On April 20-21, 2016, Singularity University, the most innovative and forward-looking institution, has chosen to host their SingularityU Germany Summit in Berlin—one of the most vibrant cities in the world. SingularityU Germany Summit is a local Chapter and community organization of Singularity University. It is one of the largest two-day events in Europe aimed at bringing awareness about exponential technologies and their impact on business and policy to thought leaders and executives from breakthrough companies.
What can you expect at SingularityU Germany Summit?
Leading experts from the global high-tech community will present the latest trends and cutting-edge developments in Mobility, Organization, Manufacturing, Artificial Intelligence, Computing, Robotics, 3D Printing, Machine Learning and Design Thinking. Together we strive to inspire and empower European leaders and influencers in using exponential technologies to solve today’s most pressing issues. SingularityU Germany Summit is an ideal platform to network for both alumni as well as first time attendees, leaders, government representatives, entrepreneurs, investors, NGOs.
500 attendees ranging from CEOs to young innovators from across the globe are expected to attend the event. Together we will explore issues such as: How can technological evolution be transformed into a sustainable and value-based growth for any industry? What ethical standards and responsibilities do global leaders have to account for?
After exploring German innovation barriers to digital transformation. As a follow-up, let’s look at an example of a successful industry already known for high-tech. And which example would be more moving than the iconic German automotive industry?
Automotive, a moving example
We explored German innovation barriers to digital transformation in German Innovation Insider: The Brakes on Digital Innovation previously. As a follow-up, let’s look at an example of a successful industry already known for German high-tech innovation: the iconic German automotive industry.
Automotive is the largest industrial sector in Germany. Vehicles and parts make up some 20% of total German industry revenue with auto sales and exports worth 368 billion euros ($411 billion) in 2014. Car-making is a German strong suit with luxury cars being the most profitable segment.
Electric Vehicles? – “Nein, Danke!”
Disruptive players emerged with electric car concepts for years. They were generally ignored by the established car makers despite the high eco-consciousness of German society in general. The new technology was not considered a threat nor as profitable as the existing businesses. So electrical vehicles were disregarded so not to disrupt or cannibalize the traditional business with combustion engine vehicles.
The influence of the car industry remains strong and has an outspoken lobby also in Germany. This contributes to failing the German government’s announced goal of leading the electric mobility market with “one million electric vehicles on the road by 2020” since only 8,522 new electrical vehicles were registered in German in 2014 (up from under 3,000 in 2012).
Germany ranks 6th in electric vehicle (EV) registrations by country in Q1/2015. EV registrations in percent of all vehicle registrations displayed. (image: countrybusinessinsider.com)
Innovation Catch-up by the Automotive Industry
The game changed when disruptive niche player Tesla Motors started cutting into the highly profitable luxury car segment with its high-end and high-tech electric vehicles. Tesla also receives outstanding customer service reviews in key markets such as the United States. Suddenly German car builders scramble to catch up to protect their stakes: everyone wants to offer at least one electric vehicle in their luxury car portfolio as a ‘Tesla Killer.’ Finally, negligent or halfhearted governmental support of the program just changed course by offering temporary tax breaks and other incentives.
Growing out of the Niche
Now, disruptive innovation may not make cars obsolete. We still want to get from A to B, so incrementally improved cars (better safety, quality components, etc.) will remain in demand and customers will continue to pay a premium for luxury models. Take a closer look at Tesla though to see the difference of their bigger and bolder view: the Model S versions, for example, are constructed all the same except for the model sticker on the back.
The true battlefield is no longer the physical car alone. From the steering unit to the breaking-system Tesla’s are built from pre-assembled, tried-and-tested components from quality manufacturers; including parts from some German hidden champions such as Stabilus (liftgate gas spring) and ZF Lenksysteme (steering mechanism).
Model S relies on quality parts by suppliers (image: insideevs.com)
Software is Pivotal
Nonetheless, it’s the software configuration in the Model S that makes the difference from regulating the available battery capacity (extended range) to other features (acceleration) that become available to its passengers. Tesla added ‘Autopilot’ functionality and a self-parking feature to its fleet just recently – simply via remote software update. Voila!
Reaching beyond the individual vehicle the software running the car became the key to future mobility. The question becomes who will own the car operating system of the future? Chances are it’s the exponential silicon players from sunny California who are best positioned, experienced and deeply understand both, digital integration and exponential innovation.
Mercedes meets the software threat and opportunity by aiming to control this pivotal technology, which may otherwise be seized by more avid digital players such as Google, Microsoft or even Tesla. Mercedes made some progress when it just announced its new E-class vehicles connecting and sharing relevant information with each other.
Out for the kill?
German luxury car-makers proudly announce their future ‘Tesla Killers’ playing catch-up with high-end electric cars of their own, such as Audi’s Q7 E-TRON Quattro, BMW’s i5 or Porsche’s performance vehicle Mission E (the latter two not available before 2019). Tesla hardware is even coming under attack with future competition getting ready; among them Silicon Valley’ Atieva and Tesla clones from China.
In true sports car fashion, Porsche’s marketing highlights 600hp for 0-to-60mph acceleration in under 3.5 seconds. Tesla already achieves this mark today. So where is the actual ‘kill’?
Porsche unveils ‘Tesla Killer’ (image: CNBC)
The Mobility Arena
The real question aims at the next step: where will the drivers of the new Audi’s, BMW’s and Porsche’s charge their batteries on the road?
Looking at future mobility as an arena rather than just vehicles, Tesla’s venture also crossed other industries such as the critical battery business in partnership with Panasonic. In addition, Tesla offers a wide-cast net of ‘SuperCharger’ power-stations free of charge for its customers at many highway rest-stops and gas-stations positioned to allow Tesla drivers to reach most areas of the continental U.S. already today.
Tesla Supercharger station with vehicle range (reddit.com)
Fueling the Future
Here, Tesla secured the first-mover advantage in securing the precious real-estate needed at busy rest-stops. In the long run, it appears doubtful that rest-stops will grant additional dedicated slots with proprietary pumps to every car-maker to recharge their line of vehicles.
Tesla SuperChargers (image: teslamotors.com)
So the German car manufacturers may be forced to cut a deal with Tesla adopting the Tesla technology and paying for using Tesla’s high-speed pump space on-the-go in the future. Tesla even announced it will not enforce patent protection for anyone who, in good faith, wants to use the Tesla technology, which may smoothen over the adoption by other car-makers.
Outlook
Looking into the crystal ball, the automotive industry is not just about introducing more electric vehicles but is morphs to become a new mobility arena as Tesla is demonstrating. Being still at the early stage of an exponential growth curve, Teslas are certainly not cheap to buy – yet.
Looking at electric vehicles simply as sophisticated hardware components, however, we may just enter a scenario in the not-too-distant future that reminds of Amazon’s successful strategy: giving the Kindle eReader (hardware) devices away cheap. Amazon is not interested in hardware but the content, the vast library of eBooks (software) fueling the customers’ demand, which makes all the difference and holds the keys to a proprietary, digital kingdom with recurring high revenues.
Amazon’s Kindle hardware is fueled by eBooks (image: michaelhyatt.com)
German innovation gets trapped in the very mentality focusing on building quality products ‘Made in Germany’ that the country got well known for. Holding on to vertical product improvement, however, obstructs crossing industry barriers, convergence, developing game-changing business models, and coming up with breakthrough innovations with potential for exponential growth and returns.
Germany – Land of the ‘Hidden Champions’
A recent research study of the Centre for European Economic Research confirmed Germany leading by far with 1,550 hidden champions. Companies are commonly considered a hidden champion if they are no. 1 or 2 on the world market, make less than EUR 1.5b revenue and their name is not overly well unknown to the general public.
