One of our team members, Aidan McCullen, had the pleasure of interviewing the author of “Pirates In The Navy: How Innovators Lead Transformation”. Another book about intrapreneurship.
Innovation is hard
Innovation is a problem. In an innovation benchmark report published in 2017 by PricewaterhouseCoopers, they found that 54 per cent of the leaders they surveyed struggled to bridge the gap between innovation strategy and business strategy. They also found that 65 per cent of companies that invest over 15 per cent of their revenue in innovation indicated that aligning business strategy with innovation was their top management challenge.
Intrapreneurship is easier
There is a discernible shift in leadership attitudes towards intrapreneurship taking place in most organisations. Increasingly innovation and intrapreneurship are seen as extensions of each other. However, it also a myth that innovation is sexy. In many companies, it is career suicide.Still, large corporations have entrepreneurial employees who are constantly trying to innovate. As far as the author is concerned, these people are crazy. They wake up every morning and go to work to swim against the tide. Only a few leaders are happy with these crazy innovators. We can all agree that innovation has to become a part of the institutional structures and processes inside large organisations. Intrapreneurship is a very effective way of doing that.
Pirates In The Navy: How Innovators Lead Transformation
The book may be about pirates, but not all pirates are the same. Terms like pirate, privateer and buccaneer are often used interchangeably. While all three words describe pirates, they do not mean the same thing. In contrast, a privateer was a pirate who had been granted a licence by a government to attack and steal from ships belonging to an enemy government. This is where the difference lies for pirates in the navy. If you are just a pirate, then the leaders inside your company do not really care about what you are working on. If your idea is discovered, it will be made to walk the plank. But if you are a privateer or an explorer, the leaders in your company have a vested interest in your success.
The innovation myths
How to get the commission to be a privateer or explorer is what this book is about. It starts with busting a few myths:
- The buzz of innovation is everywhere. No, it is not. In fact, innovation clashes with the need to be as efficient as possible.
- Adopt the lean startup method, and you can always pivot your way to success: The risk is that we will pivot – or make changes to our business idea – into perpetuity.
- Let a thousand flowers bloom: This myth is based on the notion that there is no such thing as a bad idea.
- Big returns require big bets: This myth comes from the idea that innovation is all about investing heavily in technology and research and development (R&D).
- Innovation is sexy: Actually, innovation is brutally hard work that often leads to failure.
- Corporate ventures have more resources: In today’s environment, startups are actually much better funded than corporate ventures.
- Money doesn’t drive innovators: The myth here is that innovators just need a cool place to work and an amazing mission.
- It’s all about great ideas: Companies are constantly searching for more ideas using tools like idea jams, collaborative brainstorming and competitions.
- Innovation is about technology and R&D: While exploring new technologies can be exciting, innovation is much broader.
- You can’t learn innovation: This is a myth propagated by the press who put successful entrepreneurs on the covers of magazines without highlighting their learning journey and the long trail of failures that usually preceded their success.
- There is often an assumption that startups are great at innovation and using lean startup methods. In my experience, this is a myth. Most startup teams that I have met have no interest in lean methods or running experiments. They just want to build their product. You often have to drag them kicking and screaming out of the building to go and talk to their customers.
There is a lot of cynicism around innovation. It often does not work. They only become innovation theatre when they are used without a good understanding of the underlying principles that inform their design. Corporate leaders have been spending money funding innovation theatre. A few beanbags, a table tennis table, Steve Jobs quotes and poster, and an entrepreneur in residence don’t cut it. That is PR or marketing. Nothing to do with innovation. It starts at the top with clear strategic intent, focus, methodology and money.
The real question
In the end, executives always ask the bottom-line question: How much are we spending on this accelerator, and how much return has it produced? The goal is to find profitable business models.Before a lab or an accelerator is set up, clear strategic objectives around innovation must be formulated at the company level. The goal of innovation is to ultimately impact the bottom line net profits of the company and help sustain it in the long term.
It is not culture change
Intrapreneurship is not culture change. It has a cultural impact, but it should not be confused with a change management program. Intrapreneurship and innovation are also not creativity. Creativity is a tool to develop sustainably profitable business models.
It is complex
We are dealing with complex organisations. There is always a tension between exploration and exploitation, and this creates a paradox that we need to understand in order to make the right choices. Read “Zone to win”.
You are not a start up
Quickly dispense with the notion that you can turn a large established company into a startup. A large company is not a startup, nor should it strive to be. Searching while executing: It is worth repeating Steve Blank’s description of startups as temporary organisations whose goal is to search for profitable business models, as opposed to established companies that mostly execute known business models. In most companies, that means centralised strategy, centralised decision making, linear, a lack of transparency, focus on control, distrust and traditional accounting methods. All the things that will make innovation very hard. And an outdated model (read “Humanocracy”). The challenge most companies face is also that there are very few breakthrough innovations that fit their current structures. Organisational capabilities trump human capabilities. A bad organisational system will beat a well-trained human being every time.
You are an ecosystem
In order to innovate, large companies need to stop thinking and acting as if they are single organisations with one business model. Instead, established companies should view themselves as an ecosystem of different products and business models. They also have to willingly embrace failure.
