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Put Your Internal Team on Bootstrap to Drive Innovation.

    In 1992, The American Heritage Dictionary acknowledged the popular use of a new word, intrapreneur to mean “a person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation.” This term and concept is enjoying a revival as current companies struggle to realize growth and innovation. Companies seeking growth typically design programs that are based in strategy-driven or intrapreneur-driven innovation.

    In its most idealistic form, intrapreneurism encourages employees to spend up to 15 percent of their time at work developing their own creative ideas for the betterment of the company. Google and 3M are leaders in this area- the Post-It Note is a famous example of success. Their employees choose their innovation activities, and receive little to no direction from upper management. This approach tries to replicate the entrepreneurial spirit of risk-taking and innovation in mature companies or corporations.

    After twenty years of trial and error, best practices indicate that company culture is key to success. Studies and experts claim that intrapreneurship requires encouragement and support from senior management and job protection for the intrapreneur if new ideas fail.

    This is why not all companies can replicate the success of Google and 3M. Google acquires entrepreneurial companies, puts golden handcuffs on company leaders with earn outs to keep real entrepreneurs around. The amazing part is that they have created a habitat that is well suited to entrepreneurs and many stick around to help Google innovate after their earn out period expires.

    The intrapreneur approach is highly nuanced and in most cases we have witnessed several downfalls: 1. When everybody is responsible for innovation, ultimately nobody is responsible for innovation 2. Speed to market suffers because there is no real sense of urgency 3. Market validation and relevancy to strategy are often overlooked resulting in a weak pipeline 3. Time gets usurped by the daily fires 4. Resentment builds when time is limited or employees are assigned to innovation rather than recruited based on proclivity.

    While idealistically touted as “free market entrepreneurship within the corporate organization” we argue that intrapreneurs and entrepreneurs are two different animals living in dramatically different environments. The entrepreneur truly operates in the free market evolving quickly to survive, while the intrapreneur works in a simulated reality without the pressures of survival.

    The anecdote? We suggest that companies run their business like a venture capital firm. This general premise is not a new concept either but we have some new thoughts on how to make it more effective. The idea of internal corporate venture (ICV) started in the 70’s and was followed by corporate venture capital (CVC), where corporations form funds and invest directly in external start-up companies. Stay tuned for next week’s column that will discuss corporate venture capital and open innovation. Here, we propose companies consider a hybrid model that blends ICV and CVC to take away some of the risk protection provided to the employee under the intrapreneur model. If you really want to move from basic product development to game changing innovation driven by the entrepreneurial spirit, stop coddling. Make your internal innovation teams, skunk works and intrapreneurs scrap out proof of concept. Make them write a business case or plan that will be considered against other corporate growth opportunities sourced internally or externally. In exchange for their work, give them some equity, seed capital and dedicate them to this new initiative.

    Without skin in the game people can’t be expected to have a sense of urgency. Add the pressures of failure and constrained resources to get ingenuity. Real entrepreneurs have vision, resilience and fortitude. Their natural drive, focus on survival and ability to pivot with the market is what generates market winners. It is the natural selection process at work. This is why VCs think the team is most critical and you should too.

    Business Model Innovation: Change the Game

      In today’s dynamic world it is imperative for companies to continually realize growth through a sustainable competitive advantage. The trouble is that every innovation is just one new innovation away from becoming obsolete. How do proactive companies stay one step ahead?

      It is difficult to stay ahead for long if your focus is solely on process improvement or product innovation. The key is to imbed these offerings in an ironclad business model. Business model innovation is a less expensive complement to product or process innovation and often yields a longer competitive advantage. Business model innovation enables companies reach markets that in the past were difficult to commercialize yet have market creating potential, and defend against threats in the low-end of their business.

      It is classic business strategy – where to play and how to win in the market.

      Many of our clients reference the Business Model Canvas, popularized in the book “Business Model Generation” by Alexander Osterwalder and Yves Pigneur. A company’s business model is a system of interconnected and interdependent activities that determines the way the company does business with its customers, partners and vendors. These activities and frameworks are how a company satisfies the needs of the market. Consider what Apple did with the iPod, the strategic move was not the really the MP3 player itself, but rather the iTunes platform. It was the platform that gave them a strategic advantage for the launch of iPhone and later iPad.