Note that mid-size companies comprise 80%(!) of German industry and resemble the backbone of the German economy altogether. According to the Berlin School of Economics and Law, 90% are focused on B2B.
Champions not only in world football (image: latintimes.com)
See if you recognize a few examples of hidden champions that are leading global players:
Dixi / ToiToi (portable toilets)
Sennheiser (headphones)
EBM-Papst (motor and fan manufacturer)
Enercon (wind energy)
Krones (bottling machines)
Recaro (car and airplane seats)
Trumpf (laser cutters)
Inside the Vertical Tunnel View
Among the 1.500+ market leaders, only two German companies are leading software companies (Software AG and SAP). The vast majority focuses on more tangible product innovation leaving this digital industry somewhat isolated, underdeveloped and vulnerable like an economy’s Achilles’ Heel.
You get a good sense of a vertical bias in product innovation, when you read German open job postings for innovation lead position of sorts: As an innovator in an automotive company, you require a solid background in engine engineering, for example, or as an innovation leader in a chemical consumer goods company, you will not be hired without in-depth knowledge of adhesives, for example. It becomes painfully obvious how the vertical product innovation fosters a mindset of inbred solutions and can miss out on transformative opportunities beyond the own domain, bridging and converging industries.
3D-printed car (image: carpartsolutions.com)
Point being: Innovators are usually hired from within a vertical industry. This leaves little room for a creative influx from the outside. Since meaningful innovation ‘happens’ at the crossroads of disciplines in a horizontal cross-pollination of different industries and domains. This inflexible German practice lends itself to incremental improvement of products rather than disruptive transformation of businesses, entire industries or even across industry arenas. Within a vertical mindset, ecosystem cross-pollination withers and innovators are less suited, prepared, capable, or enabled to disrupt.
Digital Transformation “Made in Silicon Valley”
When it comes to digital transformation, German companies got disrupted and steamrolled mostly by large-scale digital disruptors coming out of the United States from either California or the East coast technology ecosystems with huge global impact and a different approach:
The world’s largest taxi service owns no taxis (Uber)
The most popular media owner creates no content (Facebook)
The largest movie house owns no cinemas (Netflix)
The largest accommodation provider owns no real-estate (Airbnb)
The largest software vendors don’t write apps (Apple, Google) and so on.
The above examples differ from traditional products not only by bold out-of-the-box thinking but also by paying close attention to the customer. Their business models rest firmly in the digital world with a software business and an internet backbone.
Uber and Airbnb offer digital platforms – that’s it, no tangible goods. Nonetheless, they shake up the established industries of transportation and hospitality in ways unheard of. They also reap exponential returns by creating new digital arenas that generate highest recurring revenue in the digital space.
Digital business has arrived (image: telecitygroup.com)
Missing the Digital Train?
Back in Germany, its 1,500+ hidden champions flourish in a robust economy, so Germany must be doing something right overall with a vertical focus set on tangible quality products within industries. Good money is still made in Germany by holding a steady course of vertical product improvement.
This practice also goes hand-in-hand in hand with protecting and not challenging enough the traditional sales-driven business models to avoid cannibalizing the status quo for next-generation innovations. It reminds of the Kodak-Eastman story having invented the first digital camera but rejecting the technology in order to protect the business around the existing analog film products – and we all know what happened to Kodak.
A Digital Transformation Divide
Truly putting the customer in the center and embracing digital business requires a radical transformation of the existing business and its operations. The critical interface between IT and Marketing, for example, often is not well developed in Germany, where traditional companies lack understanding of the digital potential and struggle with developing new, digital business models in time.
It is not a question but painfully obvious that -with the current mindset and strategy- Germany misses the train on digital transformation. While the world moves online, many companies in Germany failed or simply ignored the emerging technological opportunities to develop digital business models consequently, in a structured fashion and timely.
Germany is missing the digital innovation train. (image: bobmaconbusiness.com)
In fact, German companies practically ‘gave up’ across entire industries including media, travel, and retail. In a recent wake-up call, the German government asked companies and industries to focus on digital transformation in a widely proclaimed initiative called “Industrie 4.0” ‑ a race to catch up internationally. And catching up is much needed: the narrow German ‘inside focus’ presents a vulnerability to be exploited by foreign disruptive players. The gap widens steadily as the competitors advance fast, build up huge resources and become increasingly experienced to develop and apply digital transformation with new business models.
(image: notable-quotes.com)
Pessimism with an Insurance Mindset
The high level of disruption and uncertainty does not come easily to a less flexible German mindset: Having experienced hardship many times during the not-all-that-distant history, Germans tend to seek and value predictability and safety. Anxiety and fear of the unknown forms an undercurrent in the mindset of German society, which is expressed by seeking refuge in insurance policies to prepare for unknown future events.
As an example, not only do Germans over-insure their daily lives with a myriad of insurances, Germany also holds on to one of the largest amounts of hospital beds and bunkers per capita. You find more hospital capacity in the Berlin-area alone than in all of their neighboring country, The Netherlands!
In general, start-up funding is not as easy to come by as in the U.S., for example, where venture funding is a more common practice. When I arrived in Germany a year ago, I came across a serious government program that ‘supported’ a new start-up or entrepreneurs with grants tied to a projected positive return-on-investment (ROI) within the first year. Now, building a profitable business from scratch within in year is an unrealistic goal. Consequently, the desperate entrepreneur in need of funding would have to submit a bogus business plan right off the bat, which is a set-up for disappointment down the road. So, either the government program is not meant serious (unlikely) or is designed by people not knowing the first thing about starting a business (likely).
Reluctance to embrace technology? (image: sheknows.com)
Techno-Fear and Over-regulation
Overall, the German mindset tends to be more critical regarding new and unfamiliar technology. Seeking to avoid risk comes with a tendency to ‘over-regulate’ in the sense of applying regulations just because it is possible to regulate rather than because it is necessary to come up with regulation.
Since a long time, Germany has the strictest data privacy laws (that recently translated into GDPR, Europe’s new General Data Protection Regulation). The domestic law protects the individual by granting them the right to control their personal data online and offline. These regulations are rooted in the country’s dark experiences during its Nazi-past but are also is a reflection of the outspoken suspicion among the broader population towards digital data technologies and their application. Thus, Germans tend to be more reluctant to share personal data on social media out of fear of exposure and losing control.
The protective (domestic) legislation means well but can only be effective in a closed system, which the (global) internet is not. In a digital world, international boundaries are artificial. Given the nature and proliferation of digital technology and interconnectivity of people around the globe, keeping up the aspired high standards proves increasingly cumbersome if not impossible.
The German island can hardly be defended effectively over time. It may protect the citizens from some harm locally but in return also isolates them and denies them access to the benefits of a technology that ever progresses globally.
Losing the Entrepreneurial Spirit
Given a rather pessimistic Germany mindset that is reluctant to fully immerse in the digital world, digital-resistant citizens appear poorly prepared for ‘moonshot’ visions, embracing the opportunities of Big Data Analytics or the vast potential of the Internet-of-Things (IoT).
Reluctant to start up a business (image: deskmag.com)
The present German ‘generation of heirs’ inherits the wealth created by their parents’ generation during the famous post-WWII decades known as the economic “Wirtschaftswunder” boom. Very much in contrast to the U.S. or Asia, many Germans do not share the venturing spirit anymore. They show reluctance to trying out something new such as building a business as an entrepreneur for several reasons:
Firstly, Germans tend to prefer a detailed plan before actively exploring an opportunity and strictly sticking to the plan during implementation. Besides the favorable element of thorough planning, this approach also reflects a deeper fear of failure and seeking a sense of security and predictability. Deviating from the plan is often interpreted as a failure.
