionage Act, remains on the run from the U.S. government and ended up seeking asylum in Moscow, Russia.

The 1.3 million documents he released are the largest known security breach in U.S. history.  They also unveiled highly questionable if not outright illegal action by US intelligence agencies relating to widespread spying domestically and abroad.

Traitor or Patriot?

In the light of an exclusive interview with NBC News on May 28, 2014, the popular NBC “Today” show asked its viewers in a polarizing poll to decide for themselves whether Snowden was a “Traitor” or a “Patriot.”  The morning before the interview aired, 53% of viewers saw Snowden as a “traitor”. The morning after, 61% found him a “patriot.”  Though the responses do not necessarily reflect a representative sample of the U.S. population, let’s go with it for now, since an interesting majority swing took place in favor of Snowden’s action.

We are not going deeper into whether or not Snowden did the right thing or not.  His disclosures spurred and continue to fuel a worldwide discussion on where the boundaries are for covert operations and government surveillance programs.  It’s not a new question and comes down to the ancient question the Roman poet Juvenal famously raised:  “Quis custodiet ipsos custodes?” or “Who guards the guards?”

Apparently, the continued decisions of U.S. secret courts approving intelligence programs of the disputed nature did not resonate with the viewers.  If Snowden was tried under the U.S. Espionage Act, the public may never hear of Snowden again nor details of his prosecution with most certain conviction.  The covered surveillance programs may continue without meaningful oversight.

It makes Secretary John Kerry’s strong request sound weak and questionable for Snowden to face U.S. authorities and trust the legal system.  Continued messages from high-ranking politicians up to President Barack Obama himself depict Snowden as a “low-ranking analyst” and “high school drop-out.”  – Doesn’t this makes you wonder how such an acclaimed  ‘bum’ got access to such large amounts of sensitive government information in the first place and who else is granted ‘Top Secret” security clearance, which is shared by 1 million(!) Americans?

SOX for Government Employees and Contractors?

Countering illegal practices by companies let the U.S. Congress to pass the Sarbanes-Oxley Act (SOX) in 2002.  While SOX overhauls regulatory standards for record keeping practices, it -perhaps- became more known to the public for protecting employees of publicly traded companies from discrimination who report violations of regulations by the company.  Every major business now has a process in place to ensure SOX is enforced effectively.

However, SOX only covers publicly traded companies in order to protect shareholders from fraud.  What about the public sector, namely the government?  Shouldn’t there be a similar ruling that effectively protects government employees and contractors, such as Edward Snowden, when they witness and wish to report apparent illegal actions by government institutions?

Check and Balances? (source: en.wikipedia.com)
Where are the “Checks and Balances”?
(source: en.wikipedia.com)

Checks and Balances

Snowden claimed that he repeatedly approached his manager raising concerns and was told to shut up.  Certainly, national security interests must be protected and safeguarded by the clandestine functions of government.  But then, again, who guards the guards, when “national security” becomes an obscure blanket excuse without an effective system of checks and balances that the U.S. Constitution mandates and the United States are founded on?

The Snowden affair made painfully clear that the existing legal parameters for governmental “whistle blowers” are insufficient to non-existent.  How else would the public have found out about the abuse of governmental power?  Going public and risking prosecution, currently, appears to remain the only viable option to truly allow and push for effective checks and balances until legislation catches up with a SOX for future Snowdens in order to keep our democracy working for the people.

Angel Investing within the Company – Insights from an Internal Corporate Venture Capitalist

Breaking through the crust

One of my favorite and most successful approaches to building a powerful intrapreneuring ecosystem is internal corporate venturing!

It is an exquisite tool to cut through the crust of ‘red tape’ that bureaucracy builds up over time. Internal corporate venturing or “Angel investing” allows for nimble decision-making with a lean process to give disruptive innovation ideas a chance again in a large company.

Seed-funding promising ideas

How does it work?  Think of becoming a venture capitalist within the company: You invest in ventures within the organization and help building ‘intraprises’ in contrast to funding start-up enterprises outside the company. The difference is a you don’t venture for your own profit but for the better of your organization.

The idea here is to seed-fund promising disruptive ideas that otherwise would not be implemented or even seriously considered. These opportunities –typically‑ were rejected by the ‘corporate immune system’ previously, when an employee with an idea approached their line manager or a governance committee of sorts requesting approval to ‘try something out.’

POC over ROI

Often enough, there is no clear return-of-investment (ROI) predictable for these early ideas.  What you may be looking for is rather risky and experimental, a proof-of-concept (POC).  The metrics for payoff and ROI of disruptive ideas does not follow the same approach we are used to measure the more predictable returns of common cost reduction and incremental improvement projects. Disruptive POC projects often don’t have an ROI projection when you explore technology of sorts or its application that may become a game-changer for our future business.

In my experience, communicating the POC nature of the project over focusing on ROI can actually help!  It prevents the ‘organizational immune system’ from kicking in early on, since there is little threat to established practices.  Why?  It does not come across as competing with ‘big elephant’ projects over significant amounts of governed resources following the conventional processes of the company’s machinery.  Instead, we just try something out!  It’s a little experiment that doesn’t change anything, so it poses no threat to established practices, investments or the power-base of individuals defending their fiefdoms.

Aspired returns

Having said this, there is of course a commercial end to all projects. After all, we have no resources to waste and will have to demonstrate down the road that our ‘experiments’ pay off somehow. Our working assumption is that the disruption should lead to a ten-fold (10X) payoff – at least.

Personally, I prefer aiming at a bold 100X ROI target; two orders of magnitude, that is. It sets an ambitious target and -if things work out- a great success story. It’s a powerful point to make for disruptive innovation as part of our innovation ecosystem and shifting the mindset within an organization.  Sharing these success stories with executive stakeholders is crucial (for future support) as well as with employees (for future ideas).

Governance and authorization

Interestingly, what employees are looking for more than funds is authorization to do what is right and worthwhile for the company. Often, the obstacles are perceived and only exist in peoples’ minds. These barriers are formed by many factors over time, such as the management style they experienced and organizational silos that mold a company’s culture as well as the employees’ mindset.

In this particular company, a lean oversight board makes funding decisions. It is composed of a diverse team of more forward-thinking executives and a very lean decision process. The team acts as enabling ‘go-keeper’ for accelerated innovations instead of pushing the breaks as ‘gate-keeper.’

The little monies offered for trying something new only help smoothen the path for innovators in the company. The most important part is them feeling empowered and “authorized” to take action that overcomes complacency, inertia and organizational paralysis. On the spectrum of strategic innovation roles, the board serves as a “sponsor” and sometimes as a “coach,” when an idea aims to overcome internal barriers to increase efficiency, for example.

Dealing with Risk

The purpose of this governance board is to enable the exploration of disruptive ideas by giving internal innovators a chance. The focus is on projects that can be characterized as early stage experiments to explore transformative enabling technologies and value-adding services of higher risk or less predictable outcomes than conventional project portfolios in the mature organization would feel comfortable with.

Naturally, this approach comes with an elevated risk of failure when projects do not produce profitable outcomes or simply prove infeasible or poorly timed.  This ‘price’ is accepted as long as it generates learning.

The potential damage is low, since we are talking about swift and low-cost experimentation: try often and fail fast. Thus, these risky projects complement regular and more conservative project portfolios in the various businesses of the organization. In addition, the innovation project portfolio is somewhat risk-balanced, which avoids having too many high risk projects that may jeopardize the likelihood of profitability across the portfolio.  Reality is that also the disruptive innovation project portfolio has to demonstrate tangible returns over time, so the mature organization sees the economic benefit of experimenting and not shut down this ‘playground.’

Branding the projects as experiments with a proof-of-concept (POC) endpoint helps to calm the ‘organizational immune system’ and to argue that these risky ‘small elephant’ projects complement the other ‘big elephant’ project portfolios across the organization.

Getting Funds

Here are my experiences as an internal corporate venturer or ‘angel investor’ from the past years: First of all, I don’t have much money to spend. The budget I have for this kind of ventures is pathetically meager – and I overcommit it all the time! Nonetheless, I came in under budget once again by 46% last year. It sounds like an oxymoron, and since I don’t have a money tree growing in the backyard, how does this work?

The secret is in the psychology of acting as the “first investor.” Think of this way: when someone wants you to invest into their idea first with nobody else having made an investment before you, you are skeptical and most hesitant to put down your money, right?

All I do is to commit paying for an idea in full to overcome this initial threshold and get things started.  What typically happens next is that an executive from the business affected by or potentially benefiting from the project hears of my investment, reconsiders and wants to get on board too – as a second investor. Once the ‘innovation guys’ have put money down first, the investment in the idea appears less risky to the business executive, so either we split the bill or the business takes on the cost completely!

I’ve seen it happen many times with managers turning around 180 degrees after they had rejected the idea previously. This is how to deal with them: to save (their) face, don’t point out their earlier resistance but rather thank and recognize them for their support and foresight as valued contributors to change and success for the organization.  Celebrate them as enablers, win them over as allies and keep the connection for future collaborations!

Alignment and validation

Don’t be mistaken, funding by the business is not only crucial given the fact that my funds are few.  It is even more important because it validates that the idea makes sense to the business.  It aligns with strategy and goals of the organization but also helps implementing it once the business has ‘skin’ in the game! Otherwise, even if I funded a project alone, the intrapreneur running it would have a hard time getting it implemented without the support of a business sponsor.

So all it takes is making it easy for business executives to invest in a good ideas by making them feel comfortable not to invest first, which reduces their perceived risk and lowers their threshold to act.

Key Learnings

  • The lean innovation governance board is an instrument for reasonable oversight that benefits from diverse perspectives.
  • The “Go keeper” instead of “Gate keeper” process is crucial as is the willingness to accept risk of failure for disruptive projects.
  • The model proves highly effective to get around a convoluted “red-tape” bureaucracy as well as generating a surprisingly high return-of-investment (ROI) – even without the latter being the primary focus.
  • The “first investor” psychology validates the alignment of ideas with business needs and strategy while opening the flow of funds from the businesses and facilitating the implementation.
  • This internal corporate venturing or “angel investing” approach became a beacon of hope for employees and a very profitable innovation engine for the organization that starts to change the organizational culture to the better.

 

Meet me at HxRefactored 2014 in NYC on May 13-14, 2014

HxRefactored 2014 in NYC on May 13-14 at the New York Marriott at the Brooklyn Bridge.

HxRefactored is a revolutionary design and technology conference that will gather over 500 designers, developers and leaders in health for two days of thought provoking talks, workshops and discussions on how to improve the quality of the health experience. The conference fuses the technical and creative elements of Health 2.0’s Health:Refactored and Mad*Pow’s Healthcare Experience Design Conference.

Join me at the Pharmaceutical Multi-Channel Marketing Strategy Conference in Philadelphia, PA on April 24, 2014

Q1 Pharma Multi-Channel Marketing Strategy
Q1’s Pharmaceutical Multi-Channel Marketing Strategy

Location: Hilton Garden Inn Philadelphia Center City, 1100 Arch St., Philadelphia, PA 19107

Overcoming the Three Big Hurdles to Innovation in Large Organizations

Large organizations have vast resources – but this advantage inherently bears also a disadvantage: like large dinosaurs, with increasing size and maturity they lose the ability to adapt quickly to a changing environment as their smaller competitors can to seize business opportunities.

The Big Three

Let’s first identify the three typical obstacles that large organizations struggle with before we address how to disrupt and overcome them as intrapreneurs. The task at hand is to spark new energy, employee engagement and business growth opportunities in alignment with business strategy and company culture.
By the way, if you are new to intrapreneuring, see also The Rise of the Intrapreneur and the Top 10 posts for Intrapreneurs.

So, these three big hurdles are the

  1. Vertical Disconnect: Ideas from the bottom of the hierarchy do not find their way vertically to the top anymore to get implemented.
  2. Horizontal Divide: Functional silos separate the workforce horizontally which limits putting to effective action the full potential of the company’s resources and diversity in a concerted way.
  3. Inertia: More talking about change than taking action opens a widening gap between ideas and their implementation, as it is so much easier to lean back and improve incrementally than taking risks of major changes. Red-tape and ever mounting bureaucracy does its part to keep the wheels from turning and breeding a mindset of mediocrity.

These obstacles combine to form an unfavorable ecosystem of stagnation by containing innovative thoughts from growing and ripening, by inhibiting innovators to take action with passion and by blocking courageous action necessary to drive the organization’s future success and –possibly- survival.

Sketching a future innovation ecosystem

Here is what it takes to break the crust in order to reinvigorate and nourish innovation to flourish once again by creating an innovation-friendly ecosystem:

1. Vertical cut:  Connect grass-root ideas with executive sponsors

Too often, “middle management” gets blames from keeping ideas and funds flowing more freely up and down the hierarchy (see also Leadership vs Management? What is wrong with middle management?).

A mechanism is needed to pipe fresh and promising ideas in an appropriate format from the grass-roots to find their way to executives, where the ideas get recognized, sponsored and put into motion for the better of the company. This holds true for disruptive break-through ideas in particular and in contrast to the continuous incremental improvement (see also 10x vs 10% – Are you still ready for breakthrough innovation?) that typically makes up most of the organizations day work.

Don’t be mistaken, executives worth their salt seek good ideas like the air they breathe. They are generally more open to necessary change and course corrections than one may think. The executives also hold the keys to feeding the ideas back into the machinery of the larger organization to get implemented.

A mechanism is needed that allows cutting vertically through the red-tape and hierarchical boundaries of the mature organization. It creates a pipeline of ideas that connect the top with the bottom of the organization and everything in between with intrapreneurial passion.

2. Horizontal cut: Connect across functions and geographical silos

Large organizations tend to foster functional (and geographical) silos to increase efficiency, quality, and reliability in their operations (again, see Leadership vs Management? What is wrong with middle management?). This, however, effectively inhibits ideas of game-changing nature to flow freely and being developed with input from diverse perspectives to the benefit of the larger organization.

A wise saying goes: “Innovation happens at the intersection of disciplines.” It is these diverse perspectives and adding brains to a problem that help to improve and develop an idea to become more robust, innovative and feasible. Thus, a mechanism is needed to effectively cut horizontally through organizational walls to allow employees to effectively collaborate, network and connect the established silos and islands.

Are you stuck with organizational silos too?  (source: (communities.netapp.com)
Are you stuck with organizational silos too?
(source: (communities.netapp.com)

3. Tangible results: Bridge the “Idea to Implementation” gap

In the end, what we to achieve is giving good ideas a chance that otherwise would never get considered or implemented – especially in a mature business environment that favors low-risk incremental improvement over more risky breakthrough experimentation (see 10x vs 10% – Are you still ready for breakthrough innovation?).

We need a mechanism that frees the intrapreneurial spirit of employees and directs the passion and potential of our employees’ ideas to tangible results that, ultimately, drive new business growth.

How does it work?

The intrapreneurial instruments and mechanism of this innovation ecosystem include, for example:

  • School for Intrapreneurs,
  • Internal corporate venturing,
  • Networks for implementation and
  • Opening to outside perspectives.

Over the next blog posts I will address each of these approaches (and perhaps more) and share my experiences from implementing exactly that successfully in a FORTUNE Global 500 company. So, check back soon or get updates via Twitter @OrgChanger.

 

Be the next Steve Jobs!

Can you innovate?

It a strange question.  Isn’t it astonishing how many people say “I am not creative” or believe “innovators” are so much different from themselves.  As if innovators are an enlightened lot of geniuses that come up with breakthrough innovations that nobody else could have thought of or made happen but them.  Icons such as Steve Jobs (Apple), Elon Musk (Tesla) or Jeff Bezos (Amazon) stand out.  They apparently think differently and changed the world.

The question for the rest of us is: could I be a Steve Jobs too?  Or do have to be born gifted to be able to innovate in ways that “make a ding in the universe” like Steve Jobs?

Are you a Steve Jobs? (photo credit: http://scrapetv.com/News/News%20Pages/Technology/images/steve-jobs-3g-iphone.jpg)
Are you a Steve Jobs?
(photo credit: http://scrapetv.com/News/News%20Pages/Technology/images/steve-jobs-3g-iphone.jpg)

You can learn creativity!

If you ask kids in kindergarten or preschool if they are creative, they enthusiastically respond “Yes!”  At that age we are convinced we are creative and express our views, thoughts and ideas in many ways.  We design rockets to Mars or create new animals, nothing is out of bounds or out of reach.

What has happened to us that we believe as grown-ups and employees we can no longer create and change the world? I heard “I could never do that” and “nothing will change anyway” too many times.

Good news is that genetic predisposition only attributes one-third to your creativity and innovative-ness (if this is a word), while two-thirds are skills that can be learned, as research confirmed many times over (see Marvin Reznikoff et al, Creative abilities in identical and fraternal twins, Behavior Genetics 3, no. 4, 1973).

Therefore, innovation can be taught, “nurture trumps nature.”  So, you can learn it too!

Are you an intrapreneur or entrepreneur? 

However, not everyone wants to take the risk and uncertainty to make an entrepreneurial dream come true by starting a new business on their own.  Many of us work in large organizations and would like to improve the company from within somehow.

This is where intrapreneuring comes into play.  Intrapreneurs are also called corporate entrepreneurs, since they apply entrepreneurial methods within the organization to create intraprises.   (See also The Rise of the Intrapreneur)

What innovators have in common

So is there anything that great innovators share and which we ‘mortals’ can replicate or do similarly to succeed? – In fact, there is!

In his iconic book “The Innovator’s DNA,” famous disruptive innovation guru Clayton Christensen (who is also known for coining the term ‘disruptive innovation’) identified four common catalysts that sparked the great ideas:

  1. “a question that challenged the status quo,
  2. an observation of a technology, company, or customer,
  3. an experience or experiment where he was trying out something new,
  4. a conversation with someone who alerted him to an important piece of knowledge or opportunity”

This comes down to the four following behaviors, as Christensen found out:  questioning, observing, networking, and experimenting.