      Leading innovation author, Mark Johnson identified that business model innovation is common to companies that succeed big. Between 1997 and 2007, Johnson found that more than half of the companies that made it on to the lists of the biggest publicly traded companies in America were business model innovators, companies like Starbucks, Amazon.com, and AutoNation.

      A recent global survey of more than 4,000 senior managers by the Economist Intelligence Unit found that the majority (54 percent) favored new business models over new products and services as a source of future competitive advantage. EIU analysts concluded that “the overall message is clear: how companies do business will often be as, or more, important than what they do.”

      Business model innovation is an untapped growth lever that requires management teams to leverage what they know about the market but also to look at their market in new ways. The idea is to change up the way that products and services are delivered to the end user that both delivers incremental value for the customer and competitive advantage for the company.

      Study the market to better understand where the pain points are. Spend some time thinking about whether there are new sales channels or platforms, revenue models and/or pricing structures. Perhaps there is opportunity for vertical integration or product bundling that greatly enhances the value to the end user. Remember to keep your ear to the ground and your eye on the customer- ultimately the innovation must be designed for their benefit.

      Business model innovation is about changing the playing field to gain a competitive advantage. The worn out adage still sheds some light: if you can’t win, change the game.

      Sometimes You Need to Shift Things Around

        When leading a series of innovation workshops for Memphis Mayor A C Wharton Jr.’s Innovation Delivery Team with division leaders at City Hall, our task was steep: change long-standing behavior patterns. Turn doers into innovators. Have proven professionals who are deeply embedded in their roles get out of their current paradigm and empathize with the community and citizens they serve. Break the cognitive lock created by doing the same thing every day and see the city with fresh eyes.

        While we created several fast-paced and role-playing exercises to accomplish this goal, we wanted to evoke the sense that this was not business as usual from the outset.

        We arrived early to plan for the session. The space itself was set up for parliamentary-style debates. On the wall were daunting signs that read, “DO NOT MOVE THE FURNITURE.” There was no choice but to break the mandate of City Hall.

        To shift the roles, we had to shift the rules, respectfully and playfully. To change the space is to change the poetics of space. By altering the configuration of the room, we alter the expectations of the participants. Everything shifts.

        When the division leaders entered and saw a space that once was set up for debate and competition now set up for playful collaboration and exploration, it was a clear sign that this would be not only a meeting, but an experience – and it was. Even the mayor stopped by and reveled in the workshop’s findings and the animated level of potential in the room. The participants were energized, engaged, and an active, crucial part of the creative problem solving process.

        The lesson: shift things around. Move people into new roles for a day or just a meeting. Move furniture. Change desks for a day. Experiment with breaking set patterns, for a limited time. Not only is it re-energizing for the participants, but it also yields beneficial insights that might grow a business or make the world a better place.

        3-D Printing will Drive Open Innovation

          Technology like that imagined by Star Trek and the futuristic cartoon The Jetsons is becoming reality with 3-D printing. Also known as additive manufacturing, it creates customized solid three-dimensional objects from digital schematics. It has arrived – and it is disruptive.

          Thirty years in the making, 3-D printing uses additive processes, where an object is created by laying down successive layers of material. Laser beams and molten plastic can be used to re-create many everyday objects, a button or a Tupperware top for instance, in a very short period of time. Ranging in cost from just a few thousand dollars to tens of thousands, these machines print in ABS plastic the same material found in today’s consumer products. Some models print in full color and at a very high resolution and can even use non-traditional material “inks,” printing with glass, ceramic, titanium, steel, copper, nylon and many other materials not usually associated with printers.

          South by Southwest kicked off last Friday with a bold prediction that desktop 3-D printing will unleash a new industrial revolution guided by “creative explorers.” Makerbot CEO Bre Pettis showcased a small desktop 3-D printer priced at $2,200 for a fall 2013 launch. Pettis believes that 3-D printing for the masses will change the face of manufacturing, eliminating the need for high-volume production. He envisions a future where consumers will generate what they need at home or in a small shop, anything from children’s building blocks to a prosthetic hand.

          “There’s a renaissance going on right now,” Pettis said. “It’s never been easier to make and share actual things.”

