What Corporate Innovators Can Learn From Entrepreneurs

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Popular culture celebrates the start-up. You can binge watch Shark Tank at will, and podcasts such as “How I built This” celebrate, well, how “I” built “this.” And, while media outlets love the story of a start-up and the possibility of a “unicorn,” most innovation is not entertainment. The most significant innovation challenges today are arguably being tackled in the corporate office parks of well established companies.

Inventing in a suburban garage may be hard (although WeWork has all but killed the garage mystique), but innovating inside an established organization is indisputably more complex. As the CMO of one of the world’s largest corporations noted: “Entrepreneurs can take their ideas to 50 venture capitalists, and they only need one to say ‘yes’. Within a corporation, there are 50 different people who can kill the idea with a single ‘no’.”

Our innovation work reveals three essential behaviors that come relatively naturally to start-up entrepreneurs, but feel relatively unnatural to those attempting innovation in the corporate trenches. Corporate innovators who adopt these behaviors can move confidently and quickly to create future-focused growth engines.

#1 — Get comfortable ending up with a business idea that is wildly different than planned.

Stewart Butterfield is celebrated as a brilliant entrepreneur for launching both Flickr and Slack. His genius lies not in his ability to see the future but rather, in his ability to create the future through relentless in-market experimentation and willingness to change plans. Neither of his billion-dollar disruptors were the expected fruits of an initial business plan or a formalized innovation process. In fact, Butterfield set out with ambitions to create an online game, and he “failed” twice. The first failure led to Flickr and his second attempt produced Slack!

Well-governed processes are the defining structural feature of large enterprises — channeling resources and organizing work. But the expertise and process discipline that fuels successful operation actually impairs effective innovation. Market-creating innovations challenge corporate innovators to adopt a new mindset — as well as new skill sets.

As the journeys to Flickr and Slack suggest, creating a future that is different than the past is inherently inefficient, and a detailed process plan will rarely deliver the desired outcomes. Entrepreneurs should get comfortable wading into the messiness of customers’ circumstances to explore, co-create, and iterate.

#2 — Creatively size problems not solutions. 

Consumption is easy to measure. That’s why most innovation projects start with trying to capitalize on shifting share and results in me-too products, not growth-fueling innovation.  Look at financial services: is there really a need for another credit card? Yet the product of most credit innovation is simply a recast of existing features bundled in a new way that can be marketed slightly differently.

The iconic growth companies of the 21st century – Amazon, Google, Facebook, Alibaba, Netflix, Badu, Uber, Airbnb – do something completely different. They focus on non-consumption. They see struggles in people’s lives and solve them, thereby creating new markets all together.

Markets that appear small, nonexistent or ill-defined are inherently unappealing to CEO’s looking for low-risk, large-scale, near-term opportunities to leverage currently controlled capabilities. Is it any wonder that many, if not most, established organizations only invest in close-to-the-core, incremental innovations — despite senior executive exhortations for disruption and breakthrough?

How is it that Goldman Sachs, and not the major US retail banking players, rapidly built Marcus into a multi-billion dollar consumer loan franchise? Instead of focusing on the existing, hugely profitable, credit card business, Goldman Sachs’ viewed the market through the lens of consumer experiences. What they saw were millions of people trying to reduce debt, not get more of it. Buried beneath the measurable consumption of credit card debt was massive non-consumption (and innovation opportunity) for lower cost consumer loans.

An important takeaway for executives who find themselves evaluating a potential innovation opportunity is to ask, what’s the size of the problem?  instead of, how big is that market?

#3 — Seek to scale learning not producing.

The value-creating paradigms of the 20th century, first manufacturing and later services, rewarded economies of scale. Increased volume spread across large fixed capital and operating investments reduced unit costs and drove efficiency and advantage. It is understandable that the benefit of scale retains a near-sacred status in management circles.

The encouraging news is that larger organizations can still turn size to their advantage, just in a new way. In the face of exponential technological advancements and human adaptation, a new scale-related calculus is gaining traction: scaled learning. When leaders of large companies create incentives for learning, discovery, and experimentation, scale can endure as an advantage. Amazon’s relentless experimentation produced the world’s largest cloud computing business, AWS. Alibaba’s institutional curiosity led to AliPay and now Ant Financial, the world’s largest money market fund as well as an online transaction platform bigger than Mastercard.

Executives envy the agility, speed, and nimbleness of start-ups. But small companies have extremely limited resources for experimentation, and learning. Constraints of time, talent, and cash constantly impose challenges and force trade-offs. When large company leaders create incentives for learning, discovery, and experimentation, just like Expedia, Intuit, Google, and Microsoft have done, scale can endure as an advantage. Executives who successfully scale learning will dramatically improve their innovation and growth outcomes.

Innovation inside established organizations may not generate the next tech celebrity, but it will very likely produce many of the billion-dollar businesses that will shape our shared future. These efforts will be led by leaders who successfully shift their mindsets and adopt the skill sets demonstrated by successful entrepreneurs.

The more discontinuous a prospective innovation — relative to both internal capabilities and external customer behaviors — the more flexibility leaders should allow in project plans and timelines, the more they should seek to size problems and non-consumption, and the more they should seek to scale learning and discovery.

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