Monday, October 10, 2011

Entrepreneurism & The Corporate Perspective (Pt. 2)

Myth #3 – Entrepreneurs Who Are Also Great Leaders Never Fail
Many organizations hold romantic views of entrepreneurial heroes. Even those organizations that are unmoved by exaggerated tales of inspired underdogs overcoming long odds, can be tempted to embrace stories about how great leaders are able to always implement great ideas.

This is simply not true. While not dismissing the importance of choosing the right innovation leader, choosing a talented leader is never enough. This is because innovation and ongoing operations are always and inevitably in conflict. What do I mean? The greatest strength of a successful organization is repeatability and predictability. By definition, innovation is neither repeatable nor predictable. It is exactly the opposite. It is non-routine and uncertain. Thus, the inherent conflicts between innovation and ongoing operations are simply too fundamental and too powerful for one person to tackle alone. Entrepreneurs who are also great leaders need the support of the organization and assistance from its resources to have any chance of being successful.

Jeffrey Hazlett told a group of CIO’s the story of a great marketing campaign that was intended to revolutionize Kodak. Having seen its consumer film business decrease from $18 billion to less than $1 billion in three years (the digital camera revolution), Kodak decided to take on HP laser jet printers. Their value proposition was to offer a printer at a fair price and charge 50% less for ink than HP. (Did you know that if you had to buy HP ink to fill up your car that it would cost you over $450,000!) To launch this new printer they decided to run an advertisement before a set of first run movies and have the movie-goers send a text to Kodak with their address/contact information.

The advertisement was a piece of genius. It begins with Vinnie Pastore from the Sopranos (aka “The Big Pussy”) opening up a trunk. He immediately begins telling the occupant of the trunk how disappointed he is in them, how they have been unreliable, and how they have been wasteful. The camera changes to allow you to view who he has been talking to – an HP printer. The next scene shows the HP printer in the middle of a road next to the car and not very far from the East River. Standing above the HP printer is Vinnie Pastore with a baseball bat. After delivering a final “Godfather-like” verdict, Vinnie beats the printer into oblivion. The advertisement ends with Vinnie back in the driver’s seat with his arm around a Kodak printer in the passenger seat proclaiming to the printer – “Welcome to the family.”

Hazlett, the CMO of Kodak at the time knew that the advertisement had graded out “off the charts” in preview tests. That first evening of the campaign, he went from movie theater to movie theater watching the audience roll in the aisles in laughter. In the morning he could barely wait to find out how many texts Kodak had received. They had spent millions on this advertising launch.

When he got to the office, his team met him in a conference room. They pushed a report showing the results of the program across the table. The number “2” was on the bottom of the report. He said: “2 million!” They shook their head. He said: “200,000?” They shook their head. Kodak had received only 2 texts!

Hazlett immediately summoned his entire marketing department into a conference room and proceeded to ask a series of questions. “What did we do wrong? How did this happen? What could possibly have been the reason for such a monumental failure?” After telling everyone that they could not leave the room until they found out the answer to this problem, one person sheepishly raised their hand. Hazlett asked him to speak up. He said: “What is everyone asked to do before the movie trailers start?” That’s right! They turn off their phones. The moral of this story is that even great innovation leaders – Hazlett is legendary in how he almost single-handedly enabled Kodak to reinvent itself – can and do fail.

Myth #4 – Effective Entrepreneurs Must Be Rule Breakers
Entrepreneurs are often called risk takers, mavericks, and rebels. The fact that innovation and ongoing operations are inevitably in conflict makes it easy to create a mythical drama. What will our hero do? What obstacles will our hero have to overcome? Who in the big, bad organization is our hero’s arch villain?

This romantic story usually results in our hero overcoming the stubborn forces arrayed against innovation by “breaking the rules.” It is important that you don’t want to let this notion take hold in your organization. This is because:
o Innovation leadership is not best thought of as civil disobedience. The odds are stacked against rebels and mavericks. Moreover, an organization full of rebels and mavericks fighting the system is not an innovation powerhouse -- it is an undisciplined and chaotic mess.
o Innovators need the organization. Innovation may very well signify the future. But the successful organization is the proven foundation, and if it crumbles, there is no future.
o Conflict is not due to the organization being evil, rather, it derives from the endeavors of good people doing good work. It arises from efforts to achieve the most basic goals of every business – producing, delivering, selling, marketing, servicing, and more with speed and efficiency.

