The dawn of the “craft economy”?

Posted on December 16, 2015 by Eugene Ivanov

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In a 2012 Harvard Business Review article, Maxwell Wessel made an interesting point. He argued that the corporate scale had ceased providing large companies with the same competitive advantage as it used to in the past. Being bigger doesn’t guarantee safe harbor anymore. The cost of starting a new company is becoming lower and lower, and, with first-class management systems available in the cloud and Alibaba.com-driven manufacturing in China, the minimal efficient scale is rapidly shrinking. Small companies can now compete with larger players–and even “disrupt” them–with the ferocity not imagined just a few decades ago.

Writing for HBR in October 2015, Nicco Mele builds up on this argument by pointing out that while the global M&A pace is accelerating, resulting in the creation of new corporate mega-behemoths, America’s largest companies are steadily losing market share. Mele suggests that the ongoing industry consolidation is just a desperate attempt by large corporations to defend themselves from the attacks of smaller competitors. And yet, insists Mele, America’s return to a more entrepreneurial, more fragmented economy–comprised primarily of small, dynamic firms–is inevitable. Mele calls this emerging economy craft economy.

To me, the most intriguing aspect of this discussion is not the predicted demise of the “big,” but, rather, the increasing significance of the “small.” Of course, the important role played by small businesses in the U.S. economy is nothing new. According to published data (here and here), over 50% of American workers (120-130 million) work in small businesses. Small businesses employ half of all private-sector workers and 39% of workers in high-tech jobs. They provide 60% to 80% of the net new jobs annually and they produce 13-14 times more patents per employee than large firms.

At the same time, small businesses don’t reward their employees with a lot of job security: only half of new companies survive through their first five years, and only a third will be in business for at least 10 years. The attrition rate for high-tech startups exploring new, riskier technologies and business models seems to be even higher. It would therefore appear that increasing the longevity of small businesses and improving their wellbeing may have a profound positive effect on the U.S. economy in general.

Ironically, it’s large corporations that can make startups and early-stage companies more successful. This point was highlighted in a recent report by the World Economic Forum (“Collaborative Innovation Transforming Business, Driving Growth”). The report promotes innovation-focused collaboration between young, dynamic firms and large established companies. For small firms, such collaboration allows them to use resources of large companies to rapidly scale their businesses and get access to new markets, increasing therefore their chances for ultimate success. For large companies, working with nimble, inherently entrepreneurial startups may help them succeed with high-risk/high-return innovation projects.

Regardless of whether one believes in Nicco Mele’s concept of craft economy of tomorrow, the real question of today is how small and large companies can work together to ensure global economic growth through innovation. In other words, how David and Goliath should structure their collaboration to craft value together.

Image credit: https://apaintinginthelouvre.wordpress.com/tag/the-battle-of-david-and-goliath/

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Investing in culture of innovation

Posted on December 9, 2015 by Eugene Ivanov

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Everyone would agree that the rational risk-taking–and acceptance of failure as a likely outcome of any exploratory project–represents one of the most crucial components of the bona fide culture of innovation. What is missing in our endless talks about establishing the culture of innovation is which practical steps organizations should take to promote and encourage entrepreneurial spirit of their employees. A couple of studies (nicely summarized in a Harvard Business Review article) shift this conversation from pure talk to specific actions.

The first study (published in the Journal of Financial Economics in January 2015) showed that companies that offered stock options to non-executive employees were more innovative. The positive effect of stock option grants on innovation was more pronounced when the average expiration period of options was longer. It was also demonstrated that the employees involved in innovation activities treated stock options as an incentive to risk-taking rather than an award for superior performance.

Another study (dating back to April 2011) found that certain labor laws that make it more difficult for firms to fire employees increased the engagement of the employees in innovation activities. The authors of the study called this phenomenon the “insurance effect” and argued that the lower threat of termination produced by stronger anti-dismissal laws decreased the “cost of failure” for employees to engage in potentially risky projects. As a result, these employees were more willing to take on innovation projects relative to their engagement in routine projects.