But then, which plan ever is perfect and stands the test of a dynamic reality? Sadly, the debate then quickly tends to turn to finding a culprit when things go sour rather than making adjustments to keep moving on.
Secondly, German hesitation and even a good amount of pessimism roots in the stigma of a business failure, which seems to stick more in German society than in the United States. More than 9 out of 10 start-ups fail, but when a startup fails in the U.S this does not automatically translate into a personal failure of the leader. It is much more seen as a learning experience, while a German CEO gets easily branded a loser.
Surrounded by the ‘insurance thinking’ mentioned earlier it will be hard for the former CEO finding support for a future business or even employment in Germany after a venture failed. In consequence, the German CEO is more motivated to beat a dead horse rather than cutting the losses and move on.
Summary – Brakes on Digital Innovation in Germany
For all these reasons, visions tend to be smaller in Germany. They are more designed to control risk than seizing exponential business opportunities. Thinking too small, not disruptive enough and too focused within an industry prohibits to compete with the digital global players that emerged with exponential business models, such as the Googles, Apples, Amazons, Airbnbs, Ubers, and so on out there.
Brake damage ahead! (image: dba.com.au)
What keeps the brakes on the German innovation machine is the inbred mindset and vertical tunnel vision with a focus more on products instead of customers, and the risk-avoidance and fear of applying digital technology to its full potential. It traps many German companies in a self-limiting disadvantage compared to American or Asian competitors, which prove more venturous, flexible and generally optimistic.
The U.S., in particular, entrepreneurs come not only with a more flexible and optimistic mindset but can also tap into unique startup eco-systems in place (Silicon Valley, Boston, and NYC areas primarily) with easy access to bright minds, cross-pollination and venture capital.
Outlook
There remains a demand for physical, quality products in the future, such as the machinery, tools or cars we value today as Made in Germany, so the 1,500+ hidden champions look into a bright future. Their reluctance to embrace the digital age, however, and transform to embrace new digital business models, however, may steadily push them to the sidelines as industries and arenas change beyond their input or control.
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?
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.
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!
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.
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.
This third post illuminates a very successful implementation of venture capital approach in a large organization to work around “red tape” and get more risky projects funded.
However, it’s not over! Please check in occasionally for more innovation and intrapreneuring-related posts in the future!
CURE serves as the bioscience cluster of Connecticut, a diverse network of small and large life and healthcare sciences companies, ranging in scope from therapeutics, to healthcare technology, to medical devices. Universities, government agencies, scientists, educators, mentors, students, entrepreneurs, business experts, service providers and investors join in to begin nucleate the breadth of the network.
As participants in CURE, we educate, cultivate entrepreneurship, support the build of bioscience companies and collaborate to ensure a sustainable, high-value bioscience and healthcare community that improves our quality of life and keeps the Connecticut community strong.
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.
“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 projects are risky explorations. Disruptive innovation projects even more so, and individual projects can be quite a gamble. So, how can you limit the risk across your portfolio of innovation projects? The goal is to increase the likelihood for the portfolio to succeed overall even if individual projects fail.
(Quick note for project management professionals: I am deliberately not differentiating terms like “portfolio” and “program” here. My goal is to get the basic idea across. More particular definitions don’t add value here.)
In mature organizations, incremental improvement can easily be and often is interpreted as ‘innovation’, which makes sense when optimizing a production environment, for example. Here, at the back-end of operations, big “elephant” projects tend to bind the organizations resources (How to grow innovation elephants in large organizations). The innovation project portfolio I am referring to, in contrast, aims at the disruptive end: the “small elephant projects” with higher risk but the potential of extraordinarily high returns if they succeed.
Why to manage risk
In large organizations you hardly get a “carte blanche” to manage just highly risky projects. With a corporate focus on predictable, short-term results there is too much concern of the portfolio easily becoming an unpredictable money pit. You are likely to get shut down after playing around a while without demonstrating clear success in terms of return-of-investment. Thus, you will need to come up with a strategy on how to compose your project portfolio to keep your stakeholders happy and your experimental playground open.
Risk Categories
Managing risk across a project portfolio comes down to finding the right blend of high-risk/high-return projects and lower risk projects that come with less impressive potential for revenue or savings. You also want to include a few projects that produce returns short-term to demonstrate you are making progress and reap some quick wins for impatient stakeholders while the longer-term projects need time to mature.
A common way to approach categorizing projects into into Core, Adjacent and Transformational based on their risk and return profiles:
Core projects are merely optimizations to improve the existing landscape of systems, processes, assets or products in existing markets and with existing customers. These incremental improvements are the “safe bet” and “next small step” that, typically, comes with low risk, predictable outcomes but also limited returns. They do not need high level sponsorship, are easy to predict and plan resources for, and so they are the favored playing field of mature, large organizations. These can often be ‘large elephant’ projects seen as ‘necessary’ that the organization more easily buys into.
Adjacent projects come with more uncertainty and risks as they usually extend existing product lines into new markets. Though not an entire novelty it is may be new territory for your company. Sometime, ‘imitating’ a successful model in a different industry does the trick (read also: Imitators beat Innovators!).
Adjacencies add to the existing business(es), which requires a higher level sponsorship (such as Vice President level) to move forward, to allocate resources and to accept the risk to fail.
Transformative projects are experimental and risky. They create new markets and customers with bold, disruptive “break-through” products and new business model. While the risk to fail is high, the returns could be huge when you succeed. Highest level (C-level) sponsorship and support is crucial for this category not only to persist and get resources during the development phase but also for the mature organization to adopt and support it sustainably.
Finding the balance
When you manage a portfolio of disruptive (read: transformative) innovation projects, you should expect projects not to succeed most of the time. Instead of calling it “failure,” see it as a learning opportunity. As Thomas Edison put it so famously referring to his experiments leading to the invention of the light-bulb: “I have not failed. I’ve just found 10,000 ways that won’t work.”
The common rule for playing a safe portfolio is a 70-20-10 mix, i.e. 70% core, 20% adjacent and 10% transformative projects. This way, many low-risk/low-return core projects keep the lights on while you play with few high-risk/high-return transformative projects.
Experiences
From my personal experience with the portfolio I manage, I leans towards accepting more risk, so you would expect and be comfortable with a lower success rate as a consequence but also higher returns. To my own surprise, we completed 55% of our projects successfully and ended up discontinuing 26%. Fortunately, also the average ROI from our “small elephant” projects is substantial and pays the bills for many years out. Thus, for my portfolio, the 70-20-10 mix is too conservative.
Before re-balancing your portfolio in favor of a majority of risky transformative projects, however, make sure you have continued high-level sponsorship and alignment with strategy and organizational culture of your organization. – If culture, strategy and sponsorship don’t align to support your innovation portfolio efforts, your risk increases for painful learning without sufficient business success.
The earlier post “How you become the next Steve Jobs!” relies on an innovation ecosystem of sorts that already exists in your organization – but what if there is none?
It is not easy and takes time turning an organization’s mindset from what is into what if. It’s a great and rewarding achievement, though, if you can pull it off!
Building an Ecosystem
So, let’s continue there: If you find yourself in a company which does not provide an environment that supports intrapreneuring, you may need to build an innovation ecosystem within a large organization. Practically, you choose to become a midwife helping ideas of your colleagues getting a chance to come to life. This enables other aspiring intrapreneurs to step up, unite and act together.
A transition mechanism to feed these ideas back into the regular organization to become funded and implemented with strategic alignment to company goals
Preparing management how deal with intrapreneurs. You will need to build or teach
A set of relevant intrapreneurialskills for employees
A supportiveteam and for you to maintain
A positive attitude that you will need to persist and push on.