The bottom line: innovators must do no harm to the organization’s existing capabilities.

Myth #5 – Everyone Can be an Entrepreneur
Most employees desire to be empowered. They liked to be viewed as being “special.” They believe that they have something unique to offer. They believe that they can innovate. But this mindset overlooks a harsh corporate reality – resources are scarce, and the bulk of resources in any established organization must be dedicated not to innovation but to ongoing operations. As such, resources for innovation must be allocated carefully.

A “turn the masses loose” approach ensures that resources are thinly and indiscriminately spread. Spreading resources in this fashion will result in three specific disappointments. First it will produce a disjointed overall effort. Second, it will favor very small initiatives. Individuals pursuing their own inspirations with their limited free time can only execute tiny experiments. Third, it will overemphasize the front end of the innovation process. It will overlook the back end – execution.

Ideation is everyone’s job. Employees should strive to make small improvements in their direct sphere of responsibility. Just be realistic enough to recognize that companies must concentrate their scarce resources for innovation to a subset of employees working on a handful of ideas. You can’t ask the whole organization that is in charge of today to also be in charge of tomorrow. This is because the urgent always squeezes out the important.

As an example of how one corporation addressed this problem, consider USAA. USAA opened an Innovation Center. This center takes up nearly 11,000 square feet in the corporate office. At any point in time, nearly 80 full-time employees are assigned to this Center. While there, they are relieved of their day-to-day responsibilities and are dedicated to working on “innovation.” The Center has numerous rooms with multiple white boards, markers, stickers, and computers so that ideas can be captured. The Center has space for building prototypes – physical and virtual. The Center has its own kitchen so that people can eat at any time of the day. Space is even set aside for people to play games and take a break from idea creation.

The first Innovation Center was so successful – hundreds of new ideas have led to tens of millions of dollars in new revenue and bottom line earnings – they are in the process of opening four more Innovation Centers across the world. (Demo the on-line check deposit capability introduced by the USAA Innovation Center.)

Myth #6 –Innovation Requires Wholesale Organizational Change
Most liken innovation projects to “running face first into a concrete wall.” That is because most organizations are poorly designed for innovation. Proven organizations are designed for ongoing operations, not for innovation.

This leads some to believe that an organization must be broken down and built back up in order to innovate. The problem with this approach is that it may be successful! It may make an organization much better at innovation but lousy at ongoing operations.

Innovation does not always require extensive change -- it requires targeted change. Support functions must be willing to make exceptions to standard policies for the Innovation Team. For example: HR must allow for a different bonus/commission plan for the Innovation Team. IT must be willing to support an effort that consumes disproportionate amounts of resources. Finance must be willing to use different ROI metrics than are normally used for projects/initiatives.

Just remember -- Your first obligation is to do no harm to the existing organization. Innovation may divert resources from ongoing operations, it may even cannibalize the existing business over the long run, but it may not dismantle or damage the on-going organization. (Comment on “How Stella Saved the Farm.”)

Myth #7 – Innovation Can’t Be Measured
How should innovation initiatives be managed? Some innovation leaders have a quick and ready answer: “Don’t even try. Innovation is unpredictable. It cannot possibly be managed.” While there are different rules for innovation, the innovation team must still be measured. Different does not mean undisciplined. While it is true that innovation initiatives are unpredictable, this does not make them unmanageable. The innovation team must be just as disciplined as the on-going organization. Companies must adopt a distinct but disciplined approach to innovation.

What does a distinct but disciplined approach to innovation look like? First, one must formalize the experiment. The organization should write a custom plan for each initiative, with custom metrics and cost categories. Second, be prepared to evaluate innovation leaders subjectively. While this cannot be done for the larger organization due to the risk of “favoritism” or “discrimination”, it does make sense for innovation projects. Just know that it will require closer than normal observations. Third, be willing to apply unique metrics. Never assume that metrics and standards used to evaluate the existing business have relevance for the innovation initiative.

Conclusion
This concludes our survey of the seven myths surrounding “innovation and the corporate environment.” I hope that you will have learned that the limits to innovation have nothing to do with creativity, nothing to do with technology, and nothing to do with the size of the organization. They have everything to do with management capability. Thus as entrepreneurs in a college setting, do everything you can to learn management skills that will make innovation possible in whatever type and/or size of organization you choose to go to work in.