          Thus far, 3-D printers have been used by commercial organizations for rapid product prototyping. Innovation teams create iterative prototypes fast and inexpensively to greatly shorten the time to market. Three-D printing is also a more cost-effective method to generate pre-production molds and some companies are starting to use it to manufacture end-use parts. Digital direct manufacturing (DDM) facilitates smarter low-volume manufacturing eliminating cost and lead times associated with machining or tooling. DDM makes on-the-fly design changes and just-in-time inventory possible.

          Moore’s Law may be at work pushing down the cost of these machines and bringing them closer to the consumer market. If predictions by Pettis, Forbes magazine and others about the proliferation of 3-D printing are correct, we will see a paradigm shift equal to other user-generated content disruptive technologies like desktop publishing, digital music and consumer media production software.

          We believe that should this “new industrial revolution guided by creative explorers” come to pass, Berkley professor Henry Chesbrough’s Open Innovation theory will become crucial to commercial survival and no longer a practice used just by the smartest companies. Chesbrough defines Open Innovation as, “a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.” He encourages “innovating with partners by sharing risk and sharing reward.” In a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions (i.e. patents) from other companies. Likewise, internal inventions that are deemed non-core to the business should be licensed or spun off.

          An inventor’s dream made reality. Lower barriers to entry in the form of ubiquitous access to technology and information will give rise to a new DIY community. The consumer products and manufacturing old guard will give way to the creative proletariat. Will you open your doors and your eyes to the legions of creators with growth opportunities outside your gates? If not, you may find the walls of your corporate castle crumbling.

          The corporate “not invented here” syndrome is deadlier than ever. Information is prolific and technology continues to level the playing field. Companies that remain insular will be left for dead as the world shifts to new business models that drive growth.

          The secret to effective brainstorming? Good manners.

            Brainstorming sessions can easily devolve into a contest of strong egos or a parade of old, tired ideas and their accompanying resentments. Worse, meetings around ideation or innovation sour when there is lack of good manners.

            Like roommates coming to terms on who cleans what and when, applying a few, simple house rules on the front end preserve the relationships and creates a harmony in the environment.

            Discipline is the handmaiden to creativity. You have to give the creative process a framework, basic parameters, to harness its value. Setting the house rules gives you the power to make something outside of pre-programmed egos in the room, something that may make you a market leader.

            So, how do you manage this oh-so-human-tendency to dominate with the timeless cornerstone of civilization, good manners?

            These manners often have to be imposed externally as social reinforcements to do the right thing instead of acting heedlessly on our on blinding passions in a creative frenzy.

            The manners become house rules from generating a profusion of ideas. At this stage, research proves true again and again, the more ideas created the valuable. So, the idea isn’t to analyze each embryonic concept at this stage, but to create a trusting environment that allows for maximum idea creation.

            Here are several manners we use as house rules in Studio Ideation and Co-Creation Sessions.

            First, use good manners. This means doing what your mother should have told you. Don’t interrupt. Have only one conversation going at any time. Listen respectfully. Don’t judge. Don’t bring your unruly pets (old ideas and rigid notions) to the party. Create a sense of trust.

            Second, silence the inner editor. This is not the time to analyze or criticize, as natural as that impulse may be. Creativity is a process. Killing an idea before it has time to take its first breath and develop is akin to being a schoolyard bully. Leave your ego at the door. Be vulnerable and have fun.

            Third, trust the process. There will be several steps in the process that will merit further exploration of a concept, so apply patience. More will be revealed, if you allow the generative creativity. A moderator will guide this discovery through a series of formal exercises designed for this process.

            We could get more elaborate and craft a Ten Commandments of Innovation, but why? This move may inhibit the joy and outcome of the process. Stay simple.

            Keep in mind that this a session where creativity and good manners will work hand-in-glove to generate a wealth of fresh thinking.

            Can Big Data Pay Off Big?

              Perhaps one of the most exciting advances in this decade is the emergence of big data, a collection of data sets so large they cannot be processed with standard database management programs. The analytics that companies glean from this data yield quantitative insight into business strategy that was previously unavailable. The world’s technological per-capita capacity to store information has roughly doubled every 40 months since the 1980s.

              According to Eric Schmidt, Google’s past chief executive officer, the world creates five exabytes of data every two days. That is roughly the same amount created between the dawn of civilization and 2003. Despite this, we are still in the first frontier as technology companies solve ongoing challenges that include capture, curation, storage, search, sharing, analysis and visualization.