Uniting the both studies is an idea that long-term incentives may have a strong positive effect on innovation. As the HBR article puts it:

“If workers feel pressure to deliver results in the short-term, either for fear of being fired or in order to be promoted, they may be less likely to pursue riskier innovations. On the other hand, if failure in the short-term is acceptable or even rewarded, and if workers have a stake in the company’s long-term performance, they should be more likely to innovate.”

The beauty of the above findings is that they’re easily testable. To do so, companies can introduce these purely administrative policies:

  1. To make stock option grants the principal incentive for engagement in innovation projects (as opposed to cash bonuses and the plethora of non-monetary recognitions and rewards).
  2. To place employees involved in innovation projects on fixed-term employments contracts (as opposed to employment-at-will). Creating tenure-like job arrangements for people involved in strategic innovation initiatives could be another option.

In more general terms, a message that all organizations should hear is that treating employees well will make these organizations more innovative. It’s this simple.

Image credit: www.pexels.com

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The beauty of crowdsourcing

Posted on December 3, 2015 by Eugene Ivanov

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Last week, I spoke with Paul Arnold, a seasoned business writer and BBC alumnus. The topic of our conversation was crowdsourcing: how companies use it and why they’re often disappointed with the results of their crowdsourcing campaigns. The full text of the interview can be found here; a few (edited) excerpts follow.

  1. (Why do your clients turn to open innovation?)

There are a few reasons why companies go for open innovation. Firstly, they realize they don’t have internal expertise or experience. That’s the most obvious consideration. The second consideration is that some companies, especially those with some exposure to open innovation through crowdsourcing, realize that there is a diversity of solutions. Sure, they can go to their experts, but not only is it actually more expensive to pay for experts, but there is a limited amount of experts you can talk to, and they are almost always aligned with you. So basically you are asking them what you already know.

The beauty of crowdsourcing is that you are completely agnostic to a solution that may come. It could be completely unexpected. I know cases where companies hired consultants to analyze solutions they were getting through crowdsourcing. They were smart enough to realize that they were onto something very valuable, but the ideas were so novel to them that they couldn’t understand them. And there was no other way to get these solutions except through crowdsourcing. The companies would never have gone to this source, because they didn’t know this source existed.

  1. (Why is crowdsourcing still the least used open innovation tool despite the fact that it’s actually very good?)

Crowdsourcing is damn simple, because it only has two components to it. It is a question and a crowd, and that’s it. The major problem, in my experience, is with the question. Unfortunately, not every problem can be put to crowdsourcing and even if you have the right problem you need to formulate it in such a way that it becomes solvable by crowdsourcing. And many organizations do a very bad job of that. Very often, they try to solve a problem in one giant leap. But experience shows that you have to split your problem into chunks and solve them separately or in parallel. Not only is this more efficient, but it’s actually faster, because when you fail (to solve a problem in one giant leap) you have to start again.

  1. (In your“Are We Faking Innovation?” article you highlighted a surprising survey on innovation where 85% of respondents said that innovation is important to their companies, but 72% had no understanding of what innovation meant to them. Is this something you have come across often?)

Amazingly, it happens all the time. I had a client and spoke with two of their research directors who were working for the same department. When I asked them to give me a definition of what innovation meant for them–in terms of market share, expected revenues, time horizons and things like that–they gave me vastly different responses. And those two were people who had a budget to fund innovation projects under them.

Now, I’m a great fan of diversity, but in some cases, diversity of opinions is not welcome. In fact, it’s not diversity; it’s a lack of an overall corporate oversight. At one point I advocated that companies should write an Innovation Charter, and some people said: well it’s just a piece of paper and everyone is sick and tired of these “mission statements.” Sure, I understand this complaint, but my point is that in very many companies, there is no common language of innovation. So it’s not surprising that people don’t know what innovation means for their particular company.

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Want the correct answer (and perhaps to be a millionaire too)?

Posted on November 9, 2015 by Eugene Ivanov

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Over the past few months, I’ve been preaching the virtues of crowdsourcing to young entrepreneurs and startup (co)-founders. Perhaps, I’m not a good preacher, but very often, my message is being met with a visible skepticism. Why would I approach a “crowd” of people if I have a problem, my interlocutors inquired? All I need to do is to ask my mentor (advisor, friends, schoolmates, former colleagues, etc.).