The “School for Intrapreneurs” (SFI)
A very powerful approach and critical puzzle piece in the ecosystem is the School for Intrapreneurs. We achieved to build this school successfully together with help from like-minded and supportive colleagues that I was fortunate to meet along my crooked intrapreneurial career path, if you want to call it that. The underlying premise of the SFI is that innovation skills can be taught, as mentioned in “How you become the next Steve Jobs!” – So, we teach them in this program.
In the end, results count or in the words I adopted from Accenture’s advertisement: “It is not how many ideas you have. It’s how many you make happen.”
Program Focus
Building intrapreneurial skills systematically, however, is only part of the deal. The real value of the program for the participants lays in experiencing the obstacles an intrapreneur faces in an organization themselves: the rocky road of rejection trying to get an idea on its feet.
We prepare our fellow employees in a process where they form supportive teams to collaborate in order to develop their ideas together and experiment. This includes ways to communicate with management in constructive and non-threatening ways on How Intrapreneurs avoid “No!”, for example. It culminates in pitching ideas to experts and potential sponsors for funding, implementation and support.
Executive sponsorship ensures strategic alignment of ideas with company interests. It also increases the chances dramatically for idea transitions into the established processes of the regular organization, i.e. the idea becoming a project to be implemented. This is why special emphasis needs to be put on preparing management how to support and benefit from intrapreneurs; after all, there are risks involved with intrapreneuring for the individual (see also The Rise of the Intrapreneur).
Building the School for Intrapreneurs together: Stephan Klaschka (left) and Gifford Pinchot III
The three courses build upon each other; we named them DOORWAY, PATHWAY and JOURNEY:
DOORWAY is a two-hour awareness course that outlines how innovation happens in large organizations, what typical obstacles are, what is an intrapreneur and already hints towards what is offered in the succeeding courses, PATHWAY and JOURNEY.
PATHWAY is in its core an incubator and accelerator over a 12 weeks with a mix of training and group work. Research suggests that approx. 5% of the workforce have the intrapreneurial spirit, which is consistent with our school’s enrollment numbers. At the end of the course, the teams pitch their developed ideas to a panel of experts and managers representing different business functions for in-depth feedback and advice how to improve the ideas. – Think “Shark Tank” but without bloody teeth. Teams with the most promising ideas then pitch to high level executives for sponsorship and support to turn their idea into an implementation project that enters the regular development processes in the organization. Receiving executive sponsorship is another level of validation that confirms strategy alignment with company interests.
JOURNEY is a six-month course designed to accompany the team implementing their ideas by providing a mix of skill-building and team-customized coaching. – Why is this needed and important?
Even with executive sponsorship the project has neither been budgeted for nor are other resources planned and available for its implementation; so, the project still disrupts the establishment and may trigger resistance.
Shaping company culture
We also ask JOURNEY participants to connect with the next group going through the PATHWAY course to network, share their experiences and help guiding the “next generation” of graduates. The goal is to achieve sustainability of the program by growing the number of like-minded, experienced and connected employees over time.
Over time, an increasing number of graduates keep the perpetualpipeline of fresh ideas open. They also grow to become a powerful, far-reaching and growing network of active change-makers across all parts of the organization as they connect and pass on their knowledge to the next class going through the School for Intrapreneurs.
These are the self-identified leaders of change that share a common innovation terminology, skill-set and experience while they help shaping the organizational culture and mindset on the way towards a sustainable environment, an innovation ecosystem.
Lessons from the School for Intrapreneurs
My key learning from this challenge in a nutshell is as follows:
The personal journey and ‘intrapreneurial experience’ is of utmost importance for the School’s participants – a theoretical training alone does not do the trick. It has to be hands-on and all the way to implementation.
This is why the participants value the safe space to operate and experiment in.
Typically, talent in large organizations is selected top-down by management. In contrast, talent self-identifies bottom-up and based on –intrapreneurial- merits though the School for Intrapreneurs.
Alumni are hardened by their experience and become part of a growing community of capable and engaged change agents.
Successful pitches to executives validate the alignment with company strategy – not only for the individual idea but also broader for the entire program of the School for Intrapreneurs.
The program allows gives more disruptive, risky and outside-the-box ideas a chance that otherwise would not have been brought to executive attention, or so our executive sponsors said.
The School for Intrapreneurs is part of a larger framework to change company culture over time by cultivating discovery and 10x innovation capabilities once again.
“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, Boehringer Ingelheim, BMS, and Association of Chinese Students and Scholars at Yale (ACSSY) will co-sponsor this event
Books teach us how to say “No!” – they fill up entire shelves in bookstores to help us achieve professional success and personal freedom. Rejecting requests from others helps us de-clutter our busy day and protect us from time-suckers and commitments we immediately regret.
On the other end, we are asked to delegate more to boost our productivity. This comes easier for your client or boss, who has a mandate or authority over what we work on and what process to follow. And then there are Intrapreneurs: champions of ideas they want to turn into reality within large organizations without mandate or authority. (Read also The Rise of the Intrapreneur)
The “No” trap for Intrapreneurs
Intrapreneurs are driven by their passion and belief in the idea they develop and seek support for. They also often stand outside the ordinary structure and processes of the organization. Intrapreneurs need to pull voluntary favors from people they have no control over in order to find support, funding, protection, expertise or whatever else their project requires to get off the ground or move forward.
For Intrapreneurs, avoiding the “No” becomes even more crucial: once they received a “No” to their proposal or request, it is hard to change their mind no matter how much sense the project makes.
– Why is that?
Why it’s hard to say “Yes” again
Put yourself in the shoes of a potential sponsor, lets say a manager, executive or technical expert: this Intrapreneur, a person you may or may not know well, walks into your office and requests resources, money, time, or whatever to fuel an uncalled for project with an uncertain outcome that was not budgeted for and that disrupts your operations.
The safe and easy thing is to say “No.” When rationalizing in retrospect, you just saved the company diverting and possibly wasting resources on this crazy project that may even have felt like a surprise attack! – And so you feel good, right?
Now, when the Intrapreneur comes back later to try his or her luck again, perhaps equipped with more data, what can you do? If you said “Yes” this time around, wouldn’t you be inconsistent with your previous position and possibly even undermine your own authority?
Subconsciously, you may already be biased and seeking a face-saving way to get over this discussion. So it’s safe again to stay with “No,” and remain consistent – and feel good! After all, it’s human nature!
“No” doesn’t turn to “Yes” easily
As an Intrapreneur, coming back to ask for a “Yes” again is an uphill battle, a double sell. You are basically wasting your energy fighting human nature rather than helping your cause effectively. Chances are you will not be able to turn around a previous “No” into a “Yes,” no matter how much more data and other good arguments you throw at the aspired sponsor. When seeking voluntary support from others, hearing a “No” is a huge obstacle that is hard to overcome.
So, for an Intrapreneur, the million-dollar question (perhaps literally!) is, how to avoid the “No” in the first place and get support for the idea.
How to avoid “No” and thrive your project
For an Intrapreneur, it is most important to listen closely and be open to the questions and concerns the sponsor to-be brings up: they may just as well uncover valid flaws or complementing areas to be addressed to make the idea succeed in the end.
Gifford Pinchot, the author of the best-selling book Intrapreneuring, suggests these nifty tactics for Intrapreneurs to approach helpers or sponsors in a non-threatening or overly demanding way that would trigger the negative response. A small step forward is better than a full stop of the “organizational immune system” kicking in. Don’t ask bluntly for resources of sorts. Instead, ask for advice or a reference to a co-worker!
