Oh no. Not another article on someone’s idea about how to do corporate innovation. Yes. Sorry. Here it comes.
TL;DR version: Form a group. Make sure they’re actually entrepreneurs or have true entrepreneur mindset. Give them their own P&L. And get them away from the mothership. Is this always the best way? No. Of course not. But it’s something to consider. And here’s the long winded version as to why…
It’s about the people. It’s always about the people. I’m coming to believe that – at least to a large degree – Corporations that experience disintermediation or otherwise get smashed by innovators bring this on themselves due to possibly unavoidable employee mindset. It’s not just bureaucracy, or intelligence – or lack thereof – but rather, attitudes and their attendant behavior that’s the potential killer.
Corporations as legal entities may have legal rights all their own under the idea of Corporate Personhood, but the obvious reality is that however bureaucratic they may be, Corps are run by people. (Even if we almost forget this when we tend to think of them more monolithically.) And many of these people are simply not of the mindset or willfulness to break through their obstacles when facing potential risk of obsolescence. The problem is not merely about momentum or entrenched markets or an explicit desire to milk a brand; though this last one may be a valid profit maximization strategy during the sunset of some product lifecycles. No, the problem is that even within somewhat innovative corporations, most of the noise around innovation efforts doesn’t result in adequate span of control or motivational imperatives for those charged with getting any innovation done. (And the Corps may not have the right people in these roles anyway.) Some do. And a bit more on that later. But this discussion is about those that struggle. Or are about to struggle, but don’t know it yet. Or worse, who have lot’s of folks who think they are or soon will innovate because they just went to a nice meeting where they got an innovation checklist to follow. Maybe even a t-shirt or a nice poster.
Customer Types Metaphor
Let me take a step back for a moment to try to use a seemingly separate behavioral model as a metaphor of sorts before going into employee types. Let’s consider Customer Types for a moment. There is a continuum of customer types defined along the course of the Diffusion of Innovations of products into a marketplace. When Everett Rogers defined the Innovation Adoption Lifecycle way back in 1962, he posited that continuum as consisting of the following; Innovators, Early Adopters, Early Majority, Late Majority, and Laggards. That’s five stages, which loosely define behavior, generally corresponding to a collection of characteristics of a market cohort. Five. We could pick apart Rogers’ theory and add/subtract/modify some of the definitions, but the point is, he was able to break down the higher level idea of “customer” into a variety of somewhat distinct segments. As with most things, there are rarely super bright lines at the borders. And any decent taxonomist could likely slice and dice more categories. But when we get close enough to something that’s not only sensible, but seems to bear results when we adjust our efforts along certain lines, that’s probably an ok place to stop and say, “Hey, this is a solid enough theory for our purposes that we can and should just stop here.”
Now, moving from the consumer side to the employee/producer side of things, what to do we have for workers? Generally, we see only two types most often discussed: Entrepreneurs and Employees. That’s two. Only two types? Is that really all there is? Maybe. But… Might there be a continuum here as well? And why would it matter? Well, maybe it matters because trying to sort it out could help a corporation figure out what they need to do from a people perspective in order to address particular challenges; one of them being innovation needs. A quick search in your favorite search engine for “Employee vs. Entrepreneur” will quickly reveal a lot of – probably cliched and questionably precise – thoughts on the difference.
- 8 Differences Between ‘Entrepreneurs’ and ‘Employees’
- 18 pros and cons of being an employee vs. being an entrepreneur
- Entrepreneurship Vs. Employment: Which Is the Best?
- 12 Important Differences Between Employees and Entrepreneurs
The thing these articles all seem to have in common is they are generally focused on the worker. The idea that “this article is for you to help you figure out what you might want to be when you grow up; an employee or an entrepreneur.” In fairness, some pay homage to the idea of an “entrepreneurial mindset,” regardless of whether an individual is a worker or an actual business owner. So maybe, just maybe that’s a third type of worker. But I think there may be more. I’m not an academic. I lack the time, resources, (and really the will), to study this to the degree a proper treatment I think deserves. Maybe someone will see this and pick it up as a research project.
Until when or if someone puts together a more academic treatment of this, I’m going to throw out a straw man argument that there’s probably more employee types than simply entrepreneur vs. employee. And it matters for both Entrepreneurs and Enterprise level Senior Managers alike in terms of helping to sort out whom they might want to target as best mindset types for various roles.
