All posts in “Disruption”

The Five Simple Secrets For Big Company Innovation… Beware: Hungry StartUps Already Know About These. Are They Your Real Competition?

If your company is a Fortune 1,000 or even a wannabe Fortune 1,000 then you probably know the best way to grow your top line revenues is with real product/service innovation. Something completely new addressing customer pain points that can be sold through your current distribution channels.

In fast moving markets this innovation may mean the survival of the company.  Ask anyone from Xerox, Blockbuster Video, Toys-R-Us, Borders Books, Tower Records, or Kodak. All former business titans that are gone now because they could not innovate.

Maybe they just did not know the five simple secrets to big company innovation…

New product/service innovation is great since it leverages the whole big company set of processes and procedures and pumps more revenue into the formula. Lot’s more if it is done right.

Hunger for innovation is also what drives many, if not all, large acquisitions. Think about how Coke has been on a buying spree since 1960 when it acquired Minute Made Juices.  Leveraging the same delivery system just more product going through the pipeline. Pepsi has been a hungry acquirer also. Who do you think owns the Naked Juice company?

Acquisitions are always expensive and many fizzle out after a few years so even though these type of acquisitions can appear riskless they are full of risks that may not be apparent during a frenzied bidding war and short due diligence period.

So why don’t big companies dedicate more time, money and talent to building new products and services on their own instead of paying billions for someone else’s used products/services?

Maybe because it’s really hard and risky to innovate. Let me illustrate this with a real- life business horror story…

There was a huge multinational telecom company that was feeling the pain of competition, changing markets, evolving customer needs, and worst of all… margin pressures.

So they decided they needed some type of innovation program. Can you just order up innovation like a Domino’s Pizza? Hot and fresh in less than thirty minutes.

This telecom was one of the big guys. Making billions of dollars for now. So they found someone from silicon valley complete with a hipster haircut, torn jeans, athletic shoes, and a hoodie.

He would be the answer to their innovation problem, right?

They setup this Silicon Valley Savior in one of their sleek office buildings with a new hip loft-like design and reached out to their hundreds of thousands of employees to entice them to join this innovation initiative for three months. They received hundreds of applications and accepted fifty people into the program.

Well… The three months went by, there was an exciting PowerPoint filled demo day for top management then all the teams went back to their former jobs. No innovation happened. Nothing resulted. It was a waste of time, talent, and money. I’m not dsure what happened to Mr. Hipster Haircut.

What could have possibly went wrong?

Maybe it takes more than good intentions and a Silicon Valley Savior to make innovation happen and really stick.  From what I could see this smart multinational telecom behemoth missed these five essential secrets to innovation:

1. Separate your innovators from the company – Yes your innovation teams need to interact with potential suppliers, partners, and current managers in the company. But true out-of-the-box creativity and innovation will be stifled if every day your teams walk into a building that has a sign out front saying: “BIG MULTINATIONAL COMPANY”.

People need to feel truly independent to do their best work. They need to feel they are outside the shadow of big brother. This is how Steve Jobs worked with his team to create the first MacIntosh computer. Hidden away miles from Apple corporate headquarters.

Since this innovation process will be very intense and time consuming consider sending the teams as far away as possible.

Think about this… If you were sitting in your office one day and your boss gave you two sticks and asked, “can you make a fire with these.” What would you say?  But if you were in the middle of the woods and a cold breeze was starting to blow and someone gave you two sticks the urgency would be totally different. You would figure out how to make fire with some real conviction.

Find a place away form the main office but where the teams can still interreact, when needed, with key stakeholders and target users. Then put a big sign out front that says something like, “INNOVATION STATION – Only Innovators allowed”. People will feel totally different every day.

2. Follow the Design Thinking process – Maybe some innovation happens by mistake. Think about the penicillin story. But luck is not a solid strategy to use when it comes to new product/service development.

By using a Design Thinking approach your probability of success will vastly increase. You will most likely create an innovative product/service that will serve a real user need. There are many books and other resources on Design Thinking but basically it boils down to four things:

(1) Listen to your customers/stake holders.

(2) Brainstorm ways to relieve their Pain Points or address their Passion Points.

(3) Identify the key assumption for your product/service to work then test those key assumption. Be ready to try a lot of things.

(4) Quickly/cheaply prototype ideas and test them on your target users.

3. Bring in a catalyst – This seems to be a key missing piece in unsuccessful innovation projects. They go through the Design Thinking process or something similar and the outputs (prototypes) just don’t wow the target users.

The problem is that everyone on the team is afraid to ask the hard questions. They have too much at stake to threaten the status quo and possibly ruin the fun of creation.

Enter the catalyst… This person is ready to upset the apple cart by asking the hard questions. Better known as “the questions that will not be asked.” It is the set of really scary questions that can instantly sink a project and send the team back to the drawing board. Team members usually dance around questions like… “Why does anybody care about this product/service?”, “How will we get people to use our product/service instead of what they are using now?”, or “Why yellow?”.

An innovation initiative without the occasional visit and input from a catalyst is destined to create a product/service that will look great inside the bubble created by the team but pop when it tries to scale up and actually work in the marketplace.

4. Include mentors from inside and outside the company – No innovation team can possibly have the depth and breath of skills, talents, and abilities to create effective innovations. There will always be blind-spots or gaps in expertise or experience. A panel of mentors needs to be recruited to help the team for a few hours a week.