I’ve got a huge respect for startup mentors, these very busy people who manage to find time to share their experience with younger peers. And speaking of friends, for many years, I’ve been married to a woman who is my best friend and whose advice I value more than anyone else’s. And yet, I’ll keep insisting that the collective wisdom of crowds is (almost) always better than a point of view of any single individual, however accomplished.

Recently, while reading a book on prediction markets, Oracles by Donald N. Thompson, I came across an example that makes my case in a persuasive and fun way. Thompson writes about the popular TV show Who Wants to Be a Millionaire originated in the UK in 1998 and then replicated in 81 countries. In this show, contestants have to answer a series of increasingly difficult multiple-choice questions for instant cash awards; the correct answer to the last question would earn the contestant one million in the local currency.

While relying mostly on their own smarts, the contestants have so-called lifelines. One of them is “Phone-a-Friend,” allowing the contestant to instantly phone any person she considers best fit for answering the question. Another is “Ask-the-Audience,” whereby the contestant asks the studio audience (of about 150 people) to vote for the correct answer; the contestant will then choose one of the proposed four options.

Characteristically, and conforming to what I preach, in 80 (out of 82) national versions of the show, the ask-the-audience option produced more correct answers than ask-the-expert. For example, in the UK, the audience was correct 87% of the time, while experts only 55%; in the US, the numbers were 92% and 65%, respectively. And what is important to note here is that there was absolutely nothing special about selecting the audiences for the show: these were people who simply appeared at the front of the line on the day of taping.

(The two countries where the audience didn’t produce more accurate answers were France and Russia. Thompson believes that in these two particular cases, the audiences were deliberately misleading the contestants.)

Sure, I perfectly understand the difference between winning the Who Wants to Be a Millionaire show and creating a successful startup company. But correctly answering a series of increasingly difficult questions is part of both processes. There is a proof that these questions will be more precisely answered by groups of randomly selected, diverse and independent individuals. This is exactly what crowdsourcing does.

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Are We Faking Innovation?

Posted on October 30, 2015 by Eugene Ivanov

tumblr_nqx977yGTE1tubinno1_1280Let me begin with a couple of quotes.

“Innovation is like teenage sex; everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it!”

(Cris Beswick, Founder of the Future Shapers)

“Innovation is not delivering, our innovation systems are breaking down.”

 (Paul Hobcraft, innovation consultant)

Pretty strong words, eh? Cris Beswick’s quote comes from a recent survey on innovation sponsored by Wazoku, a UK collaborative idea management software company. 85% of respondents to this survey considered innovation important to their companies; yet 72% had no understanding of what innovation meant to them. 53% of surveyed managers were unaware of their organizations’ definition of innovation and how it fit with the overall corporate strategy; 38% of the managers said innovation wasn’t their job.

What’s going on? We all agree that innovation is a key to success in today’s business environment; our corporate leaders swear by it; we collects, build upon and vote for thousands of ideas (and even implement a few of them); we hold innovation hackathons and appoint Innovation Champions–and yet, our managers and rank-and-file employees, supposedly the driving force behind any innovation program, don’t even know what innovation means for them and their organizations.

Are we faking innovation? I think we’re. We fake innovation when we fail to discuss innovation strategy in the context of corporate strategy. We fake innovation when we launch an innovation program just because our competitor launched similar program a month ago. We fake innovation when we buy idea management software and start collecting “thousands of ideas” without prior thinking what we’re going to do with all these ideas. We fake innovation when we appoint a Chief Innovation Officer and give her neither line authority nor fixed budget (or a budget that can be promptly taken away in case of “emergency”). We fake innovation when we provide our employees with no rewards for participation in innovation activities (“because in our company, innovation is everyone’s job”).

In order to clean the accumulated rust off the innovation process, we must come back to the original meaning of innovation (no matter which precise words you use to define it): innovation is about creating value. No value, no innovation–it’s this simple. For as long as buying software or running innovation jams haven’t resulted in measurable improvements in corporate performance, this is not innovation (at least, not yet). Sure, value doesn’t always have to be defined in dollar terms; in the innovation equation, the dollar sign can be replaced with something else. But value can’t.