Now ok… it’s true that there are some who have tried to categorize employees a bit further. I’ve seen definitions such as Coaster/Freeloader, Worker, Entrepreneur. And deeper attempts to look at motivational imperatives or behaviors; like Stable/Belonger/Star/Builder/Expert/Passive-Aggressive/Leader, and more. The value in these categorizations is that if you can identify the people, like a Myers–Briggs Type Indicator (MBTI), (seemingly long in the tooth and out of favor these days), or the more now in vogue Predictive Index, it may help better understand how to hire in the first place and motivate over time. Still, after all this time, there doesn’t seem to have emerged a powerful generalized model here, as we have for Customer Types.
So for our purposes here, (well, mine anyway), the goal is to define what it might take to do better innovation within a large corporation. So I’m going to attempt a categorization towards that particular end. And do so with the ideally obvious understanding that as with many attempts to categorize, it’s neither possible or even desirable to make them wholly mutually exclusive. (I can see some strict taxonomists cringing at that last thought, but of course, the real world is messy.)
Employee Types for the Purposes of Assessing Propensity for Innovation
- True, full risk taker. Utterly driven. They are possibly an innate leader or otherwise feel compelled to run the show, but alternatively, (or in addition), have an idea that simply must be attempted. The drive may be financial or mission oriented, but it’s all consuming. They take financial risks, regardless of their life stage, and sometimes even to the detriment of themselves or families. They have other traits, which are defined in all manner of articles easy enough to search.
- True Entrepreneurial Mindset
- They’ll jump off the cliff with the entrepreneur. They may not be a co-founder or first in, but they’re early in. They know there’s tons of risk. They know the hours will be longer. They’ll take the risk both due to the mission, and that they’re likely compensated accordingly, if not in salary, in work flexibility, other perks, and almost unquestionably, some degree of equity. Ironically, they likely skew either younger or older. The younger cohort here can afford to take risks because they have little to lose and the rest of their career to recover. The older cohort here may have already achieved some degree of financial success or is an empty nester, so can afford some career risk. (Did you just believe that last part because it made sense? Surprise. It’s not really true. Just seeing if you were awake and how ageist you might be. It turns out studies show a lot of entrepreneurism is actually mid-career; averaging somewhere around 40-45.)
- Innovator’s Imperative
- They think around corners. Innately curious and inquisitive, may have been or could one day be entrepreneurs. This individual could be at any life stage, but is likely past early career where they can take serious risks. May have family or other reasons why extreme career risk is not palatable for them. They’ll take some risks, but limited.
- Meets or Exceeds Expectations
- The Good Worker. High Performer. (Remember, “Meets Expectations” doesn’t mean average if the performance plan is aggressive enough.) This could be any life stage worker. They’re the ones you want on your teams to get things done. But they won’t necessarily see the future well, and they won’t take big, or even medium level risk if possibly avoidable. They can keep the line running, market existing products, launch new products, and more. But they’re least likely to be truly disruptive. The challenge here is these are potentially high performers. And maybe they’d do well on an innovation team. But they’re risky, because what got them to where they are isn’t necessarily what it takes to make something all the way brand new happen.
- They show up and kind of do their job. It’s likely they’re in the right job because some jobs need this kind of worker. This may be more line staff oriented rote maintenance roles, or in well understood production. But could potentially be in marketing. (If an individual with this mindset is in Product or somehow elevated to any management level, director or above in Marketing or Design/Coding/Etc., then please let me know if you’re a public company so I can sell that stock.)
- Just punching the clock; in whatever the role. Nothing at all wrong with this for many job functions. But for the purposes of this article, the only one(s) anywhere near your shop with this attitude better be doing nothing more than emptying the trash baskets at night.
(You’ll note I labeled the list “Propensity for” rather than Success. You might successfully innovate all over the place, and yet the results may not be business feasible. That’s another discussion.)
My above definitions are probably wrong. Likely in several ways. I throw them out there based on my own experience across multiple startups either as founder or co-founder, as a more corporate employee type, and as a consultant having worked across firms large and small. Having worked on both sides of the desk, (as buyer and provider of technology of various sorts), and on various aspects of Digital Transformation efforts, this is generally what I’ve seen. Perhaps someone with a more academic mindset will see this article and think maybe there’s some value to doing a better job in sorting things out in this area. I hope someone does. Because the impetus for my thoughts here isn’t so much due to some flash of clarity within this idea space. It’s more a vague sense of dis-satisfaction at current definitions. And the thought that if this could be sorted out a bit better, maybe corporate innovation could be made better. (Especially when I sense that someone thinks Digital Transformation just means getting out there to evaluate some Marketing Automