A New Model for Innovation in Big Companies
November 19, 2013 Editor 0
It seems we’re all racing to get more entrepreneurial. Increasing creativity and innovation is not only on the priority list for start-ups; it’s also a strategic goal for CEOs of small, medium, and large-sized companies. Despite this growing obsession, however, big companies are still not very good at it. How many times have you had a strategy meeting that gathered a smart, enthusiastic team to generate interesting ideas and debate their merits, yet after the meeting… nothing… much… happened?
Studies show that efforts to stimulate intrapreneurship — entrepreneurship within an established company — more often than not fall flat. According to my current research at Harvard on innovation models in global companies across diverse sectors, these types of projects fail between 70% and 90% of the time.This should be a deeply troubling, motivating statistic. And it’s one that stems from a very human problem in most big organizations.
“There are lots of things that can be done in large organizations but simply aren’t because nobody has the time or resources.” Call it a grim view, but this quote from my research summarizes a pattern I see frequently. This participant — the CEO of the India and South Asia division of a global firm — continues: “To actually get something going in a large organization, you need the ideas and you need the people who believe in them, but the people who are actually capable of these things are the good ones, and they are already stretched by their work in the corporate environment…. It [becomes] impossible for them to pull it off.”
As companies grapple with long odds on innovation like these, they are also looking for ways to improve the likelihood of their intrapreneurial success. Internal innovation presents a number of challenges, including but not limited to the inherent risk of promoting new ideas; complacency and attachment to the status quo; and the actual amount of capable people with the time to effectively build new ideas into workable products.
Traditionally, companies have found ways to navigate these challenges internally, in research and development (R&D) divisions like the famed Xerox PARC, founded in 1970, or through programs that encourage employees to dedicate a small percentage of their time to side projects, as 3M began doing in 1948. Many companies, including Google, follow similar models today.
Since the 1990’s, however, more and more large companies have been outsourcing their intrapreneurial efforts. They pay upwards of $300K to $1 million to consultancy firms that conduct market analyses and in-depth need-finding, identify new opportunities, generate promising ideas, and, often, develop ideas into working prototypes. The client company then refines these concepts and prototypes and takes them to market. Innovation consultancies tend to have a preferred methodology for working with their clients, such as human centered design (also called ‘design thinking,’ popularized by IDEO, Continuum, Frog Design and others), Lean Start-up, or analytical models used by large management consulting firms. Results from these business-to-business collaborations have at times been phenomenally successful, as was the case with the Bank of America Keep the Change program (IDEO) and the Swiffer (Continuum Innovation).
Undoubtedly, not all inventions from these collaborations achieve equivalent fame, or we likely would have heard about them. It is difficult to say whether the success rate of clients working with innovation consultancies is radically above the 10-30% success rates for intrapraneurship projects, but there is some indication in my research that design firms indeed provide their large company clients with ideas promising enough to improve on these odds. In addition, an often-underappreciated factor influencing how successful the design team to client handoff will go is whether the client is set up organizationally to deliver the product. And this brings us back to the question of whether the people required to do this internally have the time and resources to pull it off.
All of this can make clients, who are paying high fees for innovation consulting, nervous. And it seems to be opening the door for new options that emphasize a deeply pragmatic approach to innovation, including mixing entrepreneurs and corporations.
A Different Approach
Remo Masala, Chief Marketing Officer at Kuoni, is one of the executives taking his company in a new direction. Masala has been at Kuoni, a leading travel services company, since 2007, and is known for frequently shaking things up. He even sees this as a fundamental part of his job: “You need to understand as a company, to be different means also to start to act differently.”
So nobody was shocked when, for a recent strategy project, Masala passed over many well-known consultancies that he viewed as having already “made a science out of their way of thinking of restructuring.” He was looking for an outside team to help Kuoni approach this question, but there were a few ground rules. He wanted them to be open to multiple methods. He was especially sensitive to the human side of how this would get approved and implemented internally. Masala also wanted everything to happen quickly — for the teams to work within very tight time and budget constraints, produce fast results, quantitatively analyze them, and to help Kuoni make the decisions required to take the ideas forward.