In more practical terms, companies must always begin with defining the place innovation occupies in their overall corporate strategy. Some strategic goals can be achieved by aggressive marketing, obsessive quality control or by optimizing internal processes. Innovation can be restricted to new product development only–and that’s fine.  But there is no reason to call innovation every business initiative aimed at hitting company’s revenue targets.

Equally important, innovation leaders must learn how to create a balanced innovation portfolio. There are various innovation “horizons,” each with different investment risks and terms of return. Optimal innovation portfolio must reflect real corporate needs, not a rush to join a popular–and often ill-understood–quest to “disruptive” innovation.

And we also ought to tone down our endless talks about culture of innovation. Yes, I know, sustainable innovation can’t be established without a profound cultural change. But I also know that you have to start running real, not faked, innovation programs to change people’s attitude toward innovation. As I argued before, you begin the innovation process with structure and process. And if you keep perfecting them, while communicating the results to the rest of your organization, sooner or later, structure and process will become culture.

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Can we make crowdsourcing available to small companies?

Posted on October 23, 2015 by Eugene Ivanov

AAEAAQAAAAAAAASKAAAAJDE2OTRkNTI0LWM5ODktNDNmNi1iZTYyLTcwYmJhNmVlYmE5NgCrowdsourcing is a powerful open innovation tool allowing organizations to tap on the collective wisdom of their own employees (internal crowdsourcing) or pools of external talent around the world (external crowdsourcing).

Internal crowdsourcing (usually managed through Internal Innovation Networks) can be particularly useful for large multinationals having numerous, geographically remote locations, with the majority of employees barely seeing each other face-to-face and rarely communicating on strategic issues.

For external crowdsourcing, large companies can use two major venues. First, they can build their own crowds through creating external innovation portals that would solicit innovative ideas from the outside inventors. Although the effectiveness of external innovation portals can be questioned, companies use them also as a marketing/PR tool.

Then, companies can rent a crowd by hiring the so-called open innovation intermediaries, such as InnoCentive, Nine Sigma, IdeaConnection or HeroX. These service providers help their clients solve complex problems by outsourcing them to hundreds of thousands of on-line “solvers.” As I wrote before, using open innovation intermediaries can be remarkably successful way to crowdsource.

Unfortunately, while crowdsourcing is becoming an increasingly popular innovation tool for corporations, it’s practically unavailable to small companies. Why?

To begin with, small companies can’t use internal crowdsourcing because, due to their size, they lack the critical mass of diversity required for a meaningful crowdsourcing campaign. Nor do they have sufficient resources to run external innovation portals or pay fees for the services of open innovation intermediaries. Of course, small companies can take advantage of smaller networks of mentors and advisors–often acquired through business incubators and accelerators–but the utility of small networks can’t be but inferior to the intellectual power of large crowds.

What can be done to make crowdsourcing available to small companies?

  1. External funding could be provided to help small companies engage in open innovation activities. A precedent already exists. In 2013, the State of Ohio awarded NineSigma a grant of over $2M to provide services to the state’s mid-size companies (between $10M and $1B in revenues). The success of this initiative is manifested by the fact that 350 jobs will be created in Ohio over 3-5 years as a result of the program. Similar approach could be adopted nationwide by the U.S. Small Business Administration by providing financial resources to small businesses to pay for their open innovation activities. The SBA’s flagship 7(a) Loan program can be used as a “blueprint.”
  2. Small companies can crowdfund their crowdsourcing activities first. This approach was pioneered by HeroX that allows its clients to crowdfund their projects in case they lack resources to sponsor them outright. Other open innovation intermediaries can follow the HeroX’ suit.
  3. A more sustainable long-term approach would be to organize small companies into private innovation networks in which each member of the network can enjoy the collective wisdom of its own “crowd” by sharing intellectual resources with other members. Such networks could be originally built using the structure and resources of existing business accelerators/incubators and, perhaps, local Chambers of Commerce. Obviously, a viable business model will need to be established to make such networks operational.

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Can the Wisdom of Crowds Help Solve the Refugee Crisis in Europe?

Posted on October 10, 2015 by Eugene Ivanov

(A longer version of this piece originally appeared on the Qmarkets blog)

The refugee crisis that keeps timagesormenting Europe, as serious as it is, has two additional troubling features. First, despite the fact that the humanitarian situation in the Middle East has been worsening for quite some time, the current crisis came seemingly out of the blue. Second, there is no doubt that it won’t be miraculously resolved anytime soon.

Now, governments across Europe have to deal with the cost and logistical nightmare of settling hundreds of thousands of migrants. All that amidst difficult economic situation in many European countries; all that while facing a sizeable opposition at home from citizens concerned about financial and demographic consequences of accepting so many people of different religious and cultural backgrounds.

And as if this wasn’t enough, European leaders must also begin a search for a long-term solution to the crisis. An intrinsic part of this solution should be creating a system capable of reliably predicting when and where the next humanitarian disaster will take place.

Can politicians and experts alone make this happen? Not likely, given the scope of the problem and the urgency of the required response. It’s therefore time for European governments to turn to another source of wisdom: the wisdom of crowds. A framework must be created to systematically use crowdsourcing to look for solutions to the refugee crises, the current and the future.

Two forms of crowdsourcing approaches seem particularly relevant in this context. The first is the so-called prediction markets, the stock-exchange-like platforms aimed at predicting the probability of events by assigning a market value to each prediction. Corporations are using such platforms to forecast success rates of future products and estimate sales volumes. Similar prediction market can be created to monitor the humanitarian situation around the globe (including the Middle East) assessing the probability of a refugee crisis in any country of concern at any given point of time. Software for running and managing prediction markets is already commercially available.

Another approach would be using the wisdom of crowds to come up with long-term solutions to the refugee crisis. European citizens should be invited to contribute their ideas on every aspect of dealing with the massive inflow migrants from non-European countries, including country quotas for refugee redistribution, final destinations for arriving migrants and on-the-ground logistics of settling and assimilating the newcomers. Again, idea management software exists to allow collecting useful ideas, building upon them and then presenting them for a vote to identify the ones with the highest public support.

Admittedly, using crowdsourcing to solve complex socioeconomic problems, in a rapid and effective way, is not easy: one has only to remember the largely unsuccessful BP’s oil spill crowdsourcing campaign to deal with the consequences of the 2010 Gulf of Mexico disaster. Yet, examples of skillful application of crowdsourcing to solving the world’s most pressing problems, such as the Ebola outbreak, also exist. There is therefore every reason to believe that if applied properly, crowdsourcing will help solve the refugee crisis in Europe too.

Image credit: independent.co.uk

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Do Corporate Accelerators Create Real Value?

Posted on October 7, 2015 by Eugene Ivanov

(imagesThis post first appeared on the Front End of Innovation Blog)

Corporate intrapreneurship is relatively new business concept aimed at helping large companies advance their disruptive innovation initiatives. Due to its novelty and immaturity, this model of corporate innovation obviously needs a lot of refinements. The upcoming Corporate Intrapreneur Summit (organized by the Institute for International Research and Culturevate), taking place on October 8 in NYC, will provide a much-needed platform to discuss gains and pains corporations can expect when launching intrapreneurship programs.

In the core of the corporate intrapreneurship concept is a belief that only by institutionalizing the culture of entrepreneurship–usually associated with startup companies–can corporations succeed in creating new businesses and new markets. Being a corporate intrapreneur means working for a large company, yet behaving as a small company’s entrepreneur who cherishes risk-taking and experimentation.

The key question here is how precisely the habit of taking risky bets and embracing frequent failures can be established in a large corporation with its dominating culture of certainty, predictability and precision. Some academics suggested that this can be achieved through an “ambidextrous organization,” a corporate arrangement allowing companies support the existing (core) businesses and entrepreneurial initiatives simultaneously.

Critics of the concept argue that in real life, ambidextrous organizations are rare exceptions; the concept simply doesn’t work for the majority of large mature corporations.  Instead of trying to square peg in a round hole, corporations should tap on the real source of entrepreneurship: startup companies. This particular point of view took shape in the idea of “innovation ecosystems,” mutually beneficial relationships in which startups would serve as originators and early testers of disruptive ideas, whereas large organizations would provide resources to advance the most promising projects.