People love to talk about themselves and being asked for their expertise and opinion. This works with employees on all levels of the hierarchy no matter if you seek a sponsor or advice from an expert.
Intrapreneuring
By asking for advice, there is no Yes-or-No dead-end involved. It’s just a factual discussion among professionals about an idea and what it would take to improve it and to move it forward. Even softer is the question for help to find someone else, who could help or whom the Intrapreneur should talk to next. Even if not interested in the idea themselves, it allows the potential sponsor or expert to refer to another person, who is possibly better suited or more interested without losing face or appearing unsupportive.
Thumbs up all around
In case the idea or project tanks, as the expert/sponsor you didn’t waste any resources nor will you be held accountable. If, in contrast, the idea has a positive outcome down the road, you may even claim having supported it at an early stage or have made a key introduction that led to the project’s success. Now, that feels good no matter what happens with the Intrapreneur’s idea or project, right? That’s human nature too.
From the Intrapreneur’s perspective, for starters, you achieved to avoid the “No” kiss-of-death. You may have even got another lead or hint on what to improve or consider, something you overlooked or were not aware of before. Addressing this may require some more research, data or conversations, but for now, it drives your idea forward to take the next step, which is good and helpful.
It’s not really rocket-science but rather dealing with human nature in a resourceful and constructive way that keeps the intrapreneurial project moving forward.
Google co-founder and CEO, Larry Page, continues to have big expectations for his employees: come up with products and services that are 10 times better than their competitors, hence “10x” – that’s one order of magnitude!
10X vs. 10%
Many entrepreneurs and start-up companies, they seem to ‘shoot for the moon’! Far more than 90% of these ventures fail within just a few years. Few, such as Google, succeeded and grew to dominate internet giants. The question remains though if they can maintain the innovative pace of 10x when the innovation rate tends to sink closer to 10% in matured companies.
How big dreams changed the world
This challenge effects also other visionaries that changed the face of the world and transformed society in ways nobody has imagined, such as:
Apple building a micro-computer at times when mainframes ruled the digital world and only few could envision a demand for personal computing
“There is no reason anyone would want a computer in their home.” – Ken Olsen, founder of Digital Equipment Corporation, 1977 – just a few years before the first IBM PC sold.
eBay establishing a new online sales model that millions around the globe use every day
Google taking over the browser market through simplicity, by giving everyone control to use the most complex machine on Earth, the Internet
Microsoft cultivated software licensing to sell one piece of software millions of times over effortlessly at minimal cost.
Innovation downshift
As disruptive and transformative ventures grow and mature, the definition of what is perceived ‘innovate’ changes. Both momentum and focus shifts. With size companies struggle to continue innovating similar to their nimble start-up origins.
What happens? With size comes a downshift from disruptive to incremental change. Simplicity makes space for adding features. Adding features makes products more complex and ultimately less usable and appealing to the majority of customers.
Look at Microsoft’s Offices products, for example: Wouldn’t you wish they came out with a ‘light’ version with reduced feature complexity by let’s say 75%, so the software becomes easy to use again?
It also starts haunting Google, as their established products such as Search or Gmail need to be maintained. Additional “improvements” aka. features creep in over time. Perhaps you noticed yourself that recently Google search results seem to be less specific and all over the place while the experimentation-happy Gmail interface confuses with ever new features?
Even the most iconic and transformative companies experience the reduction of their innovative rate from 10X to an incremental 10% or so.
Technology S-curves
Funny thing is that -at least in technology- incremental improvement quickly becomes obsolete with the next disruptive jump. The current technology matures up along the S-curve (see graphics) and generates revenue, but the next disruptive technology emerges. Companies hold on as long as they can keeping revenue flowing by adding features or improvements of sorts to gain or maintain a marginal competitive advantage. Thus, incremental improvement and process optimization found their place here to minimize cost and maximize profit in a market where the product became a commodity, so the competition is based only on price.
The new technology does not yet make significant money in the beginning at the beginning of the next S-curve. The few early units produced are expensive, need refinement and are bought by enthusiasts and early adopters who are willing to pay a steep premium to get the product first. Nonetheless, development reached the point of “breakthrough,” becomes appealing to many and quickly takes over the market: the big jump onto the next S-curve gains momentum. Suddenly, the former technology is ‘out’ and revenue streams deflate quickly.
Large and matured organizations ride on an S-curve as long as possible. They focus top-down on optimizing operations. Little effort is made to address the underlying limitation of the current technology and seeking out risky new successors. Maturing companies tend to transform into a ‘machine’ that is supposed to run smoothly. A mind shift happens to avoid risk in order to produce output predictably and reliably at a specific quality level to keep operations running and margins profitable. Incremental process improvement becomes the new mantra and efficiency is the common interpretation of what now is considered ‘innovative’.
10X has turned into 10%. To keep up with the ambitious 10x goal, companies would have to constantly re-invent themselves to replicate their previous disruptive successes.
How Goliath helps David
Even our recent iconic ‘giants’ find themselves in a tighter spot today:
Google struggles to integrate a fragmented product landscape and maintain the ambitious 10X pace of innovation
Microsoft suffocates loaded with features that make products bulky and increasingly unusable while consistently failing to launch new technologies in the growing mobile segment successfully
Apple waters down their appealing simple user interface by adding features and clinging to defend their proprietary standards from outside innovations.
On top of it, all giants tend to face the stiffening wind of governmental scrutiny and regulation that influences market dynamics to protect the consumers from overpowering monopolies that jeopardize competition and innovation.
This is a fertile ground for the next wave of innovators, small Davids, to conquer markets from the Goliaths with fresh ideas, agility, and appealing simplicity. Where does your organization stand on the S-curve, riding the current curve with 10% or aiming high at the next with 10x?
Observing the down-shift
What can you observe when the down-shift happens? How do you know you are not on the transformative boat anymore? Here are just some examples:
Small Jobs – job descriptions appear that narrow down the field of each employee’s responsibility while limiting the scope by incentivizing employees to succeed within the given frame.
Safe Recruiting – practices shift to playing it safe by hiring specialists from a well-known school with a streamlined career path to fit the narrowly defined mold of the job description. They newbies are expected to replicate what they achieved elsewhere. To risk is taken to getting the ‘odd man out’ for the job, a person who took a more adventurous path in life and thinks completely different, as this may disrupt the process and jeopardize the routine output by shifting the focus away from operations.
Homogenized workforce – as a consequence of hiring ‘safely’, the workforce homogenized thereby lowering the innovative potential that comes with the diversity of thought and experience.
Visionaries leave – with the scope of business shifting, the visionary employees that drove innovation previously lose motivation when innovation and creativity slows. Now they are held to operate in a business space where they do pretty much the same thing as their competition. Naturally, these go-getters move on, as it is easy for them to find a challenging and more exciting new job in a more dynamic place. – This ‘leaky talent pipeline’ gets only worse and costly when the talent management focus shifts to talent acquisition and leaving talent retention behind.
Procedures for everything– operating procedures regulate every detail of the job. The new ‘red tape’ is not limited to the necessary minimum but rather by the possible maximum.
Short-term focus – work output becomes mediocre and focuses on short-term goals and sales targets; the next quarter’s numbers or annual results take priority over following the big dream.
Sanitized communications – broader communications within the company become ‘managed’, monitored, ‘sanitized.’ A constant stream of (incremental) success stories pushes aside an open discussion to target the bigger problems. Opportunities are missed for open dialogue and creative disruption that fuels the quantum leaps forward to outpace the competition. Peer to peer communication is monitored to remain ‘appropriate’ and can even be actively censored. Trust in management and subsequently also among employees erodes.