Ten things companies do that drive their innovators to leave
- Telling innovators to come up with some cool stuff
- The business case: Innovators can come up with a whole bunch of cool new stuff to work on. But they need a budget.
- Arbitrary decision-making:
- Sales own customers – so don’t talk to them.
- Your minimum viable product will hurt the brand:
- Our tech team will only get to that in six months:
- On-time, on budget
- Unexpected budget cuts: The company is not going to meet its projected sales this coming quarter.
- You failed, you are fired: Fail fast is a great mantra to speak out loud, but it is much harder in practice.
- I hope you enjoyed the workshop, now get back to work
Growth versus transformation
Are we focusing on creating new products to drive growth, or are we trying to change how our company manages innovation? Growth versus transformation – that is the choice to make. The focus should be building an innovation engine, a set of processes and tools enabling a repeatable process for taking creative ideas and transforming them into profitable business models.
You are not Elon Musk
Innovators have to embrace the reality that nobody owes them their faith or attention. If you were Elon Musk, you would be running SpaceX. Instead, you are likely working in a large company, getting a monthly salary. Enough of the egotistical nonsense.
The author has heard middle managers being referred to as permafrost: the place where all good ideas go to die. Clayton Christensen points out that top executives may think that they determine what happens in their companies. But the truth is that their companies are really run by the middle management. Most middle managers are incentivised by their top executives to reach specific revenue and profit numbers. Their ability to deliver on these goals is the only conversation that happens when they meet. Their bonuses and promotions depend on their ability to execute and deliver on the core products, not on bringing new innovative products into the pipeline. So what is the middle manager supposed to do when an innovator comes up with a new disruptive product idea? Given how they are being managed from the top, their first question will be how much revenue this new idea will generate for the business this year. What they don’t realise is that the CEO is in the same boat as the middle managers. They are fighting the same battle with the dominant core business.
Most intrapreneurs are just waiting for the moment when they can negotiate for a physical space of their own – away from the mother ship. I have observed that some intrapreneurs spend an inordinate amount of time negotiating with leadership for such a physical space (i.e. an accelerator or innovation lab). When they get it, they work hard to make the area a great place to work: bean bags, whiteboards, table football, sticky notes and stand-up desks.
You will need to fight just as hard for nine other spaces for innovation:
- Space in strategy: This involves working with leadership to make innovation an explicit part of corporate strategy.
- Space in budget: Leaders need to protect their investments in innovation from budget cuts.
- Space in portfolio: You need to create space for new innovations within our company’s portfolio of products and services.
- Space on the organisational chart: Contemporary innovation teams use lean startup methods that involve experimentation and iterative product development.
- Space to collaborate: There should be a bridge for collaboration between innovation teams and the core business.
- Space for incentives: Human resources matter when it comes to innovation.
- Space for tools: Over the last few years, innovators have developed some wonderful tools for innovation.
- Space to fail: We cannot use rigid business planning for innovation. About 80 per cent of new product ideas will fail.
- Space to learn: Innovation requires people to learn new skills.
These are more important than a physical space. They are fundamental to our effort to create a sustainable innovation process.
Leaders are perhaps the main catalyst for any corporate innovation process. Leadership support is so fundamental to innovation. Without leadership air cover, you can only go so far. You will need to share with leaders a general roadmap for implementing your innovation process. The ultimate proof of leadership support is when things get difficult.
Ask the right questions
Innovation is often stifled by leaders who ask the wrong questions at the wrong time. The innovation process you design should guide leaders on how to set the right expectations. For each stage of the innovation process, leaders should be asking the right questions. What happens when low-ranking employees have great new product ideas that could result in revenue growth for the company. Is there a clear and repeatable process that employees can follow to explore their ideas, test key assumptions and take successful products to market? Or is innovation success more of a hit-and-miss? This is what innovation engine building is all about.
Innovation is management
Most innovators want to be Steve Jobs. The glamorous version on stage, Not many innovators want to learn how to be Steve Jobs doing the day-to-day innovation grind. It has always struck me as unreasonable that some intrapreneurs expect their progress not to be tracked and managed. It is not a form of humiliation to be held accountable. The right way to manage innovation is to use incremental investing or metered funding – where specific goals are linked to each round of investment. Read “The startup way”. https://ronimmink.com/intrapreneurship-as-a-transformation-tool/
- Don’t create an innovation silo. Get strategic alignment. Synchronising innovation processes with company strategy ensures that we have an agreed method for tracking and measuring success.
- Fools rush in. First, develop a deep understanding of our company. You have to come to grips with the context in which we will be operating.
- Strategic guidance: Leaders must provide innovation teams with an innovation strategy that makes explicit where they should focus their efforts.
- Resource allocation: Leaders need to make sure that they are allocating budget, time and resources that are protected from encroachment by the core business.
- Legitimacy and power: If innovation teams have to constantly fight for their right to exist, then innovation has little legitimacy or power within your company.
- Bridge to the core: As such, you need clear policies that help innovation teams collaborate with the core business.
- Rewards and incentives: Innovation needs to have a dedicated and different incentive system.
