Innoventures

Agile Strategies and Start-up Thinking in Large Companies: How to Make It Actually Work

By: Dr. Irene Spitsberg, the Managing Director at InnoVentures LLC

 

Agile Innovation and Lean Startups concepts have been around for a while.  But if you ever tried to apply these entrepreneurial concepts in a large company, then you know that it is quite challenging and can be frustrating. (I know this from my first-hand experience).  The reason for this is actually quite simple – because large companies are not start-ups. They are designed and operated differently. To innovate effectively, large companies can’t simply replicate start-up principles. Rather, they must adapt them in ways that are smart and tailored to their organization.

Agile and Lean Start-ups are often thought of as team concepts. But if you are a leader in a large company, a successful approach is to ZOOM-OUT and think at the enterprise level.

Meaning you begin by focusing not on individual entrepreneurial teams or their ideas, but rather on the strategic goals, priorities and organization’s competencies at large. Then, once you clarify these and identify the innovation capabilities’ gaps, you develop both new growth ideas and agile team processes that are closely aligned with your organization’s strength, and that are likely to deliver commercial results.

Having worked as an innovation leader in leading corporations for over a decade, and now advising Fortune 500’s on building innovation capabilities, I have distilled my practical experience into Agile Thinking principles – a practical framework to build an effective and efficient innovation delivery system in your specific context. You can apply these to turn three common pitfalls into opportunities:

  1.  When pursuing new growth opportunities, companies too often misjudge the magnitude of departure from their existing business model. As a result, they over-rely on their established innovation processes. This leads to “new initiative” projects stalling and not delivering because the existing processes aren’t the right match for new growth.
  2.  With many innovation trends continuously emerging on the scene, it is compelling to adopt them in the hope of achieving quick results. This typically fails because the introduced changes impact other processes and priorities potentially interrupting both “core” and “new” innovation.
  3.  Often, when pursuing outside the core opportunities, companies rely on the creation of “Front End Innovation” groups to vet the ideas. It is common for these groups to work in isolation from the rest of the business, and often without clear deliverables and performance metrics.   As a result, the execution of new growth ideas becomes an afterthought.

Agile Thinking methodology will help you execute your great ideas!

Please follow this link to learn more about Agile Thinking methodology.

 

About the author:

Dr. Irene Spitsberg is the Managing Director at InnoVentures LLC, a strategic innovation company, where she works with Fortune 500’s as well as smaller companies on their toughest innovation strategy and execution problems.

Irene was the key strategist and driver in establishing Innovation Ventures Group at Kennametal, where she was responsible for multi-national cross-functional teams working on the development and commercialization of new offerings in adjacent and new spaces.  Her other roles included Director Global R&D Business with Cristal and a number of technology leadership positions with GE Aviation. Known for developing and implementing leading-edge innovation management frameworks and organizational solutions, Irene is a frequent speaker and author on the topics of Innovation management. Irene holds a PhD in Material Science, is the inventor or co-inventor for over 80 US patents, is a leading author of two featured papers in Research-Technology Management journal and is a recipient of NASA’s “Turns Goals into Reality” Award.

Cracking the Code: How to Innovate and Execute Great Ideas

By: Dr. Irene Spitsberg, the Managing Director at InnoVentures LLC

 

There is myth and mystique surrounding innovation, namely that its key lies in finding great ideas and selecting the best ones. However, this quickly dissolves when these ideas meet the challenges of execution.  The troubling fact is that as companies are pursuing entrepreneurial and intrapreneurial and efforts about 70 to 90 percent of these initiatives fail.

Based on my experience, the reason for most of these failures is that, inspired by showcase successes and seeking to quickly transform their organizations, leaders end up pursuing various initiatives to adopt new promising trends.  They quickly lose focus captivated by the advice available in literature and media about how they should go about innovation:  what they should do and how they should do it.

As innovators, we know that innovation delivery cannot be accomplished by simply replicating someone else’s approach. As much as we are inspired by great concepts, (e.g. Design Thinking and Agile Innovation), the reality is that successful implementation of these concepts within organizations can only come from a holistic approach  – one rooted in deep insight and that takes into account an organization’s structure, culture, and business systems. You need to understand why things work (or don’t work) and to apply the methods that have the greatest chance of success in your specific context. In other words, you must identify your own unique pathways to success. To achieve this, leaders need to crack the code of innovation delivery.

From my own experience leading innovation teams inside top global companies, I have identified seven key drivers of success that, when implemented as a system, can transform your innovation capability.  I am sharing then here:

 

7 Key Driver of Success:

  1. Setting innovation objectives. Achieving a clear and shared understanding of your innovation objectives has a profound effect on the ultimate success of your innovation efforts. This is true both in terms of gaining sustainable organizational support for new ideas, and ensuring that you have the right capabilities to execute on these ideas. Clear definitions help articulate the type(s) of innovation: sustaining or new; proximity to the core in terms of technology and market “newness”; and the percentage of organizational resources applied to various types of innovation efforts.
  2. Ideas generation. While it is true that ideas can come from many sources within or outside an organization, they never arrive fully formed. Successful innovations come from a deep and systematic examination of the market, technology and business ecosystem. This requires the right skills and an effective, systematic process for processing insights and “connecting the dots.” It is through this process that great ideas are identified and developed as potential new offerings, which can then be realized by your organization.
  3. Dealing with uncertainty. Successful new growth programs use a systematic process for identifying the riskiest areas and deploying plans for quick learning and market experimentation. The internal focus on preparing the organization for market delivery is just as important—if not more—as testing market acceptance.
  1. Managing risk. Once your idea is identified and selected, you need to work relentlessly to define and communicate its business value. You have to get quantitative, or at least semi-quantitative, even for early stage ideas. You do this by identifying key drivers of the economic value and making assumptions about their values based on the best available data.
  2. Bridging credibility gap. Understandably, investors are concerned about investing in high risk projects. To sustain funding for your new natives when competing for scarce resources, you need to be very effective in how you communicate with investors and stakeholders. The project team needs to be able to articulate how the idea was shaped and why it should work. They should also present the idea’s economic value, provide opportunities for investment staging, and show clear plans for mitigating risk and increasing the upside. 
  1. Alignment and flexible resource deployment. Even with top down sponsorship, your innovation initiative largely relies on bottom-up execution. From the start, one of your top priorities should be devising a strategy and process by which the organization’s resources will be “recruited” into the project, as it matures from the idea font end towards the back end of execution.
  2. Empathy. Your organization’s members are typically “in” to support innovation. But uncertainty and the unknown cause them to feel a great deal of anxiety when they are required to take actions that might disrupt the exiting priorities. So it is critically important to not just “ignite” with ideas but also prepare the organization to support them. Establish a common language around innovation and educate employees or stakeholders on risk reduction approaches. Relate these approaches back to known methods for dealing with operational risks. Educate and engage through frequent communication. Combine storytelling to inspire with presenting evidence to convince.  Be prepared to walk in their shoes and offer practical help when necessary.

 

About the author:

Dr. Irene Spitsberg is the Managing Director at InnoVentures LLC, a strategic innovation company, where she works with Fortune 500’s as well as smaller companies on their toughest innovation strategy and execution problems.

Irene was the key strategist and driver in establishing Innovation Ventures Group at Kennametal, where she was responsible for multi-national cross-functional teams working on the development and commercialization of new offerings in adjacent and new spaces.  Her other roles included Director Global R&D Business with Cristal and a number of technology leadership positions with GE Aviation. Known for developing and implementing leading-edge innovation management frameworks and organizational solutions, Irene is a frequent speaker and author on the topics of Innovation management. Irene holds a PhD in Material Science, is the inventor or co-inventor for over 80 US patents, is a leading author of two featured papers in Research-Technology Management journal and is a recipient of NASA’s “Turns Goals into Reality” Award.

The Seven Blind Mice, or Why the Execution of Innovation Fails

By: Dr. Irene Spitsberg, the Managing Director at InnoVentures LLC

 

Organizations tend to spend most of their innovation efforts on generating, evaluating and selecting ideas.  While this is important, the real challenge emerges when attempting to bring these ideas to market. For many companies, the execution of innovation continues to remain an “afterthought” rather than becoming a crucial part of the innovation process.

Recently, I was reflecting on the story of The Blind Men and the Elephant. It’s a story that’s been told and adapted many times. In The Seven Blind Mice picture book, the men are portrayed as mice.

As the story goes, each blind mouse touches one part of the elephant, and based on his limited senses describes what he thinks the mysterious creature might be. A seventh hero mouse runs over the creature’s surface and determines what it truly is: an elephant.