              Now that companies have the infrastructure in place to capture and aggregate the data, many are in the process of figuring out how best to use the information. Smart companies have created data strategies based on business priorities and defined their objectives before the technologists implement. The skill set and the context needed for analyzing and interpreting the data must expand beyond the IT department – computer programming, statistics, socio-economics, competitive intelligence and consumer insights are all needed to seize key indicators.

              Marketing departments show early success harnessing the power of big data; utilizing granular customer data from loyalty programs, unstructured social media data and Web analytics. Companies in retail and entertainment industries are using data to better personalize services, increase customer acquisition and gain an advantage over competitors.

              However, the total value of the data is greatly minimized if it is analyzed in silos. Most of the data-driven wins in the marketing realm are incremental and not blockbuster innovations. As well, too much emphasis on one type of data or analytics can be dangerously myopic. Much has been written about the current and projected shortage of talent in the analytics arena needed to monetize the insights the data holds. Companies are hard pressed to find the employees with advanced training in statistical and machine learning they seek. While this skill set is invaluable, straight statistical analysis of the data in a vacuum is not the most fruitful path to true innovation.

              We contend that cross-functional teams need to share and cross analyze the key findings from their respective data sets when charged with looking for new large growth opportunities. They need to assess what the data is telling them in the context of their market, adjacent markets, culture and world economics. Consider that the immense amount of data that any one company has captured and is analyzing is but a fraction of the relevant data that exists. It is easy to mire down in the data and take the short view. We encourage teams to take a broader perspective- consider all of the very complex factors at work in our world today.

              There is no doubt that sophisticated analytics can substantially improve decision making, minimize risks, and uncover emerging trends. But the practice of analytics alone does not have all of the answers nor is it an oracle that will reveal the next big thing. We still live in a human-centered world. It is important not to lose sight of the fact that human psychology and behavior ultimately drive each data point. Human genius is needed to decipher its own complicated web and drive innovation.

              Grow in Spite of Flat, Saturated Market

                As an industry matures it becomes saturated and players in the market struggle to maintain the robust growth they saw in the early days. Back then, the formula for growth was simple: invent a product or service, get distribution, expand internationally, then acquire and consolidate to dominate the market. What’s left?

                Cut costs and raise prices when the market will bear it. Once this is done, growth becomes dependent on factors such as the economy and population growth. Enter increasing global commoditization that drives down price and the prospect of growth is dismal.

                A disturbing growth deficit may be under way. From 1990 to 2000, just 7 percent of publicly traded companies in the U.S. experienced eight or more years of double-digit growth in revenues and operating profits. This was before the recession hit.

                What’s worse than doing business in a saturated market? Competing in that market with a minority market share.

                What about your company? Do you really know what your market share is? Has your growth flat lined? If your company is over 10 years old, is ranked third or lower in the market and your growth rate is under 10 percent you are likely in trouble.

                Next question. Do you know what the time horizon is until your market is saturated? How long until it no longer makes sense to be your business? The timing is crucial because you are on the clock. If you stick your head in the sand, the problem compounds. It can take up to four years for a company to reinvent itself and stimulate new growth. We encourage you to get out ahead of it to improve your chances of success.

                After the old growth tricks of line extension, incremental product improvement and acquisition are exhausted it is time to look for growth opportunities elsewhere. The good news is that there is always opportunity for growth if you expand where you look and how you think. Consider the features and benefits of your product or service and explore new markets that exhibit demand in these areas. Look in adjacent markets that enjoy strong growth to see if there is opportunity to move in or borrow trends that can be put to work in your market. Most importantly, talk to your customers and others in the value chain to learn about their pain points. Innovation is rooted in empathy with the customer and solving a problem in a new way.

                The world has changed and you must change with it. Charles Darwin said, “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” Take a hard look at your company and your market, and then make 2013 a pivotal year.

                Ditch the Trust Fall, Make Your Corporate Retreat a Growth Fest

                  Have you ever asked yourself why you are taking a corporate retreat? Is it because the company has always had one and it is just an event on autopilot? Is it intended to reinforce the company line? What do you as a leader really get out of it? What does everyone else get out of it? If it is designed to be a “morale builder” and a session to “build consensus” you may be wasting your time and money. There is nothing worse for morale than having a lockdown then hotboxing people who work over 50 hour weeks. These people likely feel that they are getting behind on their work treadmill and worse, they resent the time away from home and family.