Management fear of being the first
The real problem is the shift of mindset in top management that quickly works its way down: not wanting to take the risk of being first, which includes avoiding the risk to fail while chasing to next big opportunity or technology. Instead, they sail the calmer waters among more predictable competition fighting for small advantages and holding on to the status quo opportunistically as long as they can. In some cases, the management even acknowledges the strategy shift from ‘leader’ to ‘fast follower’ despite whatever the company motto proudly promotes – and thereby accepting 10% and avoiding to leap ahead of their competition by bold and game-changing 10x moves.
Interestingly, these same managers still love to look over the fence to awe the iconic leaders but steer away to take charge and work to become the leader again themselves. The nagging question remains if they could actually pull it off getting into first place.
Outside-of-the-box thinking may still be encouraged in their organization but is not acted upon anymore. Internal creativity or ideation contests become more of an exercise to keep employees entertained and feeling engaged, but the ideas are hardly being funded and executed. Instead, company resources are concentrated to run the incremental machine predictably and reliably at 10% as long as its profitable, no matter what. – They simply have no resources to spare and dedicate to 10x!
Business Darwinism
These businesses undergo a cycle of breaking through by successful disruption in a narrow or completely new segment, then continued growth to a size where the organization slows down to an incremental pace and somewhat stagnating innovation. It may then get driven out of business by the next disruptor or pro-actively break up into more competitive fragments that allow for agility and risk-taking once again to become leaders in their more closely defined space of business. This closes the cycle they are to go through next. There is a strong parallel between evolution and Charles Darwin’s survival of the fittest.
Keeping this cycle in mind, it becomes easier to see why management undergoes the mind shift to predictable and incremental improvement during the massive growth phase of the company in the center of the S-curve. It is also the time when the disruptive innovators have jumped ship to join the next generation of cutting-edge innovators and risk-taking disrupters that prepare to take the leap working on the next S-curve.
Which way to turn?
The question is where you want to be: the true risk-taker or the incremental improver? Understanding the trajectory and current location of your company helps to make the right decision for you. It can save you from frustration and be banging your head against corporate walls and be wasting your energy in a dinosaur organization that is just not ready anymore for your ‘big ideas’ and quick moves outside its production-house comfort zone.
This leaves some of us thinking which way to turn. If you are looking for predictability, longer-term employment (an illusion these days one way or another) and good night sleep, this is the place you will feel comfortable in.
Otherwise, dare to follow the risk-taking visionaries like Elon Musk (the brain behind PayPal, SpaceX, and Tesla Motors; see his recent great interview) to move on.
And then there is ‘intrapreneuring’ as a third direction that tries to change the company from within. (See ‘The Rise of the Intrapreneur‘)
To say it with the words of Niccolo Machiavelli, the wise and sober realist: “All courses of action are risky, so prudence is not in avoiding danger (it’s impossible), but calculating risk and acting decisively. Make mistakes of ambition and not mistakes of sloth. Develop the strength to do bold things, not the strength to suffer.”
Shoot for the moon (or Mars, if you are Elon Musk), change the world no matter what and enjoy what you do!
Have you ever had a great idea and went to your manager for support but found they were just not interested in it? Did nothing come out of it in the end, and you were disappointed? Perhaps, you just turned to the wrong sponsor for your project, a common mistake of intrapreneurs. Here are some thoughts on whom to turn for with ideas to make them happen within an organization.
Looking for a sponsor?
Intrapreneurs are ‘executive champions’ that connect people with specific ideas (‘technical champions’) to ‘business champions’ who can provide the resources to make this idea happen; typically an executive sponsor providing funding and political support. More on intrapreneurship at The Rise of the Intrapreneur and the intrapreneurial role of the executive champion at How to become the strategic innovation leader? (part 2 of 3).
Managers and leaders innovate differently
Let’s look at the ‘business champion’ or executive sponsor. It is crucial to understand the motivation of executive sponsors for a simple reason: only if your idea or proposition fits their agenda are they be willing to listen to you and getting actively involved. Consider that they take on risk too in supporting as poor results also reflect on them. You need to know whom to turn to for what kind of idea to find adequate support.
For an intrapreneur, it is critical to understand the nature of the executive position. More specifically if you approach a manager or leader to find support for an innovative idea.
Managers and leaders look at innovation differently, hence both groups innovate very differently and for different reasons. It translates directly into their understanding of what ‘innovation’ is, its risks and rewards, and consequently their willingness to listen to you. Turing to the wrong executive easily gets your idea rejected and you may not even know why.
Let’s take a look how the views of managers and leaders differ and how this molds their understanding of innovation and what kind of change. On a side note organizations need both, managers and leaders. Each role serves a different yet necessary purpose in the organization; see “Leadership vs. Management? What is wrong with middle management?”
Managers focus on predictability
Managers are charged with running the daily business smoothly. They manage a well-oiled ‘machine’ of people, tools and processes to deliver a certain output, a product or service, reliably and at a fixed cost ceiling.
The paramount goal for managers is business continuity – it is the daily bread and butter of the organization and what pays your employee salary today. Running a fast-food restaurant is a good example, the expectation here is predictability: to deliver food to the customer at a specific quality level with as little variability as possible at a defined cost and within a certain time. A competent manager delivers this predictability reliably over and over again.
With operational targets clearly defined, the appetite for improvements focuses on speeding up the process or cut cost here and there without compromising quality. Favorable changes to the status quo are small, gradual tweaks. This is the world of optimization and continuous improvement.
Little risk, little gain
Managers need to keep the risk small to fail or to jeopardize the production process with its predictable output. The low risk of disruption comes at a price though as it limits also returns.
Here innovations are primarily of non-disruptive nature, they are incremental or evolutionary. This approach is process driven. It lends itself to automation as it aims to make the process repeatable, reliable, predictable. No senior executive needs to be closely involved in operations to keep this ‘machine’ running; it comes down to the floor manager executing.
This is also the environment of a conventional development project, the ‘next version’ of something and ‘getting it right the first time.’
With an incremental change in focus, managers tend to look for ideas in their own organization, think ‘suggestion box’. It means following a clearly defined and detailed process with development stage-gates or other review mechanisms that filter ideas typically the criteria of cost, time, quality and, more recently, variations thereof such as customer satisfaction and being ‘green’ and sustainable.
Managers are interested in learning about ‘best practices’ from outside the organization but are often enough reluctant to adopt and implement them if they appear to be risky and disruptive.
Leading in uncertainty
Leaders face a different challenge. They ask: what needs to be done to prepare the organization for success several years down the road with much uncertainty ahead? – Well knowing that the answer may disrupt the established organization.
It is this uncertainty that opens up the so-called ‘fuzzy front-end’ (FFE) to develop entirely new products or services: It is too early to know exact specifications of a solution at this time, the future markets and technologies are yet unknown. Leaders focus is on getting a deep understanding of the problems that customers face to develop the technology and capability to address and monetize them.
Disruptive transformation
What we talk about here is, for example, a completely new product line, a major (adjacent) product line extension or a new (transformative) business model entirely. Think how Apple’s iTunes Store started selling digital media and apps has changed the way we use technology and whose devices we use (hint, hint) – this gamble worked out for Apple and was based on a deep understanding what customers are willing to pay for.
With nebulous solutions in far sight, a tightly governed development process with stage-gates makes little sense because this development model is designed for incremental change and tuned for refinement. It stifles the creative and broad view necessary to create something completely new in an unpredictable and yet undefined scenario of the FFE where much imagination, creativity, and flexibility is needed.
Creative with discipline
However, flexibility and creativity do not thrive only in the absence of discipline or some sense of order. The early-stage research or design process does not need to be chaotic – it’s quite the opposite. A company like IDEO, for example, operates successfully in this space and is famous for their disciplined process and methodology in producing creative and tangible prototypes over and over again.