When it comes to the “how to” of innovation, there’s certainly no shortage of perspectives or collective experience.  Organizations continue to implement and share new trends, methods, tools and approaches. Radical and Disruptive innovations, Blue Ocean strategies, Business Model Generation, Open Innovation—these concepts have been around for a while now, generating new ideas around and methods of innovation. Some newer trends, such as Agile Innovation and Lean Start-up concepts, continue to emerge, promising (though not always delivering) new creative solutions and sources of innovation.

So why, despite widely available knowledge and applied organizational resources, does delivering innovation remain elusive today?  Most academics and consultants paint only a partial picture of the delivery of innovation inside organizations. And most business leaders, while aware of the aforementioned concepts, fail to link them together or fully integrate them within their companies for desired results.

 

What are the most commonly discussed challenges to innovation?

  1. Generating ideas. Truly new ideas rely on more than incremental improvements of existing product lines and services. Opportunities emerge from the convergence of multiple market and technological perspectives, as well as insights that pertain to industry structure and dynamics. This convergence demands a focused application of skill and talent—hard work that needs to be systematically organized and funded.
  2. Selecting the most promising new growth ideas is more difficult than continuing with incremental product and service improvements because for the latter, customer and market requirements are already well understood. Selecting new ideas and making that choice, however, requires astute predictions about business viability and commercial potential at a stage when much information is not available.
  3. Testing ideas and reducing uncertainty. Also known as “probe and learn” tactics, or iterative development. Agile methods and the role of partnerships can be emphasized to reach prototype stage testing sooner.
  4. Structuring the organization to support higher-risk programs. Typically, without executive support these kinds of initiatives die. Organizations that have a built-in support structure still need to find a way to secure ongoing investment, because they must continue to re-align internal resources as projects move from the “Front End” of discovery to the “Back End” of execution.

This list is by no means exhaustive. Stepping back for a moment to the Blind Mice and the Elephant: we can see that solving or addressing each challenge as a problem of its own, still doesn’t help to identify the “elephant” – or, how to execute on innovation.

A Higher-Level Perspective.

I think the following high-level view can help provide a necessary perspective.

Regardless of different terminology used, all innovation programs within companies can be roughly divided into two categories – innovation in the “core” and innovation in the “new”.  (Here the “core” refers to a company’s core business more readily identified with a company’s name, and the “new” means new market, new technology, new business model or a combination.)

When it comes to innovating in the “core” (aka New Product Development), most organizations today embrace the Stage-Gate approach.  The key to this strategy is creating a structured process for aligning various functions (e.g. R&D, Marketing, Sales, Manufacturing) to deliver new products to market (the process is often called “Idea to Launch.”) The Stage-Gate approach is fundamentally based on the understanding and acceptance that as ideas are commercialized, the company’s resource allocation increases exponentially, as does the organization’s cross-functional engagement, which is necessary for bringing the new offerings to market. 

Granted, innovating in the “new” requires a different process; one apt for experimentation and handling uncertainty.  But how can we presume the successful commercialization of new ideas without a process that’s systematic, and designed to drive cross-functional alignment?  Or that by simply applying useful but separate concepts (without integrating them into a coherent business process) we would get desired results?

The Paradox.

So, here is the paradox: while most organizations today practice disciplined stage-gate type processes for developing and commercializing new products in the core, most of those same companies do not recognize the need for that systematic business process in the “new.”  Instead, they approach innovation in an intuitive and exploratory manner either with process that doesn’t fit or without a process altogether.  

And this is why many innovations fail—not because of technological flaws or lack of market acceptance, but because bringing “new” ideas to market requires continuous realignment of limited company resources, and these have to be reallocated from day-to-day business operations. Initiatives in the “new” aren’t likely to result in short-term returns. Therefore, the decisions that reallocate spending are harder to make unless there is a clear organizational strategy around innovation (that drives focus and sets priorities) and a well-defined business process (that provides decision-making rules and guides assignment of the necessary resources).

The “3 S” View.

One useful way to think about delivering innovation may be through a “3S” lenses – Strategy, Structure, Systems:  Strategy defines what initiatives should be pursued and where the investment of company’s resources should be made.  Structure defines how an organization’s resources are deployed and how alignment of various functions is achieved.  Systems define the operation processes for how objectives are achieved and set rules for how things are done and decisions are made.

 

 

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Most of the popular innovation concepts and tools are focused on selected elements of Strategy (think Blue Ocean vs. Red Ocean Strategy, Disruptive vs. Sustaining Innovation) and selected elements of Systems (e.g. various methods for opportunity identification, business model generation, Agile development, etc.).  However, as we already know from our experience with the Stage-Gated process, all of the three S’s should be fully considered and systematically integrated within an organization to deliver on innovation.