For example… If the team does not have experience in physical product design, find an expert and bring them in for consultation.  If no one on the team can create a budget then bring someone in to assist.

The Mentor should not do the work. That actually needs to be produced by the team. But the mentor can guide the team to a better solution faster and keep them from making mistakes.

5. Top Management Buy-in – This one should probably be number one on this list. Innovation is not a diversion for a company. It is the life-blood and only way for long term survival. If top management is not totally committed to the innovation initiative just cancel the program.

Once the big demo day comes it is too late. A committed top manager just can’t appear for the final dog and pony show and expect to make people feel like this is important to the company.

How many ways can Top Managers really show they are committed to an innovation initiative? Weekly visits, a significant innovation budget, putting other top people on innovation teams as participants or mentors. And, these are just the tip of the iceberg.

Innovation is never simple. There is no clear formula to create the next big thing that could power significant top line revenues. But any company that follows these five items will significant lower the risk of wasting time, talent, and resources on pointless innovation strategies.

Any big company CEO that is too complacent with current innovation initiatives should think about Blockbuster video. They had the market. They had millions of members. Then they let Netflix use the US Postal system to take their market away. Netflix simply relieved Blockbuster Customer pain points. Either you innovate or someone else will. Then you are gone.

Small, lean, flexible, and productive startup teams know and use these five secrets. At least the survivors do.

What Will Really Disrupt The Disruptors?

The world is changing fast… The Tech World even faster.

And every day it seems like a new technology incubator/accelerator pops up.  Universities, venture capital firms, big companies, and governments are jumping on the Incubator/Accelerator bandwagon like never before…

Everyone involved with these business startup factories hope the next crop of disruptors is just a few weeks away.  But they just might be wrong. Very wrong.

Why?

People who have been around for a while probably know that when everyone seems to be jumping on the bandwagon it usually means a bubble is forming. And there are a few other signs that flash warnings  about the strong possibility we may be seeing the peak of this startup accelerator trend.  Going forward in this article I will use the term accelerator to refer to Incubator/Accelerators.

First of all, lets nail down the basic accelerator’s goals…

Accelerator operators like TechStars, Y-Combinator, Capital Innovators, and countless others want to attract and nurture great teams who can work with a target customer group to build products/services that will disrupt some business sector and build a billion-dollar business. And… Preferably they should do this overnight. Ten weeks at most.

Think Uber, ETrade, Travelocity, AirBNB, Amazon, Google, and other startups that have caused great upheaval in some marketplaces. Who uses a travel agent, full service stock broker, the Yellow Pages, or a Sears store anymore?

But now with most major markets disrupted there are only two places where the next batch of startups can really thrive and deliver exponential growth with their innovations. (1) Smaller, more narrow niche, markets where it will be difficult to build a big enough business to attract the large sums of capital needed, and/or (2) Disrupt the disruptors.

Smaller niches are always a crap shoot while disrupting the disruptors is an interesting proposition…

Don’t think it is not going to happen. As we have seen many times, market leaders can only retain their dominance until the next big thing comes along. In a world where all it takes is one click to try something new the current market leaders could be living on borrowed time.

What new unexpected company will take Amazon’s ecommerce market away? What upstart financial innovator will out maneuver Etrade? What company that just locked in a pocket full of Seed money and a spot in a hot accelerator will take travel to the next level?

Well… It may not be one of the well-known brand-name accelerators who will shepherds along the next billion-dollar unicorn destined to disrupt a disruptor. The process, procedures, contact networks, and mentors these established accelerators used in the past were great at producing last decade’ s disruptors…   But they might not work going forward.  Whole new processes, procedures, contact networks, and mentors will need to be built from scratch…

Why is this true?

How about some real-world evidence?

The number of true accelerator graduates (companies that have achieved traction and grown exponentially) has collapsed. I will use two data points to illustrate this:

  1. TechStars, the largest accelerator, is now expanding on the backs of corporations and governments looking for innovation. New TechStars accelerators are being funded by the likes of Target, Disney, Sprint, and more… Why would TechStars give high-growth company equity away (or waste valuable resources) to these corporations and governments? Easy answer… Because the companies in these new accelerators will probably not be true Unicorn disruptors. In fact, they may collapse as soon as their corporate or government benefactors stop funding losses.
  2. Investors are having a hard time finding startups with promise. These recent articles document this enlightening trend… “Once-Flush Startups Struggle to Stay Alive as Investors Get Pickier” and “Startup Investors Hit the Brakes” and “Seed funding slows in Silicon Valley .

Smart investors will usually wait on the sidelines while others take the substantial and painful risks to identify and exploit the next big trend. Why take more than an acceptable risk their money? They let someone else take the big risks and shoulder the losers. Smart investors will be there to cherry-pick the most promising new companies.

Where will the next batch of unicorn level disruptors come from?

There may be a few that just pop out of some garage, basement or big city co-working space but look for them to appear out of accelerators with a different nurturing and growth model…

Like what?

Not just churning through startup teams… These new accelerators with have a different playbook all together. The only way to produce tomorrow’s disruptors is to disrupt the entire concept of startup accelerators.

How? More on this in my next article…