innovation – Curious about change

Grow & Kill

As a strategy for growth corporate venturing is not new – I remember loads of conversations around it at the back end of the dotcom boom in the early 2000’s. But there is a new urgency and aspiration behind some of today’s thinking. If you believe that it’s just too hard to take the legacy organisation and transform it into a butterfly then corporate venturing is one way to explore the alternatives. And it’s not a massive step from there to say that if successful, the old organisation becomes the cash cow which funds the growth of the new – which in turn cannabalises the historic success.

cannabalisation

So simple to write on paper but in reality so much harder. As many find (from Kodak and Blockbuster onwards) the lure of the old, ‘guaranteed’ revenue stream is a constant distraction from investment in the new. And there are multiple pitfalls in the contrasting styles of old and new business models.

Corporate venturing is of course nothing new – and there are many differing models from the hands-off, pure investment play to the internal intrapreneurial activities. The latter can be anything from an innovation portfolio to a fully integrated strategy. And one of the newest models is in the collaboration space – interestingly often best portrayed in the public sector with a public sector (or quasi-public sector) body initiating activities amongst local (geographic or virtual) communities. What underpins the differences (although not always fully articulated) is the rationale for the venture.

There are at least 4 obvious drivers for corporate venturing – financial (to generate returns from an investment portfolio), R&D (to provide coverage over and above the specific focus of the organisation), increased impact/reach (frequently a public sector driver to achieve more than existing resources/knowledge/reach make possible) and strategic. Grow & Kill is clearly in the latter category – but there may be other strategic rationale for having a venture portfolio which are linked to specific functions within the business (new markets, new products, new channels for example) rather than an all encompassing agenda.

The issue with Grow & Kill really lies in the distinction between a genuine desire and strategy to cannabalise the legacy business vs an appetite and approach for complementarity (which may still be underwritten by an aspiration for cannabalisation). The latter is clearly much more comfortable as an approach – trying something new and yet protective of the old but has within it many pitfalls, not least the allocation of investment, remuneration practices, organisational environments, and the decision on when / how to integrate the new.

Many of those apply equally to the cannabalisation route, but the overt strategic approach makes the need to deal with those up front a no brainer. In ideal world the new venture operates a much faster pace, frequently adopting Agile working practices, occupies a very different work environment, one which makes self-managed teams and project oriented work much easier as well as sending a very clear signal that this is different business. People will be looking to be remunerated differently and for many recognition of their contribution in the speed and outcomes will be a big driver. The question in an agile environment is less about performance measurement frequently and more about how to deal with experimentation – what happens when experiments do not succeed but are valuable learning exercises for example?

And employees (or contractors) are not the only concerned stakeholders – the attitude of investors, especially for those in the public markets is critical. Even those alert to the threats and risks to conventional business models can be less tolerant of unproven new directions.

But for many established organisations, whether it is articulated or not, the direction of their transformation programmes may make a grow & kill strategy more of a consideration, as the programmes inevitably become broader and deeper.

Predictive in action

My latest addition to the trend illustrations on Change is an Opportunity is predictive in action and I used Bluenose (below) and Digit to illustrate my point that predictive analytics doesn’t depend on the widespread internet of things or BIG data or sensors necessarily – it’s here today, using very much traditional buckets of data available to many organisations and individuals.

And that set me thinking about innovation. A bit like the myth that it is all to do with the lone innovator or maverick genius, the notion that all disruption is massive and immediate is one of those illusions that many suffer from. It’s not that it is ever really stated, just that people believe that the telephone, electricity, the internet suddenly burst on us. You can see it with the debate over driverless cars – the issue is will we or won’t we, or by when. That completely disregards the fact that most people who have cars aren’t all able to change them overnight, or whether we all want or need driverless cars. And, more pertinently to this argument, many, at least those with newer cars, have a large number of the elements of driverless cars already – automated parking, emergency braking, cruise control, lane changing. So with hindsight it might look like a big shift that happened at once but in reality as we look forward it is more likely to be a steady evolution.

And that is just as well because we don’t on the whole adapt well in terms of behaviours to sudden massive disruption. We need to get used to things gradually in most cases. (Gradually here is a relative term when considered against human evolution!). Most of the big potential disruptors that haven’t happened (yet) – wearables being a case in point – are certainly not limited by technology but by behavioural acceptance. And whilst there is evidence of the use of technology changing how we think I am interested to know whether there is evidence that we are becoming more adaptable – essentially evolving faster in how we approach novel or innovative activities.

Kevin Kelly makes the point when he says that the utility of electricity exploded when we invented many more gadgets, but not the quality (as I am reminded every day when I am searching for a different charger or in a strange room looking for a power socket that isn’t miles from any usable surface). Which feels like a lack of progress somehow – a missed potential or opportunity. And in the great and age old debate as to whether radical or incremental innovation adds more value, suggests that the answer is almost inevitably both . .

Unknown territory

For many years I drove all over the place, on my own, and I got very comfortable about knowing roughly where I was and roughly where I was going – basically I worked out which big towns I needed to go between and only worried about the detail of my actual destination when I got near to it. I’ve been doing a lot of driving recently with the ‘aid’ of a sat nav – and I’m really struck by the contrast. The whole route is defined for you from the outset – and if you veer off it (which I am wont to do if I think somewhere looks interesting) the instructions are pretty vehement to get back onto the main road, the direct A-B. And of course sometimes that’s the right thing to do. But I think sat nav is also an analogy for how big business works these days. We have to know, not just where we are going but the whole route to get there. Hence project management, business planning etc. And yet . . . .

The world is becoming increasingly complex – and complexity means that properties (and hence events) are emergent. Not linear, not extrapolatable, not plannable – they emerge from the interplay of forces and drivers. Which means that you might know where you want to get to, but you can’t know the best way to do it. You have to prototype, to experiment – see what works and when it does, do more of it. Where it doesn’t, be quick to close it down and move on. I’m hearing a lot about innovation but innovation seems in many cases to be really project management by another guise – take the chosen ideas, develop them according to the plan, stage gate then, lose (sometimes) the ones that don’t work and follow the plan on the others. It all feels rather sterile and fails to take into account emergent properties – they don’t fit the plan.

So it’s perhaps not surprising that there are many reasons I like the Cynefin framework but one of the most obvious is that it makes this tension really explicit – the VUCA world we live in means that events, actions etc are becoming more (albeit not exclusively) complex rather than complicated or simple – ie the operating environment is moving anti-clockwise from simple through complicated to complex and even chaotic. At the same time my basic understanding of how our brain works suggests that our instincts are all about moving clockwise – taking the complex (unknown and unpredictable) and seeking to map it to things we are already familiar with and hence making it known and predictable. So that gives us an ever increasing tension between the two. And as Dave Snowden points out in the video the real world is a mixture of both – but we do need to be explicit about where we are for any given context and we have to be comfortable with the complex . . . It’s that lack of comfort with the unpredictable, with the lack of a given route map that I feel instinctively is perhaps one of our greatest risks.