Rewarding Innovation heroes. Launching accelerators with great fanfare, then not following through. Making big claims about organizational transformation that never amount to anything. It’s all innovation theater and it won’t drive long-term benefits for organizations. A better approach is to make innovation a proficiency, using the principles of discovery driven growth.
We can do better at innovation than Orphans and “Hail Mary” passes
Last week, we wrote about the episodic way in which innovation is managed in most organizations. Or not managed. In fact, it’s innovation theater. Based on Stanford’s Robert Burgelman’s research, we described ways in which innovations can end up being treated like orphans, being the subject of an all-hands drive, being irrelevant or being the subject of a rushed and desperate effort to make something new happen, often in response to some kind of burning platform memo.
As veteran entrepreneur Steve Blank has said forever, when you get to the stage where innovation is seen as a heroic act, that is a clear sign that you have no control over your innovation process. Innovators should not be singled out for their battles royal against the corporation. The financial function of a firm should not be able to dismiss efforts at anything that can’t produce a predictable net present value calculation. Budgets should not be so inflexible that finding resources for a small experiment is continually blocked, as our good friend Bjarte Bogsnes points out.
All this against an environment in which it is clear that innovation is at the heart of returns and growth, and is even publicly acknowledged as essential. For instance, the Drucker Institute’s list of the 250 best-managed companies put innovation at the core of performance. Even further, as Alexander Osterwalder and others have observed, we know a lot about how to create an innovation proficiency that doesn’t require some kind of corporate mountain-climbing.
And yet, here we are again
The boom of the past few years has had predictable consequences. VC’s flooded new ventures with cash. Firms like Facebook and Google were seemingly printing money out of thin air. Even in the face of the pandemic, many companies were thriving. So what happened? An enormous amount of innovation theater. Totally predictable.
Consider the metaverse. The shiny object of just a couple of years ago, metaverse projects were sponsored at Microsoft, Disney and of course famously at Facebook which rebranded the whole company “Meta” to signal commitment to this hot new space. Fast forward to 2023 and all those hugely important and heavily funded metaverse projects? As a recent Wall Street Journal article wise-cracked, we’re looking at the “Meh-taverse” now, and many of those projects are being shut down or radically shrunk.
Or what about the decade plus that every company in the information or automotive business has spent dinking around with autonomous cars? As I’ve written about elsewhere, the whole autonomous space was filled with projects highly likely to end up in my flops file. In fact, just recently, Wired published a pretty scathing analysis of how autonomous cars are interfering with public transportation and generally making a nuisance of themselves. My personal opinion is that if we want to encourage driverless cars (which I suggest we don’t) that we create human-free spaces in which they can operate. Think about it – good public transportation can get you where you want to go without driving, with less of an environmental impact and without odd human/driverless interactions now turning up ever more frequently.
The pattern that repeats on auto-pilot
I’ve been studying corporate innovation efforts that go wrong for years. And the pattern is very common – it’s trying to force-fit new things into the model that works well for things that are predictable. So a company has a great idea (or what it thinks is a great idea). It immediately puts a big team on it, fully funds it, creates an 18 month launch plan and perhaps issues a big splashy announcement, before you’ve done any of the thinking that’s need to reduce uncertainties (a point also made by our friends Bent Flyvbjerg and Dan Gardner).
What do you get then? Untested assumptions, taken as facts. Few validated demonstrations of market desire for the things. Completely nonsensical commercial plans. Fear of the competition dominating decision-making. And I could go on. It’s perhaps not surprising that so many would-be whiz-bang innovations end up getting shut down when anyone looks under their proverbial hood.
And sooooooo….what should we anticipate?
Bye bye love, corporate venturing version
You know all those layoffs, downsizings and other ailments we’ve been reading about with respect to tech? Guess what projects those people were most likely working on? Yup. Read between the tea leaves.
Disney is cutting 7,000 jobs in the interest of “streamlining” its operations. When they say they are streamlining, what that usually means is getting rid of all those distracting, non-core operations, like, for example, the metaverse project.
A huge number of other tech (and some non-tech) firms are laying off people. The buzz words are all around us. Mark Zuckerberg declared 2023 “the year of efficiency.” That’s code for “we’re going to stop doing all this crazy, unpredictable innovation stuff and hunker down to defending our core business.” Like many other organizations, they are “focused on becoming a stronger and more nimble organization” – same implication.
We’ll see talk of getting rid of non-core activities, flattening hierarchies, eliminating jobs that are essentially corporate, and “right-sizing” organizations for the opportunities to come. While some of that may well make a lot of sense, and many companies hired like crazy throughout the pandemic, my money is on the corporate venturing cycle taking another turn.
The discovery driven growth method, brought to you by Valize
Here are some things we know. Depending on fast-following or big acquisitions is highly risky. As the pace of competition increases, by the time you have followed, an innovator is likely to have already moved on. Further, if you haven’t built internal growth capability, your ability to fast follow is likely to have atrophied.
The track record of big acquisitions is terrible. Depending on which study you read, the failure rate is somewhere between 70% and 95%.
You can’t rely on just buying innovations through acquiring startups, either. There is no guarantee that the same organizational antibodies that chewed up your internal innovations won’t do the same to one that came in from the outside. And the government is starting to look askance at acquisitions intended simply to nullify the competition.
Our conclusion is that some kind of venturing activity is essential to long-term organizational well-being. That in turn means it must be integrated into your strategic management process. That has implications for your choice of strategies, how you budget, what program and project governance process you put in place, how you reward people, the time horizon over which you plan and how you manage uncertain projects.
As Burgelman and Vilikangas observe, “venturing involves a distinct strategic leadership discipline – a discovery process based on experimentation and selection that informs executives about emerging opportunities and facilitates nuanced adjustments to the company’s strategic direction.”
As they also point out, “the strategic leadership skills that are required to successfully explore and develop ill-defined and uncertain new venture opportunities are different from those required to exploit well-defined and incremental core-business opportunities.”
Valize was founded to help you unlock the capabilities you need to make innovation and the transformation it implies. We provide training, guidance and 1:1 consultations, as well as software to make the whole process transparent and manageable.
It is the discovery driven growth system and it gets you out of the trap of episodic innovation cycles. Reach out to us here to learn more.