In practical terms, corporations realize the concept of innovation ecosystems through creating corporate incubators and accelerators. According to published data, only in the last three years more than 50 accelerators were launched by industrial giants such as Cisco, Coca-Cola, General Electric, IBM and Intel.

Corporate accelerators come in many shapes and shades, depending on the degree of connection between a corporation and startups; however, they all share the same important feature: the accelerator model dramatically improves the efficiency of the corporate tech-scouting process. In the past, corporate tech scouts had to approach promising startups one by one; now, corporations launch an accelerator and get exposed to dozens, if not hundreds, of small companies willing to join the program. An additional benefit for corporations working with early-stage entrepreneurial companies is the ability to influence their development to better align them with the corporate strategic goals (the ability to “reverse-engineer” a startup, as Mike Docherty calls it).

But how effective corporate accelerators really are? A few days ago, Anand Sanwal, CEO of the startup tracking company CB Insights, unleashed a surprisingly harsh diatribe against corporate accelerators, which he called “innovation theater” and even “a farce.” Mr. Anand asserted that the accelerators represent no more than a publicity stunt designed by corporations to “look innovative” in the eyes of their peers, competitors and investors.

Mr. Anand’s penchant for “take-no-prisoners” language is well known. However, his knowledge of the startup world can’t be questioned, either. And, by the way, his bold assertion that only 2nd-or 3rd-tier startups would take part in the corporate accelerator programs is quite testable: one has only to compare performance of startups in corporate accelerators with that for “stand-alone” startups or those belonging to non-corporate accelerators.

Mr. Anand’s escapade presents a good reason to ask a broader question: have corporate accelerators already shown their ability to create real value? As of today, the jury is still out, and in all likelihood the deliberations will be lengthy and contentious.

Image credit: http://www.venture-spring.com

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The Art of Killing (a Project)

Posted on October 1, 2015 by Eugene Ivanov

(This post first appeared on the Front End of Innovation Blog)

As inimagesnovation becomes an increasingly popular topic in business literature, social media and public discussions, it also turns into a powerful magnet for clichés. One of the most used, if not abused, is “celebrating failure.” Of course, innovation is all about experimentation, and experimentation results in failure more often than in success. We must absolutely accept innovation failures, learn from them and recognize people taking risks. An example here could be set by the Tata Group that rewards exceptional ideas even if they weren’t operationally successful (through a special category of awards, appropriately called “Dare to Try”).

But do we really need celebrate failure? In every language, in every culture, the word “failure” carries a distinct negative connotation; placing it in the same sentence with “innovation” doesn’t change anything. By calling to celebrate innovation failures we do nothing to advance innovation in places, still very numerous, where the fear of failing continues nipping innovation in the bud.

Instead of celebrating failures of innovation projects we’d better learn how to minimize the cost of failure through proper portfolio management. In practical corporate terms, that means that we have to master the art of killing projects.

Everyone would agree that killing projects is a key to maintaining healthy product development pipelines. By terminating projects that are going nowhere, companies free up resources to introduce new, potentially more successful initiatives. But in real life, killing projects turns out to be tough. Despite our proclaimed willingness to celebrate failures, we’re actually quite bad even at admitting them, for failed projects negatively affect the company’s bottom line and definitely don’t make our career prospects any better (to say the very least).

So, how do companies approach the ever important kill/continue decisions? This largely depends on which of the two schools of thought they belong to: “pick the winners” or “kill the losers.” The “pick the winners” approach relies on selecting relatively few projects that are expected to have the greatest chance to succeed–and then investing heavily in these projects. As often happens, once a “winning” project has been selected and advanced into the project pipeline, killing it becomes extremely difficult. In contrast, the “kill the losers” strategy is based on launching a large number of projects, followed by carefully monitoring them, identifying those that perform badly and then killing them as rapidly as possible.

A recent study on drug development–an area where “celebrating failures” sounds almost atrocious due to their astronomic price tag–shows that it’s the “kill the losers” strategy that turns out to be a true winner. In particular, the study showed that the number of approved drugs for any company strongly correlated with a high termination rate for drug candidates in preclinical/Phase I stages. In other words, companies making hard decisions about which project to terminate earlier in the project lifecycle did much better than those postponing these decisions for later.

