December 21, 2015

The Problem with Corporate Innovation Programs

The Problem with Corporate Innovation Programs

Corporate innovation programs are growing in popularity as more and more industry incumbents come face to face with the realities posed by disruptive innovators.

We’ve seen the proliferation of chief innovation officers, hackathons and idea contests, all signalling an appetite of varying degrees for a departure from the traditional way of thinking, geared towards the delivery of an existing business model, towards a new way of thinking, geared towards the discovery new business models.

However, Ernest Hemingway once said to “never confuse movement with action” and it is imperative that now, when large incumbents need their innovation programs to work more than ever, that they don’t fall into the trap of celebrating movement without action.

In my work in the field, I’ve seen companies with the best of intentions slip up by launching lacklustre innovation programs that while encouraging on the surface, ultimately lack substance, structure and the critical thinking required to truly support the exploration of new business models and disruptive innovation.

I’ve taken the liberty of preparing a list of some of the common pitfalls, below.

Hackathons

Hackathons are a great way to bring together cross-functional resources with the common goal of quickly solving problems, building prototypes and validating market appetite. This not only helps teams test many ideas quickly to find out what works but also saves them by avoiding the trap of committing millions to building the wrong thing. Hackathons, done right, open people’s eyes to a different way of thinking and plant the seeds for a fail fast, “move quickly and break things” mentality, made famous by Facebook, that underpins innovation and the discovery of new business models.

What’s broken?

1 - No focus on market validation

Hackathons often stress building prototypes quickly around a central theme but don’t focus enough on understanding the customer job to be done, the problem being solved and value proposition, the development of business models and validation of underlying assumptions to best gauge market appetite for a product.

A friend of mine recently attended a corporate hackathon where one of the teams worked on an app to “help you find a warm place in the city”. How about getting out of the shade?

Tip: Use lean startup methodology to frame ideas around an actual problem and clearly defined value proposition. Use the business model canvas to determine key assumptions and build prototypes accordingly. A prototype should only be built to validate these key assumptions, otherwise it serves very little purpose.

2 - Teams lack cohesion

Oftentimes people turn up to hackathons and are thrown into groups of people that either don’t work well together, don’t bring enough unique and different cross-functional perspectives to the table and lack a broad skill set to make the most out of the hackathon.

Tip: Ensure that teams contain a good mix of skills such as designer, developer, marketer, business mind as well as people with industry experience. Including customers in the process can also be very value adding.

3 - Participants pitch their ideas to non-innovators

It’s no secret that large organisations usually require a business case when allocating resources to new projects. This business case includes metrics such as minimum gross margin and market size. But what happens when the market size is small or unknown, as is initially the case with most disruptive innovations?

Judges end up selecting safe bets, where the market is known. The problem with this is that we only choose innovations that are incredibly replicable, generate only some small short term value, serve only our existing customers and are ultimately incremental, not breakthrough or disruptive innovations.

Airbnb made US$200 a week in its first year - it’s now worth more than US$25B. Think about that next time assessing products based on market size.

Airbnb investment rejection letter


Tip: Use  innovation metrics when selecting winners. Selection criteria such as scalability, business model and market validation should be stressed above market size, gross margins and other predictable indicators.


4 - No resources or plan to explore successful ideas post-hackathon

In the event of having built prototypes that show some early market validation, we should have a budget allocated to further explore the ideas, preferably in an incubated environment away from bureaucracy of the mothership.

Giving people movie vouchers for participating is great and all (I hear there’s a new Rocky movie out!), but it won’t stop your organisation being disrupted by the next Airbnb or Uber.


Idea Contests

Idea contests are a fantastic way to capture insights from across an organisation. Insights are usually confined to the cerebral cortex of employees which is tragic when you have thousands of employees working hundreds of days and dealing with hundreds of customers on an annual basis. The approach is simple enough. Set a problem, solicit ideas from your workforce and select winning ideas.

What’s broken?


1 - Ideas are often solicited without framing a proper challenge or problem.

While this encourages employee ideation, it results in hundreds upon hundreds of ideas.

Tip: Be clear about the objective of the campaign and frame idea submission around a theme, challenge or problem. 


2 - Type of innovation sought not specified.

Innovation can be incremental, breakthrough or disruptive, and each type of innovation requires a different strategy for selection and development.

As such, idea contests which make no distinction fail because they try to apply the same decision making criteria across all ideas, which means that most ideas will be selected or not selected based on flawed criteria.

Tip: Determine what kinds of innovation you’re after and provide criteria (see below) for submitting and voting on ideas.


3 - No criteria given for ideas

Often times contests may solicit hundreds or even thousands of ideas, which is great and signifies engagement. The problem is that most of the ideas lack quality.

Providing would-be idea submitters with some criteria to self assess the validity of their idea before submission not only ensures better ideas, but less and higher quality ones, making assessment of ideas easier and giving great ideas a chance to come to the fore, as opposed to getting lost in the noise.

Tip: Provide criteria for the submission of ideas. For example, if you’re after disruptive innovation ask would-be submitters to self assess their ideas using the disruptive innovation litmus test.


4 - Contests become a popularity contest

Most idea contests solicit votes and comments, purportedly to sort out the good ideas from the bad. While this mechanism can work, it is susceptible to abuse and can result in these campaigns becoming nothing more than popularity contests.

Tip: Providing would-be voters with some criteria (see above) to assess validity of their ideas before voting would help to mitigate the risk of idea campaign degenerating into a glorified popularity contest.


5 - Ideas selected based on flawed metrics

As was the case with hackathons, we need to steer away from traditional metrics when looking for disruptive or breakthrough innovation.

Tip: Use  innovation metrics when selecting winners. Selection criteria such as scalability, business model and market validation should be stressed above market size, gross margins and other predictable indicators.


6 - People don’t receive feedback

Usually only winners receive correspondence and everybody else falls by the wayside and is ultimately ignored, yet we expect them to be motivated enough to participate again the next time we run a campaign. Would-be intrapreneurs need to know why their idea was not selected, otherwise they may grow sceptical of the campaign and write it off as a piece of innovation theatre.

They end up leaving to start their own companies, join what they think is a more progressive company or grow disgruntled and their performance suffers. At a time where incumbents need to be nurturing their innovators more than ever, we need to embrace the innovators and the wantrpareneurs in our organisations and tool them up to to help achieve both their and the organisations innovation goals.

Tips:

  • Give some form of feedback to all participants and provide them with a reference guide around ideation, business model development and market validation. Perhaps next time around, they’ll come to the table with better ideas.
  • In addition, providing criteria to would-be submitters as in (3), while limiting the number of ideas, but also means that only the most serious intrapreneurs provide their ideas as they’re willing to go the extra mile.
  • Finally, it also means that it’s much easier to provide feedback to all ideas as there’s not as many to sift through!


7 - No mechanism in place to further explore ideas

What’s the point of an idea contest if winning ideas aren’t explored further? This amounts to nothing more than innovation theatre.

Tip: Ensure winning ideas get the opportunity to be taken further. Ideally this would take the form of a hackathon, focused on market validation, and subsequently through a startup incubator set in an innovation outpost.


8 - Insular thinking

 

Soliciting ideas from within our organisations only may limit the number and quality of ideas that come to the fore. We need to encourage unique insights and connect the dots between people that have varying experiences.

Tip: Consider opening up your idea contest to the public, otherwise known as open innovation. Soliciting ideas from suppliers, customers, partners and the public may not only generate more ideas, but more importantly, better ones!


9 - No guidance to ideate

Ideas come from many places but we should do our best to help employees come up with ideas rather than just leaving them to their own devices.

Tip: Tools such as the strategy canvas, future deck and analogs are just some ways to help inspire ideation.


Acquisitions of Disruptive Startups

Companies that can’t do, acquire. Well, while that’s not entirely true - a good mix of acquisition and internal innovation is best - many companies who don’t innovate stick to acqisitions to support their growth strategy.

What’s broken?


1 - Acquiring at the wrong time

Companies are acquired once they’ve already blown up and incumbents end up paying a premium for companies who haven’t got much growing to do, taking a hit to their share price in the process for acquiring at a premium.

Tip: Adopt a portfolio approach and look to invest in multiple, diversified companies at an earlier stage.


2 - Integrating the acquired company

Companies get acquired because they’re awesome. Too often large incumbents attempt to integrate these startups into the mothership’s way of life - infrastructure, process, values and so on. What happens is that the cost of running the acquired company goes through the roof, often pegged to legacy infrastructure, and the values and processes that made them great are replaced with bureaucracy. Long story short, the founders and many employees end up leaving and the incumbent has paid a premium for a potential unicorn that quickly turns into a lemon.

Tip: Know why you’re acquiring Company X. If it’s because their processes and values make them an awesome company, let them run an autonomous show and avoid integration at all costs. The benefits of complementing big company networks with the speed and culture of a smaller company are plentiful - keep it that way.

Innovate or die.

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Steve Glaveski

Steve Glaveski is the CEO and Co-Founder of Collective Campus which he established to help companies and their employees to create more meaningful impact in the world in an age of rapid change and increasing uncertainty. Steve also founded Lemonade Stand - a children's entrepreneurship program, wrote the Innovation Manager's Handbook vol 1 and 2, hosts Future², an iTunes chart topping podcast on corporate innovation and entrepreneurship and is a keynote speaker. He previously founded HOTDESK, an office sharing platform and has worked for the likes of Westpac, Dun & Bradstreet, the Victorian Auditor General's Office, Ernst & Young, KPMG and Macquarie Bank. Follow him at @steveglaveski and Book a free 15-minute call with Steve to talk through your innovation objectives.

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