                  A retreat can be an invaluable way to take time to examine the bigger picture, adjust strategies and set the operating plan for the year. If you don’t make this time, the tyranny of tasks can take over and the company rolls through each year in a state of myopic focus.

                  To get the most out of a retreat you need to do some work to make it count. In preparation, collect critical intelligence from your employees and customers to craft an effective agenda. Make it confidential or anonymous and do not filter conflict and controversy. Now more than ever, we are pulled in a multitude of directions diverting our attention and diffusing the focus of energy. Return to the simple core: “how do we grow?” Take a look at the feedback you collect through that lens. What are the critical product, service, morale, competitive, economic, sales and efficiency issues that are limiting growth? Design interactive exercises at the retreat to fully mine these limitations and simultaneously enroll the team to design solutions.

                  Equally important, allocate time to discover opportunities for growth. Here it is important that the brainstorms and exercises stretch the boundaries of thought so that time is not spent regurgitating obvious or old ideas. Consider inviting customers to participate in a co-creation workshop where the collective team collaborates on solutions or new products and services. This is a great way to make your company more customer-oriented, deepen customer relationships and deliver greater value to the marketplace.

                  The two most crucial elements of the retreat are the quality of the exercises and the participants themselves. Invite a wide range of people, not just top managers that already work closely together and share the same context. It is a unique forum to give cross-divisional top performers and those that have a drive to make things better a voice. This may be the company’s strongest form of compensation and retention tool. Team members will look forward to the retreat because it is engaging, intellectually stimulating and actually fun. Better yet, they will feel empowered.

                  To make the retreat actionable, you need to clearly communicate how decisions will be made and expectations around next steps. Consider the following: will you make decisions by consensus or majority? Who gets the final say in each area? Who is responsible for putting together the action plan and how will they be held accountable?

                  Get clear on the purpose of the retreat. We believe growth of individuals and growth in companies is ultimately why we are all in business. If your company doesn’t have a corporate retreat, consider taking a day to do some of this work for your department. Working together toward growth can be almost as fun as a trust fall or a blindfolded wall climb.

                  The Innovation Process: What’s the Secret Sauce?

                    Business banter talks a lot about “the process for innovation” which is usually referenced in the singular and stated definitively, leaving most business leaders scratching their heads.  It makes us think that there is one correct process, the secret sauce that top companies have and follow. There are actually thousands of innovation processes, none of which have been quantified or proven to be the most effective.  There is no one size fits all.

                    There is also no secret sauce. Most companies attempt an ad hoc innovation approach without clearly defined roles and processes then suffer mixed results.  Company leaders hear so much about this all-important but ever- elusive business imperative. They look for the fabled innovation handbook then become overwhelmed by the many innovation gurus, each with a unique system.

                    Innovation just means trying something new in your market to better meet your customers’ needs, thus driving growth for your company.  It’s making a change rather than just doing the same thing better.

                    How do I do this in a sensible way that mitigates my risk, you ask? The key is to develop a process that works for your company and will stick. It’s just like a diet- if it is not a behavioral and physiological fit it will never work.  Keep in mind that culture plays a big role here. If your company has an old-timer mentality that rejects any form of change, then your first step is to retool the culture. Don’t expect to transform your company’s culture into Google; there is no magic formula for this. You need to find your own way. Strive to become a smarter, more nimble and more opportunistic version of your former culture. Assume a proactive mindset, strive to lead the industry and stop reacting to it.

                    When your team is in the right frame of mind, figure out who is in charge and clearly define roles. One of the secrets to a good innovation process is making it iterative. Think about using the following tools at multiple points in the process:

                    • End user feedback: what are their pain points? Where is the demand?
                    • Market segment size and saturation level
                    • Trend spotting and scenario planning
                    • Ideation: expand your team’s thinking with interactive exercises to generate new ideas
                    • Design thinking: visually represent and design solutions for market pain points. Use empathy for the context of a problem, creativity in the generation of insights and solutions, and rationality to analyze and fit solutions to the context.
                    • Stage gates: go/no-go criteria at critical points in the process
                    • Prototype and test ideas with actual users, get them to co-create the solutions with you

                    Make this a discipline not a diversion. Put receptivity to change and discipline in your secret sauce. The market leaders cook with this. Turn up the heat and you can too.