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tallmanbusiness · 7 years ago

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Corporates struggle to innovate. Five common causes that get them stuck, and how best to unstick them.

Unusually I’ve consolidated five separate blog posts into one post, all focused on one theme: corporate innovation. Total read time is 10mins 13 seconds - ish.

For several years my mantra is that there has never been more opportunity for innovation and entrepreneurialism than now. What’s remarkable is that opportunity continues to grow constantly. New technology opens more doors daily.Incumbent businesses are being disrupted, out-manoeuvered and left behind.Corporates recognise the need to innovate, but commonly struggle to do so.Corporates often get stuck. The five big sticking points that I see repeatedly are:

Stuck because there is no precedent.

Stuck with an intolerance of failure.

Stuck in an analogue paradigm.

Stuck in demanding too much revenue from new ventures.

Stuck unable to trust their intuition.

Bringing each of these challenges to life in more detail, with some examples of effective antidotes, as follows:

1. Corporate innovation gets stuck because there is no precedent:

Read time: approximately 2min and 27 seconds – ish.

Looking back to 2005, who could have imagined back then that today more than two billion people would use Facebook daily? That Facebook would become one of the most prestigious and profitable corporates on earth. It was ‘unforecastable’ – unthinkable even.

Before Facebook there was nothing quite like it previously.

There was no precedent.

The reason that Facebook was not invented by a corporate is that, had the idea been suggested, no one in a corporate would have known how to evaluate such a new proposition. Before Facebook both the popularity and the economics of social media networks were unknown.

This lack of precedent is something that entrepreneurs and start-ups find exciting and energising. In most corporates, my experience is that the opposite is equally true. Corporates are invariably terrified by the thought of pioneering.

[I hate quotes] There is an old quote in business – apparently from Columbus: “That if you want to discover new territories, first you have to have the courage to lose sight of the shore.” [Which is especially challenging if you happen to believe that the world is flat].

My observation is that most corporates are so wedded to their sight of the shore that it is unthinkable for them to contemplate that there is an existence beyond their current horizon. They want to know exactly what a new innovation / venture is going to yield before they set-sail.

In corporates, the preservation of their core business is often an overwhelming priority. Precedent (what went before) is a handicap that causes innovation paralysis.

Start-ups are not held back by provenance, because they don’t have any. Entrepreneurs revel in the privileged advantage of a beginner’s mind. (Link to my earlier blog post on this).

Observations on getting unstuck:

Corporates need to better recognise when they lack the courage or experience to metaphorically ‘lose sight of the shore’. The solution then is to hire experienced captains who have a demonstrable track-record of successfully navigating unchartered waters.

Essentially, corporates need to hire proven entrepreneurs.

If the obstacle to hiring entrepreneurial talent is a fear that they will be “too disruptive” and/or culturally rejected – then corporate companies need to change their culture.

The choice is clear. Innovate or die.

I also strongly advocate deliberately hiring people from outside your industry – acquire a fresh perspective with new skills and experience.

Some corporates have such aggressive immune systems that they kill anyone or anything that does not conform to their current paradigm. We now live in a period of unequalled opportunity for innovation. Corporates will fail to exploit this opportunity if they are not able to control and suppress their instinctively destructive autoimmune response.

Venturing into new areas is always difficult. Corporates that are successfully innovating are the ones that actively seek out and collaborate with start-ups. Corporates should not try to compete with start-ups, but they should invest in them. If you can’t beat them, join them. If your corporate does not yet have a venturing/investment division, now is the time to create one.

My assertion is that successful investment by corporates into new start-ups has the potential to yield more shareholder value than a marginal increase in market share in their core market.

2. Corporate innovation gets stuck because corporate culture is intolerant of failure:

Read time: approximately 1min and 33 seconds – ish.

Before the digital revolution corporates would rely on techniques such as market research to de-risk their pursuit of innovation. New products and propositions would be researched to death in order to avoid the humiliation of failure.