Big corporations should take a careful look at how early-stage companies operate. Of course, startup entrepreneurs don’t run a large number of projects; they simply can’t afford it. However, they never waste time and resources on any single idea that proved to be a loser. They learn from the failure and they pivot, a startup’s equivalent to killing a project. As large companies warm up to the concept of intrapreneurship–instilling the spirit of entrepreneurship in the corporate culture–they must perfect the way they identify and terminate failed projects.

Hopefully, The Corporate Intrapreneur Summit (organized by the Institute for International Research and Culturevate) taking place on October 8 in New York City will address the topic of portfolio management as part of the corporate intrapreneurship process.

We live in a success-driven society. We should strive for success and success only. And let’s reserve celebration for those occasions, however rare, when we succeed.

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Internal Innovation Networks as a Basis for Corporate Intrapreneurship

Posted on September 29, 2015 by Eugene Ivanov

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(This post first appeared on the Front End of Innovation Blog)

Intrapreneurship is a relatively new concept developed to help large companies create new businesses, a process often called transformational (or disruptive) innovation. Intrapreneurship aims at instilling the spirit of entrepreneurship–usually associated almost exclusively with startups–in the corporate culture. Being intrapreneur means working for a large company, yet constantly taking risks and experimenting, as small company’s entrepreneurs do.

Intrapreneurship may take multiple form and follow different models; the upcoming Corporate Intrapreneur Summit (organized by the Institute for International Research and Culturevate), taking place in October 8 in New York City, will showcase practical examples of corporate intrapreneurship from  more than a dozen of leading corporations.

Yet no matter which specific shape corporate intrapreneurship might assume, there is one vitally important question that must be addressed: the relationship of the corporate intrapreneurship unit with the rest of the organization. If the newly-formed intrapreneurship structure is located within an existing business unit, there is a danger that it’ll lose its entrepreneurial edge by falling back to solving short-term problems relevant to the “host” business unit. On the other hand, if this structure is too isolated, both geographically and administratively (“an island and the mainland” model), it runs the risk of becoming irrelevant to the rest of the company.

Many perils of creating a corporate intrapreneurship unit will be significantly alleviated if the maternal company already has a functional Internal Innovation Network (IIN). I already wrote about the crucial role played by IINs in the overall corporate innovation strategy. Here, I’d like to highlight four major reasons why a viable IIN would help support corporate intrapreneurship:

  1. IINs help foster the very culture of collaboration the lack of which makes disruptive innovation in large companies difficult in the first place. Much has been spoken about the “NIH (Not Invented Here) Syndrome”; however, it’s important to realize that the NIH Syndrome applies to intra-company collaboration too as individual units are often reluctant to share with others their findings. By breaking internal silos and promoting intra-company collaboration, IINs prepare the whole organization to accept new ideas regardless of their origin.
  2. Corporate intrapreneurship requires close coordination of multiple functions within an organization, both that are (R&D, Business Development, Marketing) and are not (Finances, Legal, HR) directly involved in the corporate innovation process. However, in the majority of organizations, there is no institutional platform for all these units to collaborate on strategic issues. IINs provide such a platform, increasing the efficiency of decision-making and reducing the need for endless face-to-face meetings.
  3. IINs provide intellectual and operational support for the company’s external innovation programs. First, they help identify problems whose solution would require external sources of knowledge and expertise. Second, they facilitate testing and implementing of incoming external ideas and solutions. In other words, they provide a much needed “bridge” between the corporate intrapreneurship unit (“island”) and the rest of the company (“mainland”).
  4. IINs help identify emerging corporate intrapreneurs who–especially in junior positions and in geographically remote units–often remain unnoticed to the corporate innovation leaders. Because IIN platforms are intrinsically democratic, they provide voice to every employee regardless of their rank and location in the company.

Of course, it’d be an exaggeration to say that by themselves IIN can guarantee the success of a corporate intrapreneurship initiative. Yet it will definitely make chances for such an initiative to succeed much higher.

Image credit: http://www.wired.com

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