For example, as Gary Pisano of Harvard Business School wrote in his recent paper, HBR, 2015: “You need an Innovation Strategy” , organizations rarely tie their corporate strategies to innovation strategy. And this is exactly what is required to “help them to make trade-off decisions so that they can set overarching innovation priorities that align all functions.”

But even a good strategy alone isn’t enough to deliver business success.  The “3S” perspective clarifies that what’s also needed is a defined business process to guide a company in its execution of “new” initiatives.  This process will describe how programs are initiated and selected, how they move through the development stage and are evaluated, and how various functions come into play as the programs move from the front-end of discovery to the back-end of execution.

 

So, if we once again return to the metaphor about the blind mice and the elephant:

It appears that the seventh mouse is missing from the “innovation tale,” which is the allegory of the search for a coherent process that’s necessary to tie together all the important and related but separate innovation concepts and structural elements. As the stage gate process must be installed to effectively deliver products in the “core,” so must another type of systematic process be devised and “installed” in order to successfully deliver the “new.” This process must allow for fast experimentation and adaptation, and at the same time provide a basis for deep, systematic connections between the innovation teams and the rest of the business.

In my next article, I am planning to share an Execution of Innovation model.  It’s an analysis of and a reflection on successful innovation programs employed within large companies, which I either led myself or studied. It can help innovation leaders define more precisely what capabilities are needed within their organization in order to build a successful innovation program.

 

About the author:

Dr. Irene Spitsberg is the Managing Director at InnoVentures LLC, a strategic innovation company, where she works with Fortune 500’s as well as smaller companies on their toughest innovation strategy and execution problems.

Irene was the key strategist and driver in establishing Innovation Ventures Group at Kennametal, where she was responsible for multi-national cross-functional teams working on the development and commercialization of new offerings in adjacent and new spaces.  Her other roles included Director Global R&D Business with Cristal and a number of technology leadership positions with GE Aviation. Known for developing and implementing leading-edge innovation management frameworks and organizational solutions, Irene is a frequent speaker and author on the topics of Innovation management. Irene holds a PhD in Material Science, is the inventor or co-inventor for over 80 US patents, is a leading author of two featured papers in Research-Technology Management journal and is a recipient of NASA’s “Turns Goals into Reality” Award.

Can Large Companies Really Innovate Like Startups?

By: Dr. Irene Spitsberg, the Managing Director at InnoVentures LLC

 

Large companies are not start-ups and never will be. They are designed and operate differently. To innovate effectively, large companies can’t just replicate start-up principles. Rather, they must adapt them in ways that are smart and tailored to their organization.

Visionary leaders understand the marketplace is rapidly changing. Businesses mature, growth plateaus, profits diminish. Disruptions—i.e. business version of the “Kodak-moment”, or Netflix’s shift in business model—are part of the ever-changing business landscape that today’s leaders face.

Long-term success requires organizations’ short-term adaptation. Effective leaders look to new models of innovation. Take, for example, Business Model Innovation, Agile Innovation and Lean Start-ups. These models help big companies embrace change through disruptive thinking.

Large companies have tried applying these concepts for some time. Particularly challenging is this: Companies have to facilitate innovation, which disrupts regular modes and methods of operation, while, simultaneously, reallocating financial and human resources to development, production, and testing of new ideas, process and products.

For example, Company “X” struggles to apply an Agile approach to its already innovative culture. Moving away from their standard workflow in favor of execution speed has generated real internal chaos (and employee dissatisfaction). The reallocation of resource relied too heavily on individuals’ power plays to drive multiple projects. Suddenly, “agile” projects aren’t moving so fast.

Or look at Company “Y”: a manufacturing technology-based firm. Company Y’s “agile” teams were untethered from standard development process, to the point where they were no longer guided by any process, becoming isolated from the rest of the business. Too focused on technological components, the team returned with a “developed” product that the rest of the business was ill prepared for—and it could not be commercialized quickly. Their disruptive line of thinking—meant to depart from the norm and foster innovation—was actually disruptive to operations.

How can process changes produce better results, or in what ways can other organizations, like Companies X and Y, adopt and adapt start-up methodologies without confounding internal teams, disrupting workflow, or staging clashes between the new and old, when company culture is in transition?

Answering this multifaceted question means a deeper understanding of the challenges leaders face as they move their businesses along an agile path: (1) Generating disruptive ideas, (2) Quickly redirecting resource, adapting disruptive ideas, (3) New Leadership Model.