That’s when Masala met Hamish Forsyth, Co-Founder of OneLeap, a UK-based innovation consultancy with a rather unusual background. OneLeap began a platform enabling aspiring entrepreneurs from around the world to contact high profile investors, corporate leaders, and partners to help grow their start-ups. As they built up a unique network of thousands of entrepreneurs across 35 countries, they started to see that there was a lot of demand in reverse — companies kept asking them for advice on how to become more entrepreneurial instead of wanting to simply connect with entrepreneurs. This led the organization to start experimenting with ways that companies could learn directly from their network of entrepreneurs.
Instead of bringing teams of multi-disciplinary designers into large companies as other consultancies have been doing, OneLeap began bringing in teams of diversely skilled entrepreneurs. On the surface, this may sound similar to other innovation consultancies. But beyond the surface, there are several core differences.
OneLeap’s entrepreneurs remind big companies of their riches, and to take nothing for granted. Large companies often think they’re strapped for resources, but entrepreneurs can’t believe how many resources they have. For example, Dorjee Sun, one of the entrepreneurs brought in to Kuoni, has been starting companies since he was 19. This Singapore-based entrepreneur has had multiple exits in tech and education, and was recognized in 2009 by Time as a ‘Hero of the environment’ for his work in the Carbon Conservation business. While working on the project, Sun kept emphasizing possibilities: “If I had 2 million people coming through my 500 stores, and I had this many thousand people working for me, and I had a 160 year history, of course I would do that. If Instagram and AirBnB and Kayak and Hipmunk can start with zero, just think what they would have done if they had had your distribution pipe!” Entrepreneurs, says Sun, can help remind companies to value what they might take for granted by asking, “Why don’t you do this? How can you not [do this]?!”
Entrepreneurs help large companies to combine relentless focus, expansive search and a bootstrapping mentality. In a start-up, if entrepreneurs don’t focus relentlessly on the core of their idea, the results can be devastating. Related to this radically resourceful view, research shows that, compared to more established, well-resourced companies, entrepreneurs and companies with entrepreneurial management practices are innovative in part because of their resource constraints. Constraints encourage them to focus on their existing advantages and remain experimental. Instead of investing primarily in maintaining the familiar, as those with excess resources tend to do, they invest heavily in active search for unmet needs, creative ways to recombine knowledge or resources, and new opportunities to apply their competitive advantages.
OneLeap thus starts the process of working with large firms with a systematic analysis of the company’s advantages conducted by a group of diversely skilled entrepreneurs. This can provide a useful contrast to blue sky innovation sessions, where ‘no ideas are bad ideas’ and many ideas are so outside of a company’s core competencies that they aren’t remotely actionable.
Entrepreneurs can help big companies try on a bootstrapping mentality, where there is no time or budget to lose focus. This may seem counterintuitive in a larger organization. After all, big companies have the luxury of experimenting broadly, right? While that may be true in terms of financial luxury, this perception can also be misleading. It can take the perceived pressure off, while underestimating the fact that it takes dedicated time and human resources to build a promising idea into a viable product, and those resources are often already accounted for on other projects.
Tailored short-term teams with radically diverse yet relevant skills help identify opportunity areas quickly. OneLeap does not employ entrepreneurs; they employ facilitators, and are essentially a network of, and platform for, entrepreneurs to engage with large companies. This means their entrepreneurial teams are not coming from the same consultancy. Rather, they are one-time teams of proven entrepreneurs, hand-picked from an active network of thousands of them, and brought together on a case-by-case basis for each client project. This means the client can specify the skills they need, and OneLeap can compose a group that has them.
Once this team is confirmed, OneLeap works with their client to set up a semi-autonomous unit of entrepreneurs inside the large company for about six weeks. OneLeap structures and manages the engagement between the entrepreneurs and client internal management according to research on key differences between start-up and established company approaches to innovation.