Note, we are not talking about final products ready to go on the self in your neighborhood store tomorrow. Check out this case study on how IDEO works in more detail: What does it take to keep innovating? (part 1 of 3)
This transitional step narrows down the broad funnel of uncertainty to develop a range of concepts towards increasingly detailed specifications of the final product. The development of the final product itself is better left to the established development organization – back to the managers to cross the t’s and dot the i’s, if you will.
Active sponsorship needed
With disruption and revolutionary change comes high risk. The outcome is unpredictable and the reward uncertain, failure is likely. Yet, if the gamble works out the rewards can be enormous and the key players ‘rainmaker’.
When exploring which direction to go, the serial intrapreneur’s approach is trying many things. Expect to fail most of the time. See what ‘sticks’ and explore this option more.
Rather than rigid procedural guardrails, intrapreneurs need to secure top executive sponsorship for their continued active support, political weight and funding. Thus, for a unique and exploratory venture what you look for is a leader, not a manager. There is no staged process to follow really, only success determines what was right or wrong.
Maxwell Wessel’s blog for HBR on “How to Innovate with an Executive Sponsor” has some good practical tips for especially if your project takes the company down the disruptive, transformative route.
In general, leaders act more as strategic innovators and game-changers assuming the role of a Sponsor or an Architect while managers take more renovation-associate roles such as a Coach or an Orchestrator. Follow the above link for a more detailed description of these roles and when to chose which role.
Which direction to take?
What is my idea again?
Start by taking a hard look at your idea first to find out which category it falls into. Then decide what kind of sponsor, a manager or a leader, is best suited to approach and is, therefore, most likely to listen and catch interest.
Even better if you can already identify the role associated with the nature of your project (Coach, Orchestrator, etc.) which helps you framing and pitching the idea or a specific project to the appropriate executive sponsor in your organization.
Job description for an Executive Sponsor Executive sponsorship is an important prerequisite for the success of employee groups. The challenge is finding a great sponsor, so what should you look for? What would a job description for an executive sponsor look like? ‑ Here are some practical ideas that have worked.
Why executive sponsorship is critical
Employee groups consist of volunteers with good intentions. They work, typically, in addition to their day job and after hours driven by the desire to address a need close to their heart. Together with colleagues, they seize opportunities to complement the organization’s objectives and goals and to improve the workplace. In most cases, employee groups are not an integral part of the organization: they don’t show up in organizational charts and have no formal authority.
For most group members, this voluntary work is ‘on top’ of the regular job and not reflected in their professional goals or performance evaluation. What makes a difference is having a strong ally: the executive sponsor.
From the organization’s perspective, some governance is needed to:
Prevent the employee group left to operate in a void or detach from the rest of the organization
Align the goals of the group with the needs and strategy of the company in a complementing and synergistic way
Ensure the group’s practices comply with company policies and other regulations.
The leaders of employee groups owe their members to:
Focus the group’s work to make a meaningful impact on the organization (instead of wasting resources and the member’s time on projects or activities that do not create value, are meaningless or even harmful to the organization)
Get funds, active support, and political backing in the organization.
Both, the organization and the employee group benefits from the connection with an executive sponsor.
What to look for in an executive sponsor?
No silver bullet
When you are looking for an executive sponsor, what are you looking for? What are the relevant criteria? – Executive sponsorship is a role, just like any other job, so what would a job description for an executive sponsor look like?
Bear in mind that there is no one right answer for the working relationship with an executive sponsor. The sponsor role and level of involvement varies and depends on many factors. It also shifts over time with the changing maturity of the group and its leadership, for example, or levels of involvement and autonomy of the group. A new group may turn to the sponsor for help with forming, direction, and funding where a mature group may seek business insights, refined success metrics, and leadership development opportunities.
Criteria for an Executive Sponsor
A perfect sponsor effectively leverages their personal brand, relationships, resources to enhance the visibility and credibility of the group. Look to ‘recruit’ a well-known leader, who is well-connected within the leadership team and respected throughout the organization. In an earlier post, we briefly touched on “How to attract an executive sponsor?”
Ideally, the sponsor is a top-level executive ‑ you hit the jackpot if you can get the CEO!
Overall, the group’s expectations of the sponsor’s role usually include that the sponsor:
Serves as a champion of the group
Gives strategic direction to align with the organization’s business strategy
Helps to identify measurable success criteria that support business goals
Provides advice and counsel to guide the group’s development
Connects to a broad network of relationships
Liaises with the executive team and accepts accountability
Helps actively to identify and overcome obstacles and resistance within the organization
Supports the group through communication and visibility.
The stronger your sponsor, the stronger the group! A strong sponsor
Shares valuable business knowledge
Demonstrates leadership, and is
Genuinely willing to help others.
A good sponsor encourages people to focus on how to engage others and improve communication, enhances the members’ leadership qualities and developing partnerships while helping to overcome barriers.
The sponsor you do NOT want
On the other end of the spectrum, there are also people you should avoid as executive sponsors for the group. This category includes people who:
Provide lip-service over taking action
Use the group for selfish reasons; for example, by claiming and promoting achievements of group members as their own
Do not see the potential and value that the group can add to the organization and its businesses
Do not make enough time to work with the group
Are ineffective or unwilling to support and protect the group from opposing forces.
Finally, if you have the choice, avoid the temptation to have a group of executives ‘share’ responsibility and ‘champion’ the group collectively. This tends to dilute accountability and action while increasing communication and coordination overhead.
There is much truth in the saying: ‘Too many cooks spoil the broth.’
‘Too many cooks spoil the broth.’
One of us?
Often enough, sponsors are chosen or step up because they originate from the group’s affinity core, i.e. they are of the same ethnicity that ethic-focused group represents, a female for a women’s group, a gay or lesbian for an LGBT group, and so on ‑ you get the picture. I advocate against this practice for two reasons, in particular: First, with an ‘outsider’ you achieve more diversity and mutual learning experiences in the group as well as for the sponsor. Secondly, the group becomes more believable as a business driver that attracts a broader membership base instead of risking to be perceived as an ‘insider club’ limited to members with a certain ‘diversity ticket’.
For the same reasons, you may also consider rotating sponsors every few years.
Quid pro quo
What you want is an involved and effective executive sponsor. Now, this sponsor role comes with additional work, responsibility, and risks for the senior leader’s reputation and career. Therefore, this ‘job opening’ must be compelling enough to attract a senior executive to step forward and sign up.
It is important to offer a value proposition that makes clear what is in it for the executive sponsor to make this symbiosis work. It is quite similar as discussed in “What’s in it for me?” (WIIFM) for the group members.
Know your sponsor
Sponsors are humans too, so here are some thoughts on how to approach them: Get to know your sponsor first, just as you would prepare and approach to meet any other very important customer or external business partner. Find out their goals, interests, beliefs, priorities, constraints of the political and economic environment, and personal work-style. What exactly is the sponsor’s interest in your group?
Clarify your expectations mutually. Once you know your sponsor and built rapport, it becomes easy to offer what is important to them and helping the sponsor to achieve their goals too.
A value proposition that addresses the (financial) bottom line is powerful and convincing. It also enables the sponsor to communicate the benefits with the leadership team in a (business) language that everyone understands. It takes business acumen, though, to specify and articulate the financial impact. If this is not your strong suit, you need to find other compelling upsides or values that the group can bring to the business and that is close to a sponsor’s heart.
Do and Don’t: How to work with the executive sponsor
Here is some practical advice on working with an executive sponsor.
On the Do side, preparation and focus are key. Remember, this is a business meeting. The executive’s time is valuable, so be respectful of it and do not waste it. You want the sponsor to remain approachable and willing to meet with you in the future whenever you need to see them urgently.