In 2007 I helped launch iPhone in the UK. Before launch, we asked business customers what they thought about iPhone – universally they all hated the idea of it. However, when stocks of the new phone hit O2 stores, we literally had to find ways to entertain the queues such was the overwhelming demand.

Fear within corporate culture is systemic. Corporate employees will never willingly share their failures in their Annual Performance Review (APR). To do so would be career suicide.

The core DNA of corporate culture is allergic to failure.

The act of pioneering multiplies corporate anxiety.

Observations on getting unstuck:

Corporates need to learn to fail fast. The mantra in start-ups is “Win BIG, fail cheap and quick”.

Start-ups have no money, they can’t afford traditional research because it is simply too expensive. They have no option but to launch, and learn.

Also, start-ups can’t afford to fully build their ideas and new propositions. Which is why they rely on MVP – Minimum Viable Product.

Get the new innovation built and launched; get it front of customers; start selling; learn fast. Look for market traction quickly. If sales don’t materialise fast, adapt and improve the proposition.

Iterate.

Often corporates’ biggest challenge is not knowing when to stop – when to give-in and kill a new venture. Fear of failure can cause two dysfunctional behaviours:

Either to over-invest in a bad idea to avoid admitting defeat.

Or paradoxically, to give up too early without trying hard enough to evolve and iterate.

Start-ups are more resilient; less fearful; more determined; and apply more discretionary effort in order to win.

My assertion is that start-ups are more successful at innovation than corporates because they possess a greater will to win.

3. Corporate innovation gets stuck because corporates are wedded to an analogue paradigm:

Read time: approximately 2min and 24 seconds – ish.

Most analogue corporates (ie. those that pre-date the internet) launched the on-line version of their business at some point between 2000 and 2010. Without exception, their approach was to build websites that replicated and translated their off-line service, on-line. Only, not as good. Most corporate websites offer a poor version of the real-world experience.

Ten years ago, that was the conventional way. Back in 2000 this approach was sort-of acceptable. Frankly, the technology (especially internet speeds and capacity) was relatively limited then and so there wasn’t really much of an alternative.

However, inconveniently – that excuse is no longer valid.

There are two big problems with replicating an off-line service on-line:

Invariably it is a rubbish experience.

It doesn’t make use of the technology now available.

When I go to a shop in the high street, I can immediately see the difference between a “family” sized pack of something, versus a “travel” sized pack of something because one is very big, and the other is very small. That difference is lost when jpegs are disproportionately sized on-screen to a uniformed format where they look identical.

Supermarkets designed their on-line shops in an era when people commonly pushed big supermarket trolleys around giant supermarket superstores. Where I live, those superstores now stand empty of customers. The superstore paradigm is no longer relevant to the extraordinary digital experiences that new digital tech can now deliver.

On-line shopping should enable shoppers super-powers that would not be practical/viable in the real world. Experiences that can simulate; stimulate; predict; that leverage AI; make things easier and more delightful.

Supermarkets are not alone in their attachment to an analogue era. Another example are banks who invariably design on-line statements to look like the ones that they printed and put in the post in 1972.

Why does my bank assume I want to read lists of my transactions? I rarely use cash and so the volume of my bank transactions has multiplied exponentially.

Specifically when my account receives a deposit, I want to hear it in my ears the very next time I put my headset on (ideally rendered in a slightly sexy whisper – “you just received two thousand pounds” - how cool would that be).

Airlines – don’t get me started.

Observations on getting unstuck:

Stop briefing designers to reflect the past and echo the off-line world – nostalgia is romantic.

Be open-minded to the new capabilities that new digital tech enables.

Be aware that new capabilities are emerging constantly. Actively hunt for them.

Design is not done. ‘Done’ is only a moment.

Leverage new tech to create differentiation.

Leverage new tech to the advantage of your customers.

Employ diversity – in terms of gender, age and ethnicity. Diversity adds new perspectives and helps fuel fresh thinking.

My assertion is that corporates that actively hire from their primary competitors are invariably the least innovative.

