There are many great insights and observations in this article from Steve Blank. Especially about fear of failure and new ways to handle innovation.
Yet there are two messages I find unfortunate. That is: today’s corporations are about execution of the known, leaving the search for innovations of the unknown to startups. And that it is only now that continuous innovation has become critical and respective methods emerged.
Everybody not working in a startup (setting) could think they don’t have to innovate. And one could find an excuse for not innovating since the tools are new and something for the innovation experts. This would be wrong. Innovation is too important to leave it to startups alone. In particular, it has been and always will be the duty of the leadership to push for innovation.
Any company, be it small or large, has the general impetus to innovate. The reasoning is as follows:
Every company only exists as long as it has enough customers to secure its survival. The number of and revenues from customers depend on the business the company pursues, the (arising) opportunities in the chosen business field, and the capabilities of the company relative to competitors. Therefore, the destiny of any company depends on the outside world. The outside world is constantly changing. In order to survive, all companies have to adapt. The worst ones need a crisis for change. The best ones will ride the curve or even define the future. That is: they all innovate.
Innovation is »the effort to create purposeful, focused change in an enterprise’s economic or social potential«, says Peter Drucker. It is at the core of any business in the world. There has always been great innovation also from larger corporations in the past. Just to name a few randomly selected: railway industry, telephone, the constant evolution of the automobile, retail category superstores, credit card business, drug generica, etc.
Innovation is not a recent startup phenonomen. It is the duty of any corporate leadership to push for innovation – at all levels and in all parts of the business.
What has changed in the last twenty years or so is the advent of the digital age. Whereas in earlier times the innovations were mostly brought up by the industries themselves, information technology opens up the competition to totally new players outside the industry. Barriers to entry are going down dramatically, business models can easily be disrupted and technology knowledge becomes significantly more relevant compared to industry domain knowledge. And all of this happens at an ever increasing speed.
It is the duty of corporate leadership to adapt to the new digital rules, i.e. leveraging digital technology and playing with new speed. For this, startup organizations and the new tools Steve Blank mentions do help a lot.
I agree with Steve Blank that there is a difference between larger corporations and startups. I would not call it the difference between excecution of a proven business model and the search for new ones. As said, all companies innovate. Rather, I would put the different (perceived) risk profile into focus.
Larger corporations have a proven, valuable business. Consequently, there is a high probability to create significant value out of it while having the risk to loose a lot. Startups, on the other hand, have a low probability to succeed significantly, yet do not have that much to loose. The larger and more successful a company becomes, the more it tends to become more risk averse. This is a very human pattern. And risk averse people flock around larger companies, risk takers are more likely to work in startups. It is like the law of gravity.
Steve Blank is right that in a startup you can only fail by not learning fast enough whereas in a large cooperation the biggest perceived risk is failing to secure / incrementally grow what you have.
It is the job of (senior) leadership to go against this trend and push for innovation. The levers I see are as follows:
- Evangelize the inevitability of change and the gratification of driving change, i.e. innovation. This is a constant quest, accept it as such. You have to fight the inertia that success brings.
- At each level, shield innovation from existing business. The way of shielding depends on the scope at hand. New businesses should be persued in a seperate business unit. Larger innovations in existing businesses should be seperated in a special project. On a personal level, agree with employees where to operate outside the comfort zone to enable learning.
- Have a different accounting for innovation. As Steve Blank says, you need different metrics for innovation. It is also helpful to think differently about the money you spend. Don’t expect a ROI on every single initiative. Instead view it as an investment program with many initiatives that will secure the survival of the company in the long run.
- Make failures an acceptable, even wanted part of the corporate culture. Fear is never a good advisor and failure a necessary part of learning. The task is to take fear out of the equation as much as possible. Expectation management and the right framing are very helpful. Talk in the language of experiments. Always asks for learning results. Get engaged in defining the right focus and tools for learning. Set boundaries in which experimenting is safely possible. Most importantly: build trust.
- Be aware of three moments of truth: (1) deciding how much money you are willing to invest for innovation – even if it were to become sunk cost. (2) The time you allow your teams for learning in relation to the next big thing that has to be done. (3) The way you react when a real mistake has been made. People will sense in those moments whether you are serious about innovation. Doing it right will create trust. Doing it wrong will destroy trust for a long time.
- Even in relatively stable business environments, you cannot plan for everything. It will always turn out differently then expected. Therefore, concentrate on the strategic intent that sets the direction through defining the WHAT and the WHY. This gives a good enough frame for decision making. Seek alignment on this strategic intent With your teams. This creates autonomy for your teams to innovate on the HOW.