OneLeap’s partnership with Kuoni began with selecting the right entrepreneurs for the project. They were selected based on the following criteria: experience, recognition (objective awards, financial exits, other recognition), peer referencing, geographic representation (entrepreneurs had experience living and operating in markets of interest to Kuoni), sector expertise and variety (some expertise in travel, but also in sectors from which recombinant innovation was possible — e.g. food, retail services etc), and functional variety, with strong digital representation (entrepreneurs are naturally multi-functional, but may have specific areas of domain expertise). On this project, an exploration of B2C opportunities in a market beset with digital new entrants, digital was important. However, OneLeap always tries to include a good digital representation because digital entrepreneurs are comfortable with seeing how a product can be quickly prototyped.
Facilitated internal hackathons help companies get past slow decision-making and embrace competition. The entrepreneurial teams work with the client teams to build real prototypes on-site. And they don’t leave until it is done. One of the entrepreneurs, Sun, describes it as: “a workshop… turned into a hackathon. By having these internal hackathons, it is like replicating a Facebook culture, where basically Timeline was developed in 24 hours as people just went about it.” In essence, OneLeap runs something like an accelerated competition and incubator inside the company. OneLeap and the entrepreneurs help the company select the top ideas for prototyping.
OneLeap helps companies test prototypes quickly with real customers to get the right data to decide whether to keep or kill ideas. The prototypes then move through an intensive analysis phase. OneLeap has built ways to test prototypes first within the company and then with real consumers, and analyze the results with the objective of preparing the company to make an informed decision on what to take forward, how to get buy-in and out how to scale it. The prototyping and analysis process is highly data-driven and can wrap up in as few as six weeks. To do this, OneLeap built a simple white-label prototype and tested it with several thousand of Kuoni’s existing customers. The prototype was very light, but explained the concept using a mockup of the fully functional product, and tested varying levels of commitment through signups, a basic diagnostic, and social shares. While not yet proof that the product would succeed, it gave Kuoni the data it needed to discuss the concept and engage the board. And subsequent access to OneLeap’s resources can help maintain momentum.
Several months after the program, I interviewed Masala again, this time to ask about his return on investment. He articulated two lasting benefits: organizational and product-related. First, he said, you “have to fix the basics.” His experience with OneLeap provided assurance that what they were trying to do made sense, and they have since begun to structure themselves differently. The organizational return was a shift to a more entrepreneurial and experimental mindset in the daily business. The experience “left a good feeling in the company, we were very, very satisfied, and OneLeap will be back with us.”
Beyond the organizational returns, Masala is thinking long term. “We were lucky to have many ideas, but if Kuoni starts a business from one of the ideas that emerged from working with OneLeap’s entrepreneurs, judging the ROI is different.” He compared it to assessing ROI with any method: if you build an idea out to delivery, you still have to find the right people and you still have to deal with risk. When determining his returns so far from working with OneLeap, he “would have to compare this cost-wise to building it out on a green meadow.” In the end, he assumed the cost would be similar. But for him, the key question is: in which version are you more successful? “In the end it is about the people doing it.” That is, Kuoni and Masala are serious about allocating resources — people, time and funding — so that ideas developed in the workshop have a fighting chance to succeed.
Although companies seldom address it head on, between idea and implementation often lurks the ‘I will if you will’ attitude that avoids a real discussion of time and resource investment into the innovation pipeline and breeds diffusion of responsibility and complacency. This tricky mentality is enough to suck the air out of even the most promising ideas. OneLeap and Kuoni present a provocative case for a new form of organizational collaboration that uses entrepreneurs to stimulate and sustain innovation in large companies.
Instead of the typical meeting to generate and debate ideas that then languish thereafter due to lack of sufficient investment and time and resources, your next innovation project could have one key difference: a forceful group of successful entrepreneurs from selected fields participating in the sessions. They’re not only contributing ideas and mocking them up, but also — importantly — they are asking tough questions that just might help big companies kill the dreaded ‘I will if you will’ dynamics that can stymie the development of promising ideas.
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