Thinking different

While, typically, the underlying information is not unique, the innovator’s associative thinking combines information and connects dots that seem random or unrelated to others.  They create a picture or vision of a need or opportunity to pursue.

Now, on your way to become an intrapreneur (or entrepreneur), how can you get to these insights, find a suitable target and make it happen?

There are two basic steps:

  1. Don’t work alone
  2. Seek a fertile environment.

1. Don’t work alone

An  African proverb says “If you want to walk fast, walk alone; but if you want to walk far, walk together”.  Developing and bringing a disruptive idea to life takes time, work and -more than anything- collaboration.  It’s not a fast shot and you will need help.  What you can do is tapping into more brains: ask others and bring together a diverse team around an idea.  You want to get as many different perspectives to see the fuller picture, risks, needs, opportunities to tackle the problem you are working on.

You may be blindsided or unaware of things critical for your success including much needed political cover, validating your assumptions or technical aspects outside your expertise.  If you try to do everything yourself, you are setting yourself up for failure for a simple reason: you are not an expert in everything!  Stick with what you are good at and let other experts help you with what they are good at.

2. Seek a fertile environment

If you want to start your own business as an entrepreneur, you may want to move where you find the best condition for a supportive business environment, an ecosystem.  For entrepreneurs, for example, Stanford University and Silicon Valley remain a major tech magnets with ample and easy access to top talent and money.  Also accelerators can serve this purpose.  Comparable conditions for an innovative ecosystem exist at the US-East coast in the Boston area.  Depending on your business idea, other locations and ecosystems may be more suitable – do your homework and find the right one for you.

As an intrapreneur, your available ecosystem seems more limited: it typically is the company you work in that defines the perimeter of your freedom to navigate.  Your advantage here can be that you already know the environment and who could be supporting or funding your idea.  If not your, you could more easily ask colleagues for help than people outside your company could, which significantly lowers the bar for access to resources.

Let’s continue by focusing on intrapreneuring.  Compared to the entrepreneurial world out there, within an organization you may have more opportunities to help shape the fertile ecosystem for breakthrough ideas if none exists yet.

Now, if you are stuck with a company that does not provide an environment that supports intrapreneuring, you may consider becoming the innovation leader (see How to become the strategic innovation leader? (part 2 of 3)) to build an ecosystem within a large organization.

– Stay tune to find out how.

Join me for the SAPA-CT Milestone Celebration Meeting at Yale University on Feb 22

“Bridging between US and China in Current Pharmaceutical World – Strategies, Innovation and Implementation”

Join me at 11:15am at the Sino-American Pharmaceutical Professionals Association‘s new Connecticut Chapter (SAPA-CT) Milestone Celebration Meeting held at Yale University (N107 The Anlyan Center, 300 Cedar St, New Haven, CT, 06511), 9:00 AM to 5:00 PM, Feb 22, 2014.

SAPA-CT Milestone Celebration Meeting, "Bridging between US and China in Current Pharmaceutical World - Strategies, Innovation and Implementation"
SAPA-CT, Boehringer Ingelheim, BMS, and Association of Chinese Students and Scholars at Yale (ACSSY) will co-sponsor this event

Join me in Boston for the Corporate Venturing in the Life Sciences conference this week!

Join me at the Corporate Venturing in the Life Sciences conference this week!
Join me at the Corporate Venturing in the Life Sciences conference this week!

How to grow innovation elephants in large organizations

Driving innovation in large organizations is like herding elephants.  Big and small elephants. – How so?

Elephants come in different sizes
Elephants come in different sizes

Big Elephants in the Back-Office

In large organizations, departments gravitate to sub-optimize their core business.  Silos form under local management to run their department more efficient – following the old mantra: do more with less.
(Read more about silos forming at Leadership vs Management? What is wrong with middle management?)

Although all business functions are affected, corporate Information Technology (IT) departments often lend themselves as best examples for a “big elephant” world: they are critical enablers in a pivotal position of every modern organization.  Even though the success of practically every business function hinges on IT, also IT is not immune to this silo-forming phenomenon in large organizations.

Over time and with ‘organizational maturity’, the IT department tends to end up focusing on what they do best: large back-office projects that cannot be funded or run by any business function in isolation, since they span across disciplines or impact the entire enterprise.  Just one examples for a “big elephant” project is implementing a comprehensive Enterprise Resource Planning (ERP) system across multiple locations internationally.

This is the back-office domain and comfort zone of IT with technology know-how, big budgets, long duration, high visibility, rigid governance and clear processes to follow.

Small Elephants in the Front-Office

In contrast, the front-office typically comprises Marketing, Sales and Product Development.  Here, a small tweak or agile change (that requires some IT input) can go a long way and have significant impact on organizational effectiveness and business results.  – These micro-innovations are “small elephants” as recent Gartner research coined them.

These little disruptions to the slower-moving big elephant world easily trigger the “corporate immune-system” that favors large elephants and suppressing small emerging ones.

Typically, most projects in large organization aim to reduce cost in some way.  Only a minority of projects address new business and growth opportunities that tend to come with uncertainty and greater risk.

While big elephants are typically incremental improvement project to save cost, it’s the small elephants that are more likely to be disruptive drivers of growth and future business opportunities: the much needed life-blood of sustaining business and future prosperity.

Barriers in the Big Elephant World

IT departments tend to struggle the farther they move away from their ‘core competency’ meaning leaving the big-elephant back-office and dealing with the myriad of small needs of the customer-facing units in the small-elephant front-office.

