Cracking the Innovation Code: An Introduction

The Innovation “Knowing-Doing” Gap:

There is a significant difference between talking about innovation concepts and capturing value by applying them. Ever since I first saw mobile device market dynamics through the lens of disruptive innovation more than seventeen years ago, I’ve loved the challenge of helping large organizations transform from doing the former to realizing the latter.

During my career, I’ve worn the hats of a wireless industry analyst, a strategy and innovation consultant, a business school student, a market researcher, a corporate innovation leader and an entrepreneur. Over the years and while under those hats, I’ve had the chance to consider different answers to the question (paraphrasing the writing of someone who changed my life and whose work left an indelible impression on many of you): “Why do well-run companies fail?”

This is one of the most frequently considered questions in boardrooms and in business schools and there are a lot of books and articles that offer answers. Yet, despite all of the conversations and research and words, well-run companies continue to fail and, as my old colleagues and mentors at Innosight describe very well, they continue to fail at an accelerating pace.

I’m fascinated by this dissonance, essentially a sort of "Knowing-Doing Gap." The relevant market and organizational dynamics and core concepts are known. So the question is less “Why do they fail?” and more, of course, “(Knowing why they fail,) Why can’t their senior leadership teams do anything about it?”

Some suggest it’s an intractable problem – that organizations, because of their very nature, must rise and fall in a creative destruction of sorts. They describe how innovation requires change and how both humans and organizations are inherently resistant to change. When organizational “antibodies” take down transformational innovation initiatives, the conventional wisdom is that “Such is the way things go…and, heck, most startups fail anyway.”

I think that’s a far too easy and convenient rationalization. While there are absolutely many problems to solve along the journey to ensure that well-run companies don’t fail, I’m convinced that they are not unsolvable problems. In fact, I’m convinced that there are solutions that will greatly increase the return that organizations derive from their investments in transformational innovation. I’ve built one that I’m piloting with companies right now, in fact. 

Before I get further into what I’m doing and what lies ahead, here’s where it all got started.

“Disruption in the Palm of Your Hand”:

In my first job out of college, I worked as a mobile device market analyst for IDC. When I joined the team in the fall of 2000, Palm Pilots and other PDAs were the hot products to cover. The mobile phone market was much, much larger – consumers purchased over 400 million mobile phones in 2000 compared with around 10 million PDAs – but most mobile phones at the time were only good for phone calls and text messaging and playing games like Snake (kind of like this).

PDAs, on the other hand, promised to organize (and generally improve) our lives. With relatively large displays, apps (at least what we considered apps back then) and handwriting recognition (theoretically), they seemed poised to usher in the future of computing. And so they were cool. In that August of 2000, Palm launched the VIIx, the first PDA with wireless connectivity offering (hilariously basic, in retrospect) “web page access.” In 2002, Palm and Model Claudia Schiffer partnered to launch the Palm Vx Claudia Schiffer Edition.

It quickly became clear, however, that consumers did not want to carry three devices – a mobile phone, a PDA and a pager – to satisfy their communication and organizational needs. The clear answer was to develop a single device that would offer the capabilities of all three. This was obvious to the senior leadership teams of the leading mobile device companies and they all dedicated themselves to the task – and, of course, they were all convinced that their own unique visions of the future would win. I sat across the table from many of those teams and we talked through all kinds of concepts. A PDA with phone capabilities. A phone with PDA capabilities. A pager with phone and PDA capabilities.

Of course, we all know what happened. As Clay wrote more than twenty years ago, the capabilities of those leading mobile device companies defined their disabilities. Each leadership team described a vision of the future grounded in the strengths of their companies – which makes obvious sense on many levels. Those teams then led their companies to build the products their companies could build. To paraphrase Clay once again, however, they were fixated on building drills and either couldn’t – or wouldn’t – develop clean sheet solutions to create holes. Within a few years, many of those teams and their companies were gone. These two animations (mobile OS market share, mobile phone brands) do a great job visualizing what happened.

In early 2003, I was fortunate to learn disruptive innovation theory from some folks working with Clay at the time, some of whom who would become those future colleagues and mentors at Innosight. I co-wrote (with my coach, Nate Redmond), a research report (“Disruption in the Palm of Your Hand”) considering some of those early mobile device market dynamics through the disruptive innovation lens. I was hooked. That’s where I got my start trying to help more well-run companies succeed.

Innovation Theory vs. Practical Reality:

Over the years, I’ve worked with many innovation leaders whose bookshelves are filled with innovation books and whose coffee tables are covered with copies of the Harvard Business Review and the Sloan Management Review. It’s very easy to read those books and those articles and to relay the innovation concepts and case studies within. As I mentioned earlier, however, it’s an entirely different thing to practically apply the concepts, much less to create, deliver and capture tangible value from them. 

For example, it sounds good in theory to say “Our core business unit leaders should be afraid of us, because we are going to disrupt them.” In reality, however, if those core business unit leaders control innovation team purse strings - and they sense you’re coming after their cash cows and track records of success - the innovation team might be the thing that gets disrupted. 

Another example. It sounds good in theory to say “We can’t ask new venture teams to give us financial projections (...because they’ll waste a lot of time developing worthless spreadsheets and/or the request will push them to develop solutions too close to the core).” In reality, however, most innovation leaders wait far too long to ask their teams how those new ventures will actually make money. Yes, don’t ask them for spreadsheets, but on Day One, a new venture team should be able to describe its initial business model hypotheses. It should be clearly acknowledged - and completely fine - that those hypotheses are wrong. At the end of Day Five, however, those hypotheses should be a little less wrong. If “We can make money with this…” ultimately turns out to be wrong - and a clear deal killing assumption - innovation leaders should push their teams to figure that out early, not after they’ve wasted a lot of people, time and money developing beautiful solutions that ultimately are not businesses.

A Better Way:

The tool I’ve built is designed to help innovation teams more systematically mitigate new venture risk and to avoid these traps in the process. At a high-level, the tool does several things, including:

  • Ensure venture teams and key stakeholders can assess and track comprehensively innovation initiative upside and downside

  • Enable "dynamic risk reduction" by guiding venture teams to iteratively identify and test their riskiest assumptions (wherever they may fall across a traditional stage-gate process)

  • Create a safe, transparent, structured way for team members and key stakeholders to share what they really think about innovation initiatives

  • Provide "derisking progress" metrics that venture teams and key stakeholders can use to make data-driven “park, pivot or persevere” decisions

Of course, I believe that there’s a real “there, here.” I believe that this tool, as a no-touch SAAS solution, will greatly improve organizational innovation ROI. For now, though, it’s all about derisking and to do that, I’ve got several pilots underway at different stages and across a range of large and small organizations in several different industries. 

In the coming days and weeks, I’ll share further how the pilots are going and what I’m learning. I’ll also post some broader (and hopefully thought-provoking) innovation insights I’ve developed over the years. Much more to come soon. In the meantime, please write back with any comments or questions that you might have. I look forward to hearing from you.