 

Generating disruptive ideas

Start-ups are built around embracing change. They rely on generating and adapting to disruptive ideas and outside-the-box thinking. Without legacy in place that binds or stalls large companies, smaller firms strategically utilize limited resources to actualize new ideas.

By contrast, large companies spend more time and energy assessing if something fits strategically. It’s very difficult to break out of legacy operation and limiting behaviors. Their narrow focus solidly entrenches them in the status quo.

Generating disruptive ideas is the first and biggest challenge faced by large companies seeking to innovate. Because in reality it isn’t about ideas, it’s about uncovering opportunities. This requires connecting market and technology insight with deep customer understanding. To identify opportunities, you must also understand the industry ecosystem within which your company operates. This is why traditional brainstorming methods rarely lead to identification of large, disruptive opportunities. And treating idea generation solely as a numbers game is a misguided approach.

To successfully uncover disruptive opportunities, organizations must:

  1. Reframe core competencies to support idea generation
  2. Embrace concepts that focus on recognizing disruptive opportunity
  3. Cultivate new skill sets, absent or weak within the existing organization, that are necessary for developing and pursuing new opportunities

 

Quickly redirecting resource, adapting disruptive ideas

Start-ups are built around experimentation. Ideas are prototyped and quickly brought to market. If the test fails, then the business regroups, adapts, and releases another prototype for testing.

Large companies can develop the same capacity by incorporating Agile Innovation principles and Lean Start-up methodology into standard practice.

But here is the challenge: Applying these methods on a project level may make sense, but can pose significant challenges at the organizational level.

Consider that large companies have much greater resources and capacity than startups. The problem is that the resources have generally been allocated.

To innovate successfully, larger firms must leverage resources toward testing new ideas. If the idea shows promise or warrants further testing, they must reallocate resources as appropriate to support disruptive projects.

This kind of innovation requires participation through all levels of the organization, with a radical shift in how R&D innovation teams connect with other parts of the business. Without this shift many great ideas fail even after they pass market tests.

The ability to reallocate resources for disruptive innovation allows larger companies to assert their traditional advantage over smaller companies or start-ups. They are able to leverage existing brands, established relationships, and internal or external market and supply chain channels.

 

New Leadership Model

Executive level support is critical to the success of disruptive innovation—this is a given. But what many companies overlook is strengthening the “scaffolding” of their new ventures. Organizational structure and methodology that support disruptive innovation as a process must be integrated or “installed.” New ventures require cross-functional and departmental alignment as they move towards commercialization.

Executives might authorize new investments, but they don’t assign resources. As a result, mid and senior level managers can be pulled in several different directions at once, especially when several leaders sponsor multiple projects.

One solution is to establish a team entirely dedicated to innovation, with authority and resources to establish manufacturing pilots. In reality, though, this is frequently impractical. Most companies need to test ideas within their existing organizational structure.

 

Another solution is the combined approach:

  1. Applying Business Model Innovation to embrace disruptive idea generation
  2. Using agile development and lean start-up methods to develop models for iterating
  3. Designing multi-level organizational strategies and agile but systematic processes to support start-up thinking and methodology

Combining approaches helps identify strategies that don’t disrupt operations while still introducing new methods. The goal is to help businesses commercialize their disruptive ideas by connecting innovation efforts to the existing organization.

It’s important to embrace tradition (i.e. core values, validated process) and change. Multi-level strategies then help to re-align the organization as a whole as it integrates disruptive change. The result is the ability to adopt disruptive ideas without disrupting operations.

 

About the author:

Dr. Irene Spitsberg is the Managing Director at InnoVentures LLC, a strategic innovation company, where she works with Fortune 500’s as well as smaller companies on their toughest innovation strategy and execution problems.

Irene was the key strategist and driver in establishing Innovation Ventures Group at Kennametal, where she was responsible for multi-national cross-functional teams working on the development and commercialization of new offerings in adjacent and new spaces.  Her other roles included Director Global R&D Business with Cristal and a number of technology leadership positions with GE Aviation. Known for developing and implementing leading-edge innovation management frameworks and organizational solutions, Irene is a frequent speaker and author on the topics of Innovation management. Irene holds a PhD in Material Science, is the inventor or co-inventor for over 80 US patents, is a leading author of two featured papers in Research-Technology Management journal and is a recipient of NASA’s “Turns Goals into Reality” Award.