4. Corporate innovation gets stuck because it demands too much revenue from new ventures:

Read time: approximately 1min and 22 seconds – ish.

If the revenue that a corporate consistently generates from its core business is measured in billions (or hundreds of millions), it is very difficult to get excited by (and dedicate precious resources to) a new venture that produces [say] less than ten million dollars. Why bother?

Much has already been written about this - it is called the “Innovators Dilemma”.

Corporates tend to have one of two reactions to this dilemma.

One is to simply abandon the innovation idea.

The other is to wildly over-estimate anticipated demand and massively exaggerate the forecast revenue to the point of being totally unrealistic. With regard to innovation Corporates often hold completely unrealistic expectations.

To put that into context, in my experience, it is very rare for any new venture to produce revenue in double-digit millions within the first two years.

Observations on getting unstuck:

Stop counting the money exclusively – identify other measures of success.

Quantify the positive impact the innovation will have on reputation, rapport and reach – all of which, via social media, have never been more measurable than they are today.

Don’t just count the sales-revenue, I’m keen to encourage corporates to take an equity stake in new ventures so that as the new business grows so will the value of their shares, (often disproportionately so).

To accelerate sales of the new product or service, identify ways of attaching / bundling it with an existing product – ideally the most popular product.

Don’t look to up-sell existing customers individually (one-by-one), find ways to ignite them in wholesale quantities eg. using a ‘free-mium” pricing model.

My assertion is that corporates that get stuck by the “innovators dilemma” have failed to recognise and work out how best to leverage their biggest asset – which is fast-track access to millions of consumers.

5. Corporate innovation gets stuck because corporates are unable to trust their intuition:

Read time: approximately 2min and 27 seconds – ish.

Invariably start-ups are born out of passion. Entrepreneurs have a knack for spotting a gap in the market and for ‘going-for-it’. Before launching, start-ups often lack the resources (and expertise) to fully research and evaluate the validity of the business model that they have chosen to pursue. Commonly start-ups rely on instinct and intuition.

It is understandable for corporates to apply more rigour than that exercised by start-ups. For good reason, Corporate Governance is there to protect customers, staff and shareholders. However, often corporates allow both governance and self-imposed rules to completely disable the power of their collective intuition. In the worst cases, they stop listening.

The challenge with corporate governance is that it can get in the way of properly tuning in to customers’ true wants, needs and aspirations. At mobile operator O2, if we’d acted on what our business customers had told us prior to the launch of iPhone, we could easily have been dissuaded from going ahead with the launch. Thankfully we trusted our own instinct and intuition that the product would be a massive success, which it went on to be.

Observations on getting unstuck:

Have a hunch. It is good to have a hunch.

Tune in to your gut – listen to what it is telling you. Don’t ignore that sense of uneasiness in your stomach. Train yourself to react instinctively and immediately to it and respond to it. Don’t ignore what your body is telling you.

In the words of Matthew Key, the former CEO of O2, “Trust your intuition, it’s what got you here.”

Celebrate and understand your successes. Build a foundation of success on which your confidence can justifiably rely on. If you don’t bank your successes in your own mind, you are denying the opportunity of building a solid foundation of confidence.

Spend more time hanging-out with your customers. It amazes me how few corporate employees truly spend time with their customers.

Listen to social media. Ronan Dunne, CEO of Verizon describes Twitter as his opportunity to “walk the shop floor”.

Employ people who have a natural tendency to be astutely observational.

Put customer insight at the heart of your decision making, and focus on doing the right thing by your customers – these two actions will rarely let you down.

The opposite of intuitive thinking is to overly rely on process, governance and research. Don’t focus on de-risking decisions, but instead focus on learning fast and iterating quickly. Worry less about making the right decisions. Learn to recover faster. (Link to my earlier blog post on this).

My assertion is that corporate governance can stifle intuition and with it, innovation too.

#Business #sme #corporate #innovation #Start-ups #Scale-ups #digital #coaching #mentoring #entrepreneur

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