- Innovation Practice. Companies need to adopt the right tools for designing business models and testing assumptions. These tools need company-wide adoption rather than adoption in small pockets of the company.
- Process management: The processes for managing innovation should be optimised to systematically track and measure how well teams are reducing the level of risk in new ideas.
- Skills development: Such skills training should be provided across the whole organisation, including people in departments such as HR and finance.
- Before you start planting the flowers of great new ideas, find out whether our corporate garden is fertile with the right nutrients to nurture innovation.
- Some of the most challenging characters are former startup founders who sold their last company and are now moonlighting as corporate innovators.
- Talk to all stakeholders. Believe it or not, the CEO may be the boss, but they don’t run the company.
- Resist the urge of the big bang
- In order to survive a long-term project, you need to have early wins in order to build credibility.
- Resist the lure of the long-term plan
- Even the best-laid transformation plans will not survive their first contact with the organisation.
- Identify early adopters and start working with them.
- Do not pick a direct fight with the corporate machine. We never met an innovator who has won that fight.
- Do not push for disruptive ideas too soon.
- View incremental innovation projects as a gift. These types of projects have lower levels of risk and are therefore more likely to succeed.
- Use the power of storytelling https://ronimmink.com/leadership-is-storytelling/
- Develop a clear understanding of what it takes to move from idea to profitable business model.
- By starting small, you will have developed an understanding of what is getting in the way of innovation inside your company.
- Teams need protected funding for innovation. You need to design a process that describes how this funding will be released to innovation teams incrementally.
- The process needs to provide clear guidance on how to get the funding for innovation.
- Use incremental investing or metered funding.
- At each stage, incremental funding should be connected to an expectation that innovation teams will provide evidence of progress.
- For investment boards to be effective, they need to balance two things. They need to have a senior enough membership that is allowed to make meaningful budget decisions within the company’s schedule of authority. At the same time, they need to be close enough to the innovation teams in order to make quick and informed decisions.
- An idea is homeless when it gets here. It will be homeless when it leaves.
- Lower cost of innovation: Whatever you do, do not spend a lot of money or resources on testing your ideas.
- Stay away from the company brand.
- Find a diplomat.
- When you are running an underground movement, remember to keep it quiet. Once you talk about it, it’s no longer an underground movement.
- You cannot take an aggressive approach to driving transformation – especially if the goal is to drive innovation. The goal is to change mindsets. It is a play for people’s hearts and minds.
- The early majority are different to early adopters. These leaders will not tolerate our mistakes or allow us to use their divisions to ‘learn’. They are looking for things that work. And then you cascade.
- What products and services do we currently have in our portfolio?
- What capabilities do we have as an organisation?
- Which of our business models are under threat of disruption from startups and competitors?
- Which innovation projects are we currently running, and how much progress are they making?
- What is going on in the world around us?
- What key trends should we be paying attention to?
- Are there emerging technologies we should be concerned about?
- Are there fledgeling startups or competitors that could disrupt our business?
- Is our current portfolio of products, services and capabilities adaptive to its business environment?
- Where are the gaps in our portfolio?
- How are we going to use innovation to respond?
- Which key trends should we be exploring?
- Which moves are we going to make in order to improve our portfolio of products, services and capabilities?
- Which new business models and value propositions are we going to invest in?
- Where are all the corporate traps and bureaucracy?
- Which stakeholders are the most difficult?
- Which ones are most supportive?
- Are there any other early adopters of innovation within the company whom you might target and work with?
- What innovation programmes are running at the moment.
- Why were the programs set up?
- What are they trying to achieve?
- Are these programs focused on creating new growth, transforming the company or both?
- How much impact are they actually having on either creating new growth or transforming the company?
- What challenges are they facing? What are the main enablers and blockers within the company?
- How do we create the space for experiments with appropriate constraints?
- How do we fund projects without knowing the return on investment in advance?
- How do we create appropriate milestones for innovation teams that are working autonomously?
- How do we provide professional development and coaching to help people get better at entrepreneurship?
- How do we create cross-functional teams with the right people in them?
- How do we create the right incentives and advancement systems?
- How do we manage and transition successful startup teams?
- Is anybody in the real world who cares about the product or service we are thinking of creating.
- What problems are we solving, and for which customer segment?
- Is there a real customer need out there? How do we reach these customers?
- What are the technical risks?
- Can this be done profitably?
- Where will we create and deliver value?
- How will we reach customers to tell them about our product and/or deliver it to them?
- How much will it cost us to create and deliver value? How much will customers pay?
- How will we break even or get to profitability?
- When should this be done?
- To what extent does your product depend on the successful commercialisation of other companies’ innovations?
The lessons are all the same
There is little difference in other books about intrapreneurship. Such as “Future proof your business” or “Driving innovation from within“. It is about developing a deliberate and repeatable process with toolsets, skills training, playbooks, templates, incentives, innovation boards, budgets, financial process, communication planning, stakeholder engagement and winning hearts and minds. This book will give you all of that. Combine that with Aidan McCullen´s new book “Undisruptable” and you have a cocktail for success.