Schedule appointments regularly (monthly, for example, if the sponsor agrees) with an agenda of topics to discuss
Provide background information on meeting topics ahead of time and come well prepared
Be on time and keep meetings on schedule
Present any problems with a proposed solution
Inform of issues in the workplace that affect the group and propose what the sponsor can to mitigate or resolve the issues
Be honest with your sponsor – do not sugarcoat, blame others, or cover-up mistakes
Give your sponsor a heads-up also before taking more public and visible action so they will not get caught by surprise – if there is bad news, share it with the sponsor first
Discuss key goals and ask them for guidance, advice or assistance – allow your sponsor to help you and the group
Reserve your requests for sponsor appearances and events to where it counts most. For example, as a speaker at a ‘headline’ event to draw a crowd, attract new members, and demonstrate the group’s value for the business. Ask if the sponsor is willing to recruit other executives or respected business partners and customers as guest speakers or participants.
The sponsor could host a luncheon or dinner for the group’s leadership once or twice a year to meet everyone in person, discuss, and recognize achievements of the group and individual members.
As for the Don’ts, try to avoid these pitfalls:
Don’t come with a hidden personal agenda – it’s strictly about the group
Don’t bother the sponsor with petty day-to-day issues – focus on the meaningful impact on the business and the group
Don’t ask for general funding or support – be specific and have data and facts ready to support your case
Don’t be afraid to ask for guidance and advice – but also don’t come just to commiserate.
Beyond the job description
Don’t underestimate the importance of the right chemistry between the group leader(s) and the exec sponsor; it is crucial to establish and foster a trustful, constructive, and pleasant work relationship.
For an employee group, executive sponsorship is more than the group’s endorsement by senior management: a strong sponsor becomes the lifeline when times get rough.
So when you go out to ‘hire’ your executive sponsor, also hire for the right attitude.
Can strategic innovation rely on creative chaos? – To make a long story short, the answer is: No! Read here what it takes to consistently innovate and give you a very cool example too.
Creativity ≠ Innovation
Let’s first be clear about what we talk about when we use words like ‘innovation’ and ‘creativity’.
In this context, creativity refers to the novelty or ‘newness’ of a product idea. However, novelties can exist without a real-world application. There is usually no shortage of new ideas in your organization but merely generating ideas alone does not lead to tangible innovations. Most creative ideas do not come to fruition because they are not feasible, too far ahead of their time or just not developed effectively to take the next step towards realization.
This is where an innovation is different from a novelty: it is the combination that translates a novelty into a marketable product (or service), so an innovation brings together the newness, the value it creates and the adoption to something marketable – or as my professors calls it: “where the rubber hits the road!”
The application gap
Some people believe that new ideas can only emerge and take shape in an environment of creative chaos or in an anarchic workplace. This may bear some truth; nonetheless, it takes more than that to propel an idea through the organization to develop it to become a marketable product.
This is where so many organizations fail and the bigger the company the bigger the challenge: good ideas emerge from employees but they get stuck and starve somewhere in the middle layers before making it through to the decision-makers in executive management. Too often there is a disconnect between ideas, decision-making and implementation.
So, what does it take to bridge the gap? What is needed to ensure ideas with potential make it through to the top to become the innovations that will drive an organization’s future success?
Bringing structure to the creative chaos
It comes down to creating a balance between the creative space and focus on the future application. Innovative organizations manage to establish a rigid process or ‘production system’ that allows their staff to be creative by harnessing the process in a way that it delivers innovations reliably, continuously and within a specific time frame. – If you don’t believe that creative chaos generates cutting-edge ideas and leads to tangible output in a clearly defined productions system: here comes the example!
The IDEO shopping cart example
A company that masters this balance between creativity and structure consistently is IDEO, a successful company and innovation leader that makes its living by developing products for others. IDEO’s successful strategy is actually quite simple and straight forward; it focuses on innovation, speed and tangible prototypes.
To get the most out of this, watch the video first before reading on. It takes 8 minutes or so and your time is well spent! In the example, IDEO’s challenge of the week is designing a new shopping cart – a product that we all know and hardly anyone seems to give a second thought about how it could actually be improved much…
While you are watching, see if you can make out how IDEO’s process works in what they call ‘the deep dive’. The guy that reminds me of Groucho Marx is actually the boss of IDEO.
Let’s compare. Here are some elements of IDEO’s process that you might have noticed and that are essential to their innovation process:
The team runs one project at a time. There is focus and no distraction by other projects or interferences.
The creative work is done in a playful environment that helps to getting to fresh ideas faster. The staff has the freedom to design their working environment themselves, the creative space.
All customer interactions take place outside this creative space and don’t interfere with the creative process. I bet some customers might be quite shocked to see how IDEO actually works if they could walk around and observe the process.
There is no hierarchy, no ‘boss’, just a commitment to follow the given creative process or framework.
The accepted attitude within the company is to dare and ask for forgiveness afterward rather than asking for permission upfront. It invites to trying out things instead of being reigned by (real or assumed) constraints from the beginning.
The team first identifies several critical dimensions then splits up to build several separate mock-ups in parallel before consolidating and converging to the final product. Trade-offs come late in the game after basic requirements have already been incorporated.
The team goes out to meet experts to learn from about relevant facts faster and shares all insight and findings they come across with the others.
The discussion or ‘deep dive’ of a team is focused and non-judgmental to allow for creative ideas to surface in a safe and trustful environment. Only one person speaks at a time and the team members support each others’ ideas while deferring any judgment.
Chaotic as it may look, the team actually follows a strict protocol or process with much discipline. One person, called the facilitator, keeps the team moving forward and was selected for the ability to be good with people, not for expert knowledge. This facilitator ensures the team remains on track, focused and follows the framework of the creative process.
There is a strict time constraint for the project to force teams to produce results. Occasionally, the facilitator acts somewhat autocratic by forcing group decisions to keeping the team on schedule.
Teamwork and trial-and-error succeeds over the plans of a lone genius.
Every team needs to produce a tangible product like a prototype or mock-up. A merely ‘theoretical result’ does not suffice. The prototypes are tested in real-life environments by the end users.
All team members vote for the best and feasible ideas while everyone contributes working towards the final product.
‘Adults’ coordinate the overall process to ensure the teams meet customers’ expectations in the end.
What you do not see in the video but you might be interested in is how IDEO selects its people, the company’s most important asset and success factor. The teams are deliberately composed of members with mixed backgrounds and expertise. Much effort is put on the recruiting process and it takes 17 or so interviews before one gets to work for IDEO. These interviews focus on the culture fit and attitude of the interviewees. Performance evaluations found on peer reviews.
Oh, and don’t miss this one: IDEO deliberately hires people that would not listen to their boss! Imagine that in the places you and I work!
So, what does it take to innovate?
What are the essential and generic characteristics of the innovation process?
Here is what it comes down to in summary to systematically and continuously innovate in an organization:
Open and conductive environment and company culture.
Carefully selected, highly motivated and diverse teams
Process aligns creativity and discipline
Leaders who demand and promote innovation.
As IDEO puts it, they are experts of the process, not of the product they start working on. – This is the (open) secret of IDEO’s success.
Still want more?
There are more free videos on IDEO and how they operate as well as on their shopping cart project publicly available on YouTube, for example.
In case you want to get involved yourself in innovating with IDEO, check out their open innovation network!
I plan to discuss more aspects of strategic innovation soon such as what it takes to be the innovation leader in your organization…
– Stay tuned and please share your comments!
References and additional information
Home page of IDEO, the highly successful product design company
OrgChanger.com 