Many reasons contribute to say “No!” to emerging small elephants:

  • Small elephants are disruptive to the big elephant world, perhaps even threatening to the establishment
  • It is hard for the back-office to accept that there cannot be much standardization around these small small elephant solutions by the very nature of their scope and scale
  • It is cumbersome to plan and manage resources scattered across small projects that pop up left and right without significantly impacting big elephant projects.  Unfortunately, pressure to save cost only fuels the focus on fewer, bigger elephants.
    Gartner brings the dilemma to the point: “[..] the focus on optimization, standardization and commoditization that underlies IT’s success in the back office is contrary and even detrimental to the needs of the front office.”
  • Insights in front-end processes and customer needs are essential (and not usual IT back-office competencies) to seize small elephant opportunities, which are often disruptive and driven by the agile intrapreneurial spirit that makes full use of the diversity of thought and understanding customers deeply.
    – See also The Rise of the Intrapreneur
  • On top of it all, the challenge for IT is to understand the potential and pay-off for initiatives that rely on IT in a domain outside of IT’s expertise:  In the mature world of big elephants, ROI projections are demanded upfront and based on models that apply to mature organizations.  These models typically do not apply well to measure project ROI in the emergent worlds of small elephants, which puts the small elephants at a disadvantage; another disconnect that easily leads big elephant organizations to reject proposed small elephants.

As a bottom-line, for large IT departments it is simple and convenient to say ‘No!’ to requests for “micro-innovations” coming in from employees scattered across the front-offices.  And, sadly, often enough this is exactly what happens. Despite the lasting impact of “No!” (see also How Intrapreneurs avoid “No!”), turning ideas and proposals down too fast also leaves out opportunity for huge innovation potentials (see also 10x vs 10% – Are you still ready for breakthrough innovation?).

What happens to IT without small elephants?

Ignoring the need for micro-innovations and not supporting them effectively will not serve IT departments well in the long-run.  With only big-elephant focus IT departments are at high risk to lose sight of the needs of their internal customers.  Consequently, IT undermines and finally loses its broader usefulness, acceptance and footing in the business functions they intend to serve.

When small elephants are neglected or blocked, it practically forces the front-office to look for other resources sooner or later in order IT-services providing resources to get their needs taken care of.  Over time, the big IT department drifts to become more and more obsolete, and finally replaced by agile and responsive agencies and contractors that deliver on their front-office customer needs.

After all, IT’s general role is one of an enabler for the core businesses rather than being perceived by its customers as a stop-gap.

How to raise Small Elephants

So, what can a mature yet forward looking IT organization do to support micro-innovations – or ‘balance the herd,’ so to speak, to include a healthy number of small elephants in the mix?

  • Brad Kenney of Ernest&Young recommends limited but dedicated resources (including time) for micro-innovations in Ernest&Young’s 2011 report “Progressions – Building Pharma 3.0”;
    for example, dedicate 10% of the expert’s time to implement micro-innovations
  • Test changes in emerging markets first, if possible, where agility is high at a lower risk of jeopardizing the bottom line or threatening the established organization and its investments in mature markets
  • Establish effective collaboration platforms that make it easy for employees to openly and conveniently share content among each other as well as with external parties.

How Intrapreneuring helps

A systematic approach to Intrapreneuring can go a long way to help move these micro-innovations forward.  It starts with systematic intrapreneurial skill-building for employees across all levels of hierarchy and includes:

  • Understanding how innovation happens in large organizations, i.e. large and small elephants and the need for both to exist
  • Helping employees become aware of and overcome their own mental barriers and silo-thinking
  • Attracting, inspiring and engaging employees to take their idea forward knowing there are obstacles in their way
  • Training skills that help to frame, develop and pitch ideas to potential supporters and sponsors
  • Building and presenting a business case for review and improvement by peers and management
  • Enabling and empowering employees to bring their small elephants to life and sharing the story of their success to inspire others
  • Working to gradually change the mindset of the organization, its culture, as needed, to become more balanced on the elephant scale, to unlock the resources within the own workforce and to seize opportunities for growth and the future of the business.

Just as out there in the wild, without raising small elephants the life-span of organizations with only big elephants is limited.

Join me in Boston for the Corporate Venturing in the Life Sciences conference this week!

Join me at the Corporate Venturing in the Life Sciences conference this week!
Join me in Boston this week: Corporate Venturing in the Life Sciences conference

Podcast on Innovation in Large Organizations, Intrapreneurs and Corporate Venturing

Podcast Announcement 2013-09-24futurethink spoke with Stephan Klaschka, Director of Global Innovation Management at Boehringer Ingelheim, who is responsible for encouraging disruptive innovation within the firm. He spoke about creating “intrapreneurs” in large organizations by instilling an entrepreneurial mindset into employees and ways to use partnerships to get to new ideas.

Click here to get to the podcast.

Stephan will be leading the session “Reassessing the Organizational Culture to Better Engage Corporate Venturing Prospects” at the upcoming Corporate Venturing in the Life Sciences Conference November 13-14, 2013 in Boston, MA

Top 10 Innovation posts

Here are my Top 10 posts on innovation:

Can strategic innovation rely on creative chaos?  To make a long story short, the answer is: No!  Read what it takes to consistently innovate and give you a very cool example too.

2.  How to become the strategic innovation leader? (part 2 of 3)
What is an innovation leader? Is this role similar to an innovator? (The answer is ‘no’.) – Recognize the three key roles in innovation, how to find an approach and avoid critical pitfalls.

Not everything new is an innovation and some is more renovation than in innovation.  Here is a framework that helps to distinguish an innovator from a renovator and works for entrepreneurs and intrapreneurs alike.  It is important to understand which role to play and when; it all depends on what you need to achieve and what is critical to reach your goal!
Creating value through new products is not enough. Capturing the value requires equal attention on the innovation process. Focusing on creativity and neglecting execution along the value chain is a costly mistake.

5.  Why too much trust hurts innovation
Most managers understand that trust is a key ingredient to effective collaboration and innovation.  Yet, few actively try to cultivate and nourish trust in their own organization to achieve the right mix between trust and constructive tension.

6.  Imitators beat Innovators!
You thought Facebook was the original? Or YouTube? Or LinkedIn? – Get ready for your wake-up call! Break-through innovations are over-rated! Imitators are successful by combining someone else’s innovation with the imitator’s advantage and by doing so they can become innovators themselves!

