I was reading a book over the weekend called Leap: How to Thrive in a World Where Everything Can be Copied.
It lays out an argument for what causes some companies to quickly become copied and others to stand the test of time over decades.
It got me to start thinking about my own experiences building new products as a startup founder vs as an “intrapreneur” in a larger organization.
There are many potential benefits to corporate innovation or “intrapreneurship” (like “thriving in a world where everything can be copied”) but there are also a few major roadblocks to be aware of.
I wanted to share 4 key questions that I think are very important to answer for a larger company looking to incubate new products or businesses.
This is not an exhaustive list by any means but hopefully provides some food for thought.
Do members of an innovation team have the correct incentives?
Many companies have short term performance goals that have a significant impact on quarterly or annual compensation.
This can also impact promotion cycles and one’s ability to rise through the ranks of a company.
Building a new product or business is not something that commonly explodes like a rocket ship within a few months, so the traditional performance KPIs are not a good vehicle for judging performance in this arena.
If they are used, it’s likely they will create an incentive for smaller thinking and less impactful new ideas.
Another issue with incentives relates to how senior management perceives and understands the task at hand.
If their perspective of this process revolves around short term KPIs, it’s likely there will be a lot of downward pressure for unrealistic results and lots of mind changing.
I have experienced this one.
It’s not possible to build a new product or business in two weeks and start making millions of dollars immediately.
Do members of an innovation team have clear lines of authority?
This is also something I’ve run into personally.
It can be especially common in the case of a company that has done acquisitions and wants to build a new product or business with its newly acquired entities.
In many cases, senior managers will shy away from conflict and allow for ambiguity around hierarchical structures.
When no one knows who to listen to, it can lead to a lot of politicking and a huge clash of incentives.
This can be crippling when things need to happen quickly (as with innovation cycles that require fast decisions, testing, and feedback loops).
It also can lead to endless speculation about what ideas are worth testing and what aren’t from people who have no experience in this process.
That is particularly a waste of time.
Time spent speculating and not testing is the equivalent of flushing money down the toilet.
Unfortunately, this is all too common.
If you were your own competitor, how would you crush existing company?
The answer to this question can vary a bit depending on if you are the market leader or not, but the purpose of the question is similar.
In the Innovator’s Dilemma, Clayton Christensen describes how large companies often get caught off guard by upstarts who leap into the future with products that may seem niche at the moment but end up defining the future of a market.
This question asks you to think about that theme.
There is a more structured way to approach this than pure speculation, but in a sense, it is asking you to lay out a prediction for the future of your industry and try to jump in front of it.
The rest of the company can focus on incremental improvements of existing product lines, but why have an innovation team if your goal is just marginal gain too?
It can be challenging to do this inside of an incumbent company as you may have biases about existing technology and business models but it is possible with a disciplined approach (involving user interviewing and market analysis).
In my opinion, this is one of the most fun questions to think about.
It may be counterintuitive to try and cannibalize your company’s existing product lines, but it’s going to happen whether it’s you or someone else.
So better if it’s you.
What advantages do you have as a result of existing customer reach, specialized knowledge, etc?
I imagine this question sort of like the scene in the movie Apollo 13 when the spacecraft is running out of oxygen and the team in mission control needs to use an assortment seemingly random parts to quickly devise a solution to save the flight team’s lives.
To solve the problem, the team throws all the available parts on the table and brings specialists into the room to help brainstorm and eventually (quickly) find a solution that works.
The analogy here is that once you take stock of your existing assets and talent, some clear advantages in certain areas should emerge even if they aren’t so obvious at first blush.
The story of the pharmaceutical company Sandoz is a fun example of this.
In the early 20th century, they were a major exporter of fabric dye and as a result, had a large staff of chemists (specialized knowledge).
A byproduct of the dye was also that factory and lab workers became very sick.
Around the same time one of the first synthetic drugs, called Antipyrine, was developed in Germany that provided an effective treatment for influenza symptoms.
As Sandoz observed the popularity of this new drug and recognized their glut of chemistry talent and had first-hand experience with hoards of sick workers, they saw an opportunity to compete in a new, more profitable market than fabric dye.
The rest is history.
The purpose of that story was not to glamorize a pharmaceutical company but to highlight the fact that in an innovation endeavor, you should explicitly lay out an advantages you have.
It makes a big difference.
There is a much more rigorous process you should follow to building new products and businesses, but if you can’t answer these four questions, then you should be a little bit worried.