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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Corporate Explorers Transform Disruption Into Opportunity With This Proven Framework Innovation used to be seen as a game best left to entrepreneurs, but now a new breed of corporate managers is flipping this logic on its head. These Corporate Explorers have the insight, resilience, and discipline to overcome the obstacles and build new ventures from inside even the largest organizations. Corporate Explorers are part entrepreneurs, using innovation disciplines to jump start cutting-edge ideas, and part change leaders, capable of creating support for investment. They see that corporations already own the ideas, resources, and--critically--the talent to build new ventures. Companies like Amazon, Microsoft, Bosch, LexisNexis, and Analog Devices enable managers to put these assets to use and gain an upper hand over startups that threaten to disrupt them. Corporate Explorer is a guidebook to the practices that enable these managers to go from idea into action. It demonstrates how success is not only possible but may offer entrenched companies better odds than venture-capital backed startups. This actionable and proven framework explains how managers can become successful corporate innovators; it includes tools to: * Learn how to apply innovation practices with greater discipline * Turn great ideas into a full-time job as an innovation leader * Experiment with and scale original business models * Transform innovation programs into a thriving source of new business * Attract, retain, and motivate entrepreneurial talent * Energize employees by creating a realistic way to innovate These lessons come from the trailblazers of corporate innovation--Andrew Binns (Change Logic), Charles O'Reilly (Stanford Graduate School of Business), and Michael Tushman (Harvard Business School)--who have decades of experience helping entrepreneurial-minded executives activate employees to become Corporate Explorers. Entrepreneurs take notice--it's time for Corporate Explorers to set the pace and chart the course for disruption.
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Seitenzahl: 352
Veröffentlichungsjahr: 2022
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Table of Contents
Cover
Title Page
Copyright
Dedication
Preface and Acknowledgments
SECTION I: Explore Aspiration
1 Innovation Advantage
Beating the Odds
Strategic Ambition
Innovation Disciplines
Ambidextrous Organization
Explore Leadership
Explorer, Not Entrepreneur
Chapter Summary
Notes
2 Corporate Explorers in Action
Explorer's Insight
Purpose Driven
Investor Support
Manage Uncertainty
Chapter Summary
Notes
3 Strategic Ambition
Emotion, Logic, Aspiration
License to Explore
Social Movement
Hunting Zones
Manifesto
Chapter Summary
Notes
SECTION II: Innovation Disciplines
4 Ideation: Generating Ideas for New Ventures
Idea Addiction
Solution Trap
Customer Discovery
High-Value Customer Problems
Idea Generation
Chapter Summary
Notes
5 Incubate: How Corporate Explorers Learn Through Experimentation
Business Experiments
What Needs to Be True? (Hypothesis)
Run Experiments (Test)
Make Sense of Your Results (Learn)
Run a New Experiment (Iterate)
Follow the Evidence (Decide)
Chapter Summary
Notes
6 Scale: Assembling the Assets to Build a New Venture
Combining Assets
Customers, Capabilities, Capacity
Scaling Paths
Trigger Points
Chapter Summary
Notes
SECTION III: Ambidextrous Organization
7 Explore Organization
Structure Options
Focused
Bottom Up
Top Down
Structure Decision
Chapter Summary
Notes
8 Explore Business System
Team Design
Sales Team Integration
Corporate Functions
Resource Allocation
Feedforward Management System
Executive Attention
Chapter Summary
Notes
9 Risk and Reward for the Corporate Explorer
Motivation Puzzle
Venture Model
Shadow Stock
Long-Term Incentives
Personal Risk
Corporate Explorers Motivation
Chapter Summary
Notes
SECTION IV: Explore Leadership
10 Silent Killers of Exploration
Core Business System
Preserve Professional Identity
Avoid Risk
Optimize for Short Term
Maximize Comfort
Change Leader
Chapter Summary
Notes
11 The Double Helix: How Corporate Explorers Lead Innovation
and
Change
Future Organization
Storytellers
Social Network Leader
Insider or Outsider
Reputation Manager
Chapter Summary
Notes
12 Readiness to Act: Leadership and Scaling a New Venture
Competing Commitments
Both/And Leadership
Productive Tension
The Mirror
Courage
Passion
Chapter Summary
Notes
Appendix: Corporate Explorer Framework
List of Figures and Tables
About the Authors
Andrew J. M. Binns
Professor Charles A. O'Reilly, III
Professor Michael L. Tushman
Index
End User License Agreement
List of Tables
Chapter 5
Table 5.1 Business design.
Chapter 6
Table 6.1 AXA scaling strategies.
Chapter 7
Table 7.1 Ambidexterity – structural options.
Chapter 11
Table 11.1 Players in the internal ecosystem.
Chapter 12
Table 12.1 Both/and leadership.
List of Illustrations
Section I
Figure I.1 Corporate Explorer
Chapter 3
Figure 3.1 Three dimensions of ambition.
Figure 3.2 Hunting zones.
Section II
Figure II.1 Innovation Disciplines
Chapter 4
Figure 4.1 Ideate, incubate, scale.
Figure 4.2 Customer discovery practices.
Figure 4.3 Customer value map 1.
Figure 4.4 Transformed customer value.
Chapter 5
Figure 5.1 Experiment cycles.
Figure 5.2 Critical assumptions matrix.
Figure 5.3 Ecosystem adoption chain.
Chapter 6
Figure 6.1 Assets for scaling.
Figure 6.2 Best Buy Health.
Figure 6.3 LexisNexis Risk Solutions.
Section III
Figure III.1 The Ambidextrous Organization
Chapter 7
Figure 7.1 Ambidextrous structure – autonomy and access.
Figure 7.2 Intel Emerging Growth Initiative process.
Chapter 8
Figure 8.1 Team design options.
Figure 8.2 Feedback/feedforward metrics.
Section IV
Figure IV.1 Explore Leadership
Chapter 12
Figure 12.1 Zone of productive tension.
Appendix
Figure A.1 Corporate Explorer framework.
Guide
Cover Page
Table of Contents
Title Page
Copyright
Dedication
Preface and Acknowledgments
Begin Reading
Appendix: Corporate Explorer Framework
List of Figures and Tables
About the Authors
Adevertisement
Index
End User License Agreement
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ANDREW BINNSCHARLES O'REILLYMICHAEL TUSHMAN
CORPORATEExplorer
How Corporations Beat Startups at the Innovation Game
Copyright © 2022 by Andrew Binns, Charles O'Reilly, and Michael Tushman. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
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Library of Congress Cataloging-in-Publication Data
Names: Binns, Andrew (Managing principal), author. | O’Reilly, Charles A., author. | Tushman, Michael, author.
Title: Corporate explorer : how corporations beat startups at the innovation game / Andrew Binns, Charles A O’Reilly, and Michael Tushman.
Description: Hoboken, New Jersey : Wiley, [2022] | Includes index.
Identifiers: LCCN 2021046905 (print) | LCCN 2021046906 (ebook) | ISBN 9781119838326 (cloth) | ISBN 9781119838340 (adobe pdf) | ISBN 9781119838333 (epub)
Subjects: LCSH: Technological innovations. | Creative ability in business. | Corporations. | New business enterprises.
Classification: LCC T173.8 .B56 2022 (print) | LCC T173.8 (ebook) | DDC 338/.064—dc23/eng/20211004
LC record available at https://lccn.loc.gov/2021046905LC ebook record available at https://lccn.loc.gov/2021046906
Cover Design: Wiley
For Tristan, Gethin, and Clary—You have lived this book as much as me; without your love and support it would never have been possible.
—Andy
To all the Corporate Explorers in this book and elsewhere who have helped us understand the challenges they face.
—Charles
For Marjorie Rose and the light she shines on me and her world.
—Michael
Preface and Acknowledgments
Corporate Explorer is a book 20 years in the making. It started when I (Andy) attended an IBM Strategic Leadership Forum at Harvard Business School led by Professor Michael Tushman and Professor Charles O'Reilly. Mike and Charles were engaged to support IBM's Emerging Business Opportunity (EBO) program. I had just joined IBM from McKinsey and was assigned as an internal consultant charged with supporting these nascent businesses.
One of the leaders we worked with was Carol Kovac, then general manager for IBM Life Sciences, and our archetypal Corporate Explorer. In just five years, Carol, Jamie Coffin, and the team created something remarkable: a new multibillion-dollar business inside a corporate behemoth. Living this story, I was blessed with the opportunity to learn first-hand what it took to succeed. This has forever shaped my belief that it is possible for corporates to beat startups at innovation, even if I also learned it would not be simple.
The IBM experience was core to Mike and Charles's popular book Lead and Disrupt: How to Solve the Innovator's Dilemma. They describe how IBM and other corporates successfully (and unsuccessfully) ideate, incubate, and scale new ventures. Their book makes a powerful case for an ambidextrous organization that can manage businesses at multiple stages of maturity – some driving operational effectiveness in the core business, while others explore new potential opportunities in the way IBM did in the EBOs.
In parallel to this, corporate innovation has become something of an industry as more and more companies invest in accelerators and labs. A global innovation industry has developed mostly focused on innovation tools, techniques, and methodologies. Many of these are excellent. We have great respect for Tom and David Kelly's work on design thinking, Steve Blank and Eric Ries on lean startup, as well as the vital difference made by the agile software development movement and its focus on teaching corporations a new way of working.
Even so, two things were missing. First, most innovation methodologies make very little distinction between innovating as a startup and doing so from within a corporation. That is a big gap. Managing innovation in the context of working in a corporation is fundamental to its success. Second, there is a presumption that the leader of corporate innovation is a facsimile of a startup entrepreneur. They share much in common, but these are completely different roles. A Corporate Explorer must translate methodologies designed for one context and try to make them work for theirs.
Out of these insights came the notion of a book focused on the individual Corporate Explorer. These are people who do what others say is impossible: lead disruptive innovations from inside large corporations. Sometimes, they do not get assigned to this role, other times they start the ball rolling themselves. In all cases, Corporate Explorers see an opportunity, build support for action to capture it, and make it happen. They do not wait for permission; they mobilize others into action. That is leadership.
Corporate Explorer is a work of synthesis, bringing together what we have learned from others, and from our own experience as consultants, educators, and researchers. The work that we started at IBM has continued through Change Logic, a firm that we co-founded in 2007 together with Peter Finkelstein. Change Logic has worked with some of the firms described in this book, along with many others. These clients have taught us everything we know about how to be a successful Corporate Explorer or senior executive with the task of helping them succeed.
Our thanks go to the many Corporate Explorers we have met over the years. Specifically, to those that have contributed time, experiences, comments, and ideas to this book. These include Carol Kovac, Krisztian Kurtisz, Balaji Bondili, Kevin Carlin, Tony Montalvo, Claire Croke, Colin Lyden, Fiona Treacy, Mike Mayes, Jason Lynch, Yoky Matsuoka, Sebastian Jackisch, Sara Carvalho, Venu Gopinathan, Colin Ritchie, Erich Kruschitz, Lukas Mayrl, Patrick Magnee, Christopher Widauer, Chris Brenchley, Lorna Keane, Brian Donnelly, Bob Barthelmes, Sagi Ben Moshe, Osamu Fujikawa, Nakajima Teruyuki, Shige Ihara, Edica Lin, Uwe Kirschner, and Michael Nichols.
We are also indebted to the executives that have taught us so much about corporate innovation, most of all Vince Roche and Andreas Brandstetter, who shared many insightful comments with great generosity. We also thank Martin Cotter for opening the door to new possibilities at Analog Devices and being a great thought partner. We have learned so much from our clients, special thanks to Yusuf Jamal, Olivier Dumon, Gaby Appleton, Ron Mobed, Jamie Coffin, Tomer Zvulun, Aicha Evans, Sergio Putterman, Alexander van Boetzelear, David Nanto, John Greco, and, of course, Bruce Harreld, for the opportunity to start this journey.
Our Change Logic team has been a constant source of ideas and support. This book is very much a team effort. Our colleagues deserve credit for all that is good in these pages. Deep thanks to our partners at Change Logic, Christine Griffin and Kristin von Donop, for allowing me to be absent for so long in 2021. Thanks also to colleagues past and present, Aaron Leopold, Eugene Ivanov, Jo-Ann Sabatini, Nishi Gupta, Alina Cowden, Vincent Ducret, Alexander Pett, Elspeth Chasser, Tamra Carhart, Andres Echeverry, Daryl Dunbar, Curtis Rising, Kevin Moruzin, Lucas Wall, Brendan Hodgson, George Glackin, Ulrike Schaede, Peter Ainley-Walker, Jason Rabinowitz, Wendy Smith, and Noel Sobelman.
I have been very fortunate to have guidance and feedback from some outstanding friends and colleagues, who spent time reading and commenting on the manuscript. Thank you, Lisa Wade, Peter Robertson, Brian Woolf, George Glackin, Michele Martin, Carol Kovac, Noel Sobelman, Vincent Ducret, Diana Shayon, and Narendra Laljani. I am also enormously grateful to our research and editing team, Vanessa Ceia and Elissa Chase. Only I know how pivotal they have been to the evolution of this project. Everyone named is entirely blameless for any flaws in the book, though they are likely to have contributed to its most useful insights.
Writing this book during COVID gave it a special context and it may not have been possible without it. I was at home, not traveling for the first time in 20 years and benefited from the support of my wife and companion, Tristan Boyer Binns, as well as encouragement from our dear friends Jim Ball and Anita Diamant.
Most of all I must thank my co-authors Mike Tushman and Charles O'Reilly. I have had the enormous privilege to work with these two awesome men since 2000. Our collaboration has helped me to learn and grow as an adviser and consultant.
We have had the privilege of knowing and working with many Corporate Explorers. As they start their new roles they often ask, “What do I do now?” This book is our answer. We hope that it informs and inspires many new Corporate Explorers to realize their potential as leaders and innovators.
Andy Binns, Gloucester, Massachusetts, July
Charles and I have always aspired to do research that is both rigorous and relevant. A critical part of this has been our engagement with practicing leaders from around the world. This engagement has been supercharged by our colleagues at Change Logic. To the extent that our ideas have had direct impact on firms, it has been through our amazing Change Logic professionals. But there would be no Change Logic without the insight, creativity, leadership, and raw talent of Andy Binns. Andy has been our Corporate Explorer. It has been our privilege to have him as our partner and colleague.
Michael TushmanCambridge, MassachusettsCharles O'ReillyPalo Alto, California
SECTION IExplore Aspiration
This is a book about successful Corporate Explorers – leaders who build innovative businesses inside existing corporations. That may strike some as an unlikely topic. Corporate innovation is often understood as an oxymoron, a phrase that contradicts itself like a “deafening silence” or a “working vacation.” Our view is that it need not be. We will describe how Corporate Explorers build successful, disruptive businesses using the assets of existing companies to accelerate their work. It is hard work, and some fail, but it is happening now in corporations around the world.
The four sections of this book explain the difference between these successes and failures. In this first section, we describe why and how corporations have learned to use corporate advantages to lead disruptive innovation. We meet our first Corporate Explorer in action, following Krisztian Kurtisz at UNIQA as he drives innovation from within a corporation. We then explain how having a scale of strategic ambition is equal to the opportunity that inspires Corporate Explorers to action.
Figure I.1 Corporate Explorer
1Innovation Advantage
Conventional wisdom is that corporations should not even try to lead disruptive innovation. It holds that companies grown fat on the profits of a mature business model are incapable of doing something new and surprising. They are too covetous of their profits to risk pursuing unproven ideas, so, while they are willing to entertain good ideas, they rarely invest enough to see them prosper. That makes them ripe for what our colleague Clay Christensen has called disruption. Disruption is a phenomenon that turns all the rules of an industry upside down in a short time. Think Uber and the taxi industry. A stable industry for a century, Uber swept aside licensed taxi operators worldwide with its ride sharing service. Within a decade, the rules for an entire industry have been turned upside down. This phenomenon has only gathered pace as first the digital revolution and then the COVID pandemic fueled the fire of market change.
Christensen's famous book The Innovator's Dilemma (1997) concluded it was almost impossible for an established firm to lead disruption. His data showed that the winners were almost always insurgents, or startups, who succeed by attacking dominant market players. He argued that those that led in one generation of a product had no incentive to invent and commercialize a replacement. On the contrary, they had an incentive to defend existing franchises from being cannibalized. The rapid rise of the digital giants of the twenty-first century like Google, Amazon, and Alibaba, at the expense of technology, media, and retailing titans of the twentieth appears to confirm this hypothesis. The pace of disruption is now even faster than it was when Christensen did his initial research. Digital business makes it even tougher for established firms. Digital has democratized disruption with technologies that enable firms large or small to build revolutionary business models. More than ever, disruption is a game for startups. Firms like Uber, Lyft, Casper, Airbnb, SoFi, Warby Parker, and Bloom Energy can turn the world upside down. It is not a game for old mature business.
Conventional wisdom follows Christensen, concluding that old, slow, established organizations cannot hope to compete with the speed and ingenuity of digital startups. Despite having greater financial and technological assets than a startup, they lack the entrepreneurial spirit to grow new ventures. Innovation is a game for entrepreneurs with backing from venture capital. Corporate managers with a good idea are often advised to become entrepreneurs rather than to waste time slogging through big-company bureaucracy looking for approval. So goes the conventional wisdom that corporations cannot do radical innovation.
There is no question that large companies have struggled to respond to emerging threats from new firms that break the rules of the industry. There is a long list of firms that either no longer exist or are mere shells of themselves. One study concluded that 50% of the companies in the Standard and Poor's stock index will be replaced by the end of the decade.1 The mobile phone company Nokia went from leading the digital mobile handset market in 2007 to being sold to Microsoft in 2013 for $7 billion, only to be written off a few years later. The music company EMI had a star-studded history of putting out recordings in multiple formats, from 78-rpm recordings and the Beatles’ famous 33-rpm albums recorded at Abbey Road, to magnetic tapes and compact discs. Then, digital music and the business model that came with it, destroyed profits, and EMI ceased to exist in 2012. We could name countless others: Kodak and Polaroid in photography and imaging, and Blockbuster and Debenhams in retail, and the list goes on. Disruption has no respect for age, geography, or industry. It can happen anywhere.
Beating the Odds
So, why a book about Corporate Explorers?
The answer is that in the nearly 25 years since Christensen's book was published, another reality has emerged: big companies are learning to use their assets to beat the odds of disruption. Amazon, one of the world's few trillion-dollar value firms, has made the invention of new businesses core to its mode of operations. It is now not only an “everything store” and online marketplace, but also one of the world's most important technology service providers with Amazon Web Services and a competitor to Netflix in the production and streaming of movies and videos with Amazon Prime. Technology firm Nvidia saw the threat of being wedded to a rapidly commoditizing PC market. Even as its market share started to collapse, it invested in relaunching as an artificial intelligence (AI) company. Meanwhile, Netflix was able to disrupt Blockbuster with mail-order DVD delivery and then pivot to create an online streaming service and, most recently, become a hugely successful content creator. These are large firms making multiple reinventions within 20 years and flatly contradicting the notion that only startups can lead disruption. They have learned to use their assets to create an innovation advantage.
To be fair, many of these companies are relatively young firms with founder owners. They are often “digital natives,” still imbued with the spirit of entrepreneurship. This is less true for Microsoft. The software giant had for a generation made its money on software installed on servers and personal computers on a company's own premises. The onset of the Cloud enabled an explosion of new services and solutions from customer relationship management software (Salesforce) to human resource management (Workday). Disruption theory would predict that Microsoft should have been eclipsed by this software-as-a-service era.
Instead, Microsoft reinvented enterprise email with its Office 365 online service, deliberately disrupting its own installed base of exchange servers to create a new suite of productivity offerings. The same is true for less heralded firms like online information provider LexisNexis. Twenty years ago, LexisNexis ran a legal and news information service for lawyers and corporations; it was a steady single-digit revenue growth company with high-margins. Then, starting from 2001, it created a new multibillion-dollar sister company, LexisNexis Risk Solutions. A manager won backing from his senior team to create a big data company, providing analytics and information solutions to insurance companies, government agencies, healthcare providers, and many others. Today, this new business generates more revenue than the old one.
In each case, these established firms realized that they had a head start compared with entrepreneurs. They had resources and capabilities they could leverage. They had financial muscle, skilled people, production capacity, customers, and a whole host of assets that are beyond those of even a well-funded early-stage firm. Microsoft had an enormous base of existing enterprise customers that had their email exchanges installed on servers within the company. The Office 365 offering moved these email accounts to the Cloud, cutting costs for the enterprise customers, and creating a platform of innovation for Microsoft. LexisNexis had some of the assets that it needed – mechanisms for accessing and cataloging public records information, brand identity, financial resources – and where it lacked them it acquired, such as its data-linking software.
In many firms, these assets act more as liabilities, prompting managers to defend what they have. In others, these assets are understood as giving an advantage in getting ahead of disruption. What is different? We believe there are four main factors that permit firms to initiate disruption. First, senior leaders realized that they needed to set a strategic ambition with a scale equal to the opportunity or threat of disruption, which would mean that they would have to act differently. Second, a global innovation industry codified innovation disciplines so that corporations could improve the rigor with which these methods are applied. Third, more companies are becoming ambidextrous organizations, separating out the core business from the disruptive ventures, so that they had the autonomy to grow, while retaining access to the assets of the core business. Finally, explore leadership has emerged as a distinct capability in corporations, in both those we call Corporate Explorers and the leaders who are ready to commit resources to support new ventures.
We have organized the book around these four factors. We explain that much of the difference between those firms that succeed at building disruptive ventures and those that continue to struggle has to do with their adherence to these four factors.
Strategic Ambition
As digitally native firms like Google and Amazon surged to dominance in the 2000s, more and more older firms rang the alarm: “We need to innovate like Google, Amazon, and Apple.” These leaders wanted to execute new ideas with the same freedom and velocity as Google, bake innovation into their strategy like Amazon, and create new markets like Apple. They wanted to understand how to apply emerging technologies, and they also wanted to tap into new ways of doing business. CEOs saw small, nimble firms race to extraordinary market valuations and wanted to bring some of that dynamism into their own firms.
This awareness drove CEOs like Jensen Huang at Nvidia to make bold moves to get ahead of disruption when they saw the risk looming. Huang realized as early as 2007 that his firm's fortunes would soon wane if he did not act. Nvidia made the technology that enabled a computer to show images on the screen that they sold to PC makers like Dell or HP. Intel started to combine this with their own technology that runs the software on the computer itself. Combining the “core” and “graphics” processing in this way was eliminating large parts of Nvidia's market. Huang's 20-year-old firm had grown to $10 billion of revenue and suddenly faced an existential threat. They were caught in the gravitational pull of the Intel “black hole.”
Huang's response was to galvanize the firm around a new vision for Nvidia, one that deliberately staked out territory beyond the firm's historic core. He built new businesses in AI and autonomous driving, and by 2015 Nvidia started to report to the financial markets on the revenues of these businesses alongside that of its traditional PC business. Analysts were skeptical until 2017 when the company's performance suddenly leapt forward, showing that what Nvidia had been incubating was starting to gain traction. Now, Nvidia has seen its share price increase 3500% in five years. Nvidia was able to reinvent itself ahead of a crisis and put itself at the core of the digital revolution.
Others have demonstrated a similar level of commitment to getting ahead of disruption. Ajay Banga at Mastercard committed his firm to “waging a war on cash,” by offering a wider array of digital-cash-processing options. Vince Roche at Analog Devices has committed his company to growth beyond the core, creating both an innovation lab – the Analog Garage – and business units dedicated to new growth areas, such as digital health. Hubert Joly launched a reinvention at retailer Best Buy, creating new elderly care services that leveraged the firm's expertise in home electronics. German Automobile manufacturer Audi launched innovation units separate from the core organization, charged with exploring business models of the future.
The technology firm Bosch has gone a step further creating an accelerator program for rigorously testing a range of disruptive new business models beyond the core business. Japanese firms are strongly focused on getting ahead of disruption. The technology giant NEC Corporation created a Business Innovation Unit specifically for the job of finding new sources of growth in emerging areas of business. Another Japanese firm, AGC, has diversified by creating new businesses with its marketing-incubation-transfer approach. We will illustrate lessons from each of these companies, and others such as the global consulting giant Deloitte, information firm LexisNexis, and the European insurance company, UNIQA.
In addition to these successes, there are also notable failures. Jeff Immelt failed to convert the industrial conglomerate GE into a software firm. Mercedes spun out its 1886 innovation lab, implying that it could not solve the problem of integrating new business models into a legacy firm. Even Google, the one-time poster child for corporate innovation, has had to accept that it has not fully cracked the code for creating businesses outside its core markets. The mothballing of its Stadia gaming platform in 2021 is a recent example.
Despite these failures the momentum is unstoppable. There are enough corporations that now see disruption as an opportunity, not something you guard against for fear of losing to upstart competitors. These companies are willing to experiment with business models that challenge the core purpose or identity of the firm, knowing that unless they do, they may become disruption's victim, not victor.
In Chapter 2, we introduce the Corporate Explorer – that is, managers who are in the vanguard of this new approach to corporate innovation. We tell the story of Krisztian Kurtisz at UNIQA Hungary and his successful effort to create a disruptive new business in the insurance industry. In Chapter 3, we explain how a clear, compelling strategic ambition for innovation enables Corporate Explorers to go beyond the incremental. Although one of our core messages is that Corporate Explorers should not wait for permission to work on innovative new ventures, there is no question that a strategic ambition opens managers to new areas of potential exploration. It is more than a vision statement. It is a new belief system for the firm that makes it permissible to challenge some of the assumptions that might prove toxic to disruptive innovation.
Innovation Disciplines
This disruptive ambition led to a reinvention of corporate innovation departments. These units used to be the preserve of experts and process managers. As recently as the 1990s, experts – be they scientists, engineers, actuarial or otherwise – designed solutions to meet a customer need that they themselves defined. Ideas were managed through a “stage gate” process that, although helpful for improving core product development effectiveness, set rigid criteria for acceptance or rejection, mostly with the logic of eliminating risk from a project. The net effect was to focus on incremental advances and discourage disruptive ideas from emerging. In the past 20 years, a host of academics, venture capitalists, entrepreneurs, and consultants have greatly advanced our understanding of how to generate disruptive innovation. This global innovation industry has produced a plethora of methods and tools to guide the Corporate Explorers in their work: design thinking, lean startup, business model canvas. Corporate Explorers do not need to know them all, they just need to know how to be excellent at ideating, incubating, and scaling new ventures. Excellence in these three disciplines is a critical underpinning to success.
Ideation is about generating new, breakthrough ideas with which to build disruptive businesses that realize a firm's strategic ambitions. This is partly about generating a volume of ideas – the more ideas you have the more likely it is you will find a good one. More importantly, ideation is about learning how to work outside-in, solving problems customers care about rather than focusing on inside-out expert-led solutions alone. Amazon has its PR/FAQ (Press Release/Frequently Asked Questions) approach. Every employee can propose a new idea with a one-page press release that announces the launch and includes quotes from customers about why they find it valuable. Methodologies like design thinking have taught managers how to use deep levels of empathy with customers to stimulate creativity.2 Corporations also let the outside in by collaborating directly with entrepreneurs via outposts in startup hubs like Silicon Valley, Berlin, and Haifa. Ideas alone are not enough. They need to be ideas that match the firm's strategic ambition. They also need validation.
Incubation is the discipline of converting a great concept into a validated business proposition. Or, if the evidence dictates, canceling or pivoting the project. In the past, the better an idea seemed to the CEO, the more pressure a Corporate Explorer may have felt to accelerate it. For example, in the 1990s, the legendary CEO of Intel, Andy Grove, became convinced that Intel's technology for videoconferencing (ProShare) would be a huge market winner. After five years of effort and $750 million in investment, the project failed. Grove said, “We assumed that just because it could be done technically there would be high demand … it's just that we were wrong.” Incubation replaces, or at least supplements, instinct with evidence that an idea is worth continued investment.3
Incubation starts with a set of hypotheses about the customer, the market, and the need the solution will meet. Innovators test these assumptions with low-cost experiments and iterate the proposal based on what they learn. IBM's highly successful Emerging Business Opportunity program used a six-question “business design” (for example, what is the customer problem we are solving?). At Amazon, employees whose ideas get approval at the PR/FAQ stage can form “two-pizza teams” (i.e., teams small enough to be fed with two pizzas) to validate the idea. In both cases the idea is to work backward from the business you aim to create, rather than forward from the product or technology you want to sell.
This orients a Corporate Explorer to a customer (do they want it) and the commercial proposition (will they pay). However, it is only useful if you do in-depth validation by running business experiments. Experiments analyze customer responses to low-fidelity, minimally viable versions of the solution, so that innovators can then build based on what they learn. This lean startup methodology was originally designed to help entrepreneurs.4 However, large firms from around the world, have enthusiastically embraced it. GE, P&G, Intuit, and the National Security Agency are all adopters of the approach. At the end of a rigorous set of business experiments what emerges is a business proposal validated with real customer data and insight. It does not guarantee the success of the business, but it does improve the odds of success, and reduces the risk of costly failures like Intel's ProShare.
Scaling is the third discipline that converts a validated business model into a sustainable, revenue generating business. This means assembling the assets needed to build the business around the incubated concept. New ventures need access to customers (brand, customer relationships, sales force, route to market, distributors, etc.), capabilities (technology, product, service, operations, etc.), and capacity (manufacturing, global footprint, etc.). New ventures need autonomy from the core business as a quasi-independent unit. This helps them to stay focused on scaling the opportunity, rather than making it conform to corporate practices designed for a more mature firm. However, they also need access to core business assets, so that they can leverage the advantage of being part of a larger corporation.
Arguably, scaling is the most important of the three disciplines of disruptive innovation; unless you scale the incubated idea, there is no market impact and revenue. Even so, there is still value from innovation. Firms learn about new technologies and capabilities, they attract talent that might otherwise have gone to startups or competitors, and it creates a buzz with customers. However, this book is about leading disruptive new businesses and that means taking them to scale. Paradoxically, despite being the most important discipline, it receives the least attention. There are only a handful of books on the topic, very few consulting firms focused on it, and no public training programs, as there are for design thinking, lean startup, and others. For example, GE is said to have trained more than 60,000 of its employees in the lean startup method. However, that focus on ideation and incubation comes at a cost. It encourages a lot of ideas, few of which will receive funding to go to scale.
The disciplines of the global innovation industry have transformed corporate practices for ideation and incubation. However, emulating the practices of entrepreneurs and participating in startup ecosystems alone are not a recipe for success. Too many corporate ventures are started but then undermined by the parent company whose short-term needs override such activities.
Across three chapters, we describe how they build new ventures using the three innovation disciplines. Chapter 4 on ideation looks at the specifics of generating ideas to solve customer problems. Corporate Explorers often start with an idea. The key to success is making sure that that this idea is one that matters to your intended user and buyer. Chapter 5 focuses on incubation and describes how to move from having an idea to a validated commercial proposition. Firms do this by applying the scientific method: run experiments to test our assumptions and find out if we can solve a customer problem in a way that they value, that they are willing to pay for, and we can deliver. This evidence-based approach runs counter to many corporate cultures, although it is essential if we are to overcome corporate risk aversion. Chapter 6 takes us to the heart of the challenge: scaling a new business. Corporate Explorers need to gain access to their firm's customers, capabilities, and capacity needed to scale. We describe how they do this by combining assets from the core with ones they build into the new venture and add from acquisitions and/or strategic partnerships. We introduce scaling paths as a tool to help Corporate Explorers map out potential scenarios for achieving their goals.
Ambidextrous Organization
One of the great myths of business is that corporations become victims of disruption because of innovations they do not see coming. The reality is that disrupted firms like Polaroid and Nokia both saw the disruption coming and had the technology assets to compete. Polaroid had the world's first commercially available megapixel digital camera in the 1990s and Nokia had all the assets to win in the smartphone era. They all saw disruption coming, but the core business was too focused on delivering immediate results to also build a new business. That's because the core business has its own operating rhythm designed to optimize results, incrementally improve to defeat competitors, and maximize profitability.
In contrast, an explore business unit has a different rhythm. It lives with high uncertainty, testing and learning its way toward a successful model. These are two equally valid, but contrasting logics – one operating in known, if complicated, environments, the other in highly complex uncertain ones. Sparks fly when you cross these two logics; one logic typically rejects the other. Core businesses drive short-term results to meet performance expectations. If this same logic is applied in an explore business, it forces the new venture to stop learning and start executing. Corporate leaders are forced to find the safest route to commercialization, often missing the disruptive opportunity. The new venture underperforms, reinforcing the core business’ assumptions about the riskiness of these ventures.
One solution to the challenge of managing businesses at different points of maturity is an ambidextrous organization. This approach enables a company to have a portfolio of businesses at different stages of maturity, some experimental, others mature profit engines. The key is to separate explore ventures from the core business, so enabling both units to execute strategies appropriate to their maturity. They share a common strategic aspiration but operate to their own rhythm. Explore has autonomy to operate, with a special status reporting to the CEO or other senior executive, operating outside the core business system. In 2000, IBM created its Emerging Business Opportunity Program based on this approach. In 2006, the IBM strategy team reported to its board that the business created under this program contributed over $15 billion in revenue, 24% of the IBM total. The return on investment was double that of IBM's acquisitions portfolio in the same period. The secret to success was putting the EBOs outside the company's management system. This gave them the autonomy they needed to grow without sacrificing their access to IBM's assets.5