7.  Boost ‘Group Intelligence’ for better decisions!
Group intelligence can be increased and lead to better decision-making – or why not to rely on a group of geniuses!  New research breaks the ground to understand collaborative intelligence and the – but how to apply it to the workplace?

8.  Collective Intelligence: The Genomics of Crowds
Group intelligence beats individual brilliance – and businesses are willing to pay for the crowd’s wisdom in the social sphere.  The MIT’s ‘genetic’ model allows  combining social ‘genes’ to harness the collective intelligence of crowd wisdom successfully and sustainably; areas of application are scientific research or business/employee resource groups, for example.

9.  Can movies innovate with only seven stories to tell?
How innovative are movies really – if at all?  While AVATAR and THE ARTIST appear polar opposites, they share a similar story; so where is the innovation?

10.  ‘Complexity’ is the 2015 challenge! – Are leaders prepared for ‘glocal’?
What is the key challenge in the coming years and how to prepare future leaders.

Don’t miss my Top 10 posts for Intrapreneurs!

Starting an ERG as a strategic innovation engine! (part 3 of 3)

While many companies demand creativity and innovation from their staff few companies seem to know how to make it work. – Is your organization among those hiring new staff all the time to innovate? The hire-to-innovate practice alone is not a sustainable strategy and backfires easily.

An alternative and sustainable way to tap deep into your employees’ creative potential and turning it into solid business value is by forming an employee resource group (ERG). A well-crafted ERG serves as a powerful and strategic innovation engine for your organization!

Losing the innovative edge?
It is the large companies that seem to struggle with innovation most. When companies grow they tend to become less innovative. When this happens we see great talent turning into under-performing employees. – Why is that and is there a way out?

Stuck in mental models of the past?
Remember the heavy dinosaurs that finally got stuck in the pre-history tar pits and starved, too heavy to move themselves out of the calamity? Mental models are the tar pits that companies grow to get stuck in – unless they find a way to shed (mental) weight and think nimble again to survive.

The mental models often originate from days past when the business started and flourished with initial success. The models worked when the company grew back then but models out-date easily over time. At some point the company began to work harder to standardize its processes to ensure the output is delivered reliably and predictably and costs are driven down: the focus shifted from innovation to efficiency. Specialized and refined business functions create increasingly complex and bureaucratic processes, ‘standard operating procedures’ rule the course of action. Things don’t move fast here anymore. Improvement ideas from employee on the floor hardly make it to the top executives and starve somewhere in between, probably in the famous ‘idea box’…

> For more general insight on complexity as a leadership challenge, read this: ‘Complexity’ is the 2015 challenge! – Are leaders prepared for ‘glocal’?

This focus on incremental efficiency also traps R&D departments to a point where true creativity and innovation get stifled, the innovative output drops. In short, the larger a company the less it innovates. Sounds familiar?

Many companies chose the dangerous and seemingly easy way out in buying new ideas from the outside through acquisitions and hiring ‘new talent’. The danger lays in applying this practice too broadly and becoming reliant on this practice, i.e. getting trapped in a vicious and reinforcing cycle. This practice also alienates and frustrates the more seasoned employees who feel underutilized and –quite rightly so see their career opportunities dwindling. Soon enough the sour side of the hire-for-innovation practice for employees becomes transparent also to the newer employees and drives them away in frustration. This organization just found the perfect recipe to turn top talent into poor performers!

Don’t waste your human capital
Bringing in fresh brains to an organization may justify mergers, acquisitions or hiring at times – but not as a strategy for continuous innovation and without also at least trying to tap into the innovative capacity that lays dormant within the organization.

Don’t write your staff off easily by following blindly the common yet wrong assumption that an employee loses the creative spirit after a few years and that new hires would be more innovative than whom we already have working for us. Haven’t we hired the best and brightest consistently in the past? Well, then this logic doesn’t add up, right?

Ask yourself: have you lost your innovative edge? Will you personally be more innovative once you change to another employer? – I don’t think so either. The good news is that even if you don’t believe it, changes are that managers and human resource experts of your new employer do, at least the ones who follow the outdated mental model! – But then, how long can you expect to last there before you get written off? It’s like getting on a train to nowhere.

Derailing the train to nowhere
But seriously, the seasoned employees’ intimate knowledge of the organization and its people can hold enormous potential for innovation not only under financial considerations but also as a morale booster for staff. Getting personally involved more and engaging them in driving change again actively leads the way to measurable and favorable results for the organization. These employees are the people who know your business, your markets, your customers and where to find resources and short-cuts if needed to get things done! Remember the “Radar” character in M*A*S*H who creatively procured whatever his unit needed by knowing how to play ‘the system’ and navigate the cliffs of bureaucracy on unconventional routes?

So, how can you motivate and (re-)activate your employees to come forward with brilliant ideas and getting them implemented to boost the organization’s profitability? How can you spread new hope and direct the enthusiasm to practical and meaningful outcomes for the company and the individual employee alike?

Facing organizational barriers
There is no shortage of good ideas in the heads of employees. Too few of them, however, actually get picked up and implemented since organizational barriers have many dimensions the need to be overcome first. Here are some examples:

  • A vertical barrier effectively disconnects employees from the executive level which hold the (financial and other) resources to make things happen. Penetrating this barrier means to connect the people within the organization closely and effectively again. > Readers of my previous post What does take to keep innovating? (part 1) will recognize that an executive champion is needed who brings together the technical and business champions. If you feel intrapreneurial and consider becoming an executive champion, check this out: How to become the strategic innovation leader? (part 2)
  • The horizontal barrier separates business functions and operating units that evolved to become silos or manager’s ‘fiefdoms’ of sub-optimized local productivity often with lesser concern to the overall performance of the organization. What you are up against here is often enough beyond specialized deep expertise but also defensive egos and managerial status thinking that led to a comfortable and change-adverse local equilibrium. As an intrapreneur you bring a much needed yet disruptive element to the organization. Since you are rocking the boat you can get caught up in ‘politics’ easily. Functional managers and their staff may perceive you as throwing a wrench into their well-oiled and fine-tuned machine that could jeopardize not only their unit’s efficiency but also their personal incentives for keeping operations running smoothly. > For more insight on the tension field of management vs. leadership check out Leadership vs Management? What is wrong with middle management?
  • Another barrier relates to the perceived value that your work creates for the organization, so let’s call it the value barrier: When you start acting intrapreneurial, you may be seen as someone wasting resources, incurring additional cost or generating questionable value (if any value at all) in the eyes of executives and other managers.

Therefore it is of critical importance to clearly demonstrate the business value your work adds to the organization. Based on an unambiguous success metrics the value proposition needs to be communicated clearly and frequently especially to executive management to gain their buy-in and active support.

These and possibly more barriers are a tough challenge. Now, I assume you are not the almighty ‘Vice President of Really Cool Stuff’ (that would be my favorite future job title!) but hold a somewhat lower rank. Perhaps you got stuck in the wrong department (the one without the Really Cool Stuff).

So, where do you start to innovate and ‘rescue’ your organization from a looming train-wreck scenario?

Breaking down barriers by innovating from within using ERGs

A vehicle I tried out quite successfully over the past years was forming an employee resource group (ERG). This grassroots approach has the power to crash right through the vertical, horizontal and value barriers while driving change effectively and sustainably through the organization as a strategic innovation engine.

> A previous post discusses the business model behind the ERG approach in more detail: Build ERGs as an innovative business resource!

Here are the first steps on the way to founding an ERG:

  • Identify a business need and build a business case, i.e. a clear value proposition aimed at executive management convincing them of the need and benefits of forming an ERG within the limits of company policies. Attracting an influential executive sponsor to gain buy-in is a key requirement for instituting an ERG successfully. The sponsor serves as a political and resourceful ally, an experienced advisor and advocate but also ensures strategic alignment of the ERG’s activities with the broader goals of the company.Since executives value their time more than yours, keep it short and to the point. Think executive summary style and offer details separately for those who chose to dig deeper and to demonstrate that you thought this whole thing through. If your organization already has a distinguished officer or departments with a vested interest in employee engagement for example then connect, collaborate and leverage your joint forces. > More on how to build a case study for an ERG at: Q&A – Case study for founding a business-focused ERG
  • Get organized! Seek voluntary members and reach out to future constituency of the ERG. Active members are needed as the driving force and source of ideas that the ERG turns into business projects aimed to innovate and energize the organization.
    The first ERG I founded was “NxGen”, which stands for the “Next Generation at the Workplace”. The NxGen ERG has a generational orientation but is open to all employees regardless of their age or workplace generation. Nonetheless, from the start mostly the youngest employees (Generation Y) drove NxGen. In many cases they did not know of each other as the GenY-ers were spread thin across the various business functions of the company.The GenY-ers, in particular, found a forum in the NxGen ERG to get to know each other in the first place. We then focused on goals based on shared values or needs to build a strong support network within the company. At all times we kept the ERG open and inclusive to interested employees join from other workplace generations.

    The ERG offers its members a safe environment to discuss issues and ideas. It also serves as an informal forum to find coaches and mentors for personal development or specific projects and initiatives. Active ERG membership allows less experienced employees to quickly acquire new skills and test them in real-life by running a project hands-on even in areas outside of their job description or business function to address needs close to their heart with tangible business value. Here, the ERG serves as a very practical leadership development pipeline and safe ground for experimentation within the organization.

    > More on the virtues of Generation Y as I experience it in NxGen under: Generation Y for managers – better than their reputation?

  • Get active by launching business-focused projects. Again, you are targeting management and executives in particular to build credibility and thereby become more effective over time.Start with feasible projects of high visibility and short duration that address a significant business need with a clear and quantifiable success metrics. For each project seek executive sponsorship at the highest level you can attain from the business area that the project affects. Make sure to communicate your successes broadly and frequently to kick-start the ERG. Stick to a clear, specific and unambiguous metrics for your success; if you can tie it to a monetary ROI the better, as this is the language of business. > More on establishing a success metric under: Driving the ROI – where to start your projects metrics?

    Showcasing and celebrating your successes as an ERG motivates the already active members, keeps attracting new members and builds credibility among executives to keep the ERG wheels turning as a strategic innovation engine for your organization.

On a personal note
The example of the NxGen ERG is very real. NxGen was nationally recognized as best-practices ERG within 5 months (!) of its founding and became a valued and frequent sounding board for C-level executives within one year. The ERG has no funds of its own yet runs projects and initiatives nationally and internationally that already shifted the company culture and opened it more for change.

References and additional reading

How to become the strategic innovation leader? (part 2 of 3)

What is an innovation leader? Is this role similar to an innovator? (The answer is ‘no’.) – Recognize the three key roles in innovation, how to find an approach and avoid critical pitfalls.

Typically, the innovation leader is not the innovator but there are exceptions such as founders of innovative companies that start out as innovators and remain innovators; think Steven Jobs of Apple, for example. However, let’s focus on more common organizations that need innovation leaders often more than they are aware of…

Conquering the world from your garage?

We all heard the stories of the sole genius inventing in a garage and a few days later they run one of the most influential companies in the world like Apple or HP. However, strategic innovation cannot rely on a one-time-wonder hoping to be repeated over and over again. Organizations become too large, technology too complex and the competitive clock-speed ever faster to leave innovation to a single genius sitting in an ivory-tower coming up with all the good stuff for the rest of the organization. Nobody is an expert in everything or savvy enough to cover all necessary angles. Even more so, many people have great ideas that can contribute to better innovative products, so make use of this critical resource!

Strategic innovation requires governance and collaboration to succeed continuously. What it takes is a process, a framework, a ‘system’ that delivers innovations consistently, timely and sustainably.
‑ Unless you believe that Steven Jobs developed your iPad all by himself, right?
He understood how to turn Apple into an ‘innovation machine’ and –over time‑ how to effectively capture the value it generates.

(To get a better flavor where I’m coming from, please check out my previous post “What does it take to keep innovating?”)

Champions for innovation

What organizations need when they ‘grow up’ beyond the ‘innovation garage’ stage is many innovation leaders in different functions. You can distinguish different innovation leaders or ‘champions’ in an organization by how they contribute to the innovation process.

In general, there are three essential kinds of champions:

  • The technical champion holds the technical know-how for innovations.
  • The business champion comes up with the funding to develop an innovation into a product of sorts.
  • The executive champion “follows the fellow who follows a dream” as a professor of mine put it, and this is what we will focus on shortly.

The roles of the technical and the business champion need little explanation. Let’s assume for now we have identified or (perhaps more likely) unidentified technical champions in our organization somewhere (try the R&D function) and will also find a business champion (in the C-level suite) to fund a great idea that has potential to produce a significant return-on-investment.

Are you an executive champion?

As the leaders we are or want to become, let’s focus on the executive champion as the critical and most complex ingredient in the continued innovation process. Perhaps, this is where you can shine as an executive champion in your organization!

The good news is that anyone can be an executive champion and propel the organization forward! Yet few are aware of what it actually takes to be an effective executive champion. I found it surprising that even people in professional jobs with fancy ‘innovation’ job titles often simply don’t know this! So let’s move on.

Executive champions focus on the value

The executive champion understands the difference between creating value and capturing value of innovations. No worries, it took even Apple years suffering through the consequences of bad decisions to finally get it right…
Creating and capturing value are not the same. A company can create value by developing new technologies, for example. However, at this stage this novelty by itself has no value for the organization unless it can also reap the profits from the novelty.

It takes innovation leaders to ensure this crucial step is taken deliberately and effectively. They ensure the idea or prototype makes it all the way to a marketable product and the company rakes in the profit.

Steps to success

How does the executive champion operate? What does an executive champion do to succeed?

First and foremost the executive champion promotes an innovation broadly, which includes to

  • Articulate a clear vision
  • Develop an actionable strategy
  • Develop capabilities that power the innovative thrust of the organization such as capabilities to build and foster specific skills, behaviors, creativity, values or a mindset.
  • Steer execution to not only generate the newly created value but also capture it throughout the value chain. This may include analysis of the value chain and its players, initiating projects, controlling project portfolios, driving the commercialization of creative products or services, establishing entry barriers for competitors, measuring performance, etc.

Fuzzy values? – Here are some how-to examples

Do you find all this ‘value talk’ too abstract? Then let’s look at an example how ‘capturing value’ works in real life where Apple, for instance, controls each layer of its vertical value chain to a point where it ‘owns the customer’:

Let’s take the phone and data network for iPhones in the USA: iPhones come only with the AT&T network which is inferior to the Verizon network. ‑ Trust me, I know and experience it every day!

Why would Apple chose AT&T over Verizon? Because customers want an iPhone so badly that they will literally walk out of a Verizon store and straight to AT&T to get the iPhone that Verizon cannot offer. Customers don’t pick another Verizon phone and use the superior Verizon network. Instead, they are willing to swallow the (AT&T) toad because Apple owns the customer! This way Apple holds a much stronger position over AT&T than it could ever have over Verizon, i.e. Apple controls this tier of the value chain. Too bad only for the iPhone customers stuck with AT&T like myself *sigh*… the gamble worked out nicely though for Apple.

The simple rule here is that if you don’t own the customer you don’t make the money!

The message is clear: It is not enough to have an innovative product like an iPhone. You need to know how to capture the value and this goes far beyond a fancy piece of technology! This can be the most challenging task of the executive champion to consider and figure out.
And, yes, I know there are mobile phones out there with better technology and features but they don’t have the same ‘love factor’ that continuously attracts Apple customers and locks in their loyalty.

Why innovations fail

We have seen many times that when even the most promising innovation flopped, a flabbergasted management falls short to explain why. Therefore, let’s take another perspective and a quick look at what can go wrong (and did go wrong in Apple’s past too but Apple learned over time).

Innovations can fail for many reasons. Here are the basic pitfalls to look out for in reality:

1. Failure to create value that the customer recognizes.
Often the inventor or manufacturer sees a value in an innovation that is not shared by the customer because the customer does not recognize the value, i.e. the customer is not willing to pay premium for the special feature but only spend for what they clearly see and value.
This is a frequent trap for a technology champion and can lead to products with incremental improvements towards a state of perfection that the future target customers just don’t value.

Also business champions can make the mistake to get inspired too much by the technology and fund the product development without thinking through the value chain.
You have guessed it: the technology champion and the businesses champions are the ones that lack the explanation for the failure – that’s why we need the executive champion!

2. Missing to erect effective entry barriers for competitors.
Entry barriers are an interesting chapter on their own and widely discussed, so I’ll keep this short. Since Apple is such a rich source for examples, here is another one:
The iTunes store sells apps and other content like audio and video in proprietary formats. This is a great example how Apple established an effective entry barrier for its competition by establishing itself as the sole source. It can even control the content while raking in the profits. Other companies try the same approach but find it hard to compete with Apple’s dominance.
Victoria’s Secret, the successful lingerie company, took a different approach: They fended off competition by creating apparently competing lingerie stores under a different brand in the vicinity of Victoria’s Secret stores; this led competitors to believe the market was saturated and entering it was not attractive and attracted more customers to shop in either store adding to Victoria’s Secret bottom line – smart!

3. Failure to capture the value with vertical channel innovation.
Honestly, this is a complex and tricky topic that I might dedicate a future post also extending into strategic marketing. What it comes down to is this: how you can control the vertical value chain with the question to answer at each tier ‘who owns the customer?’ ‑ The right answer is: ‘it better be you!’
For now, let’s just say it requires cooperation and offering incentives for your channel partners to remain loyal and supportive to your strategy. The iPhone network example gives you a flavor or think of the apps providers for iTunes that engage in a symbiosis with Apple.

Leading without mandate

Bottom-line, more innovation leaders tend to be better for an organization than less. An organization cannot leave innovation to individuals or an ‘innovation department’ somewhere. Everyone can and should contribute to innovation! – Take your chance and drive it, it’s fun!

‑ Please share your thoughts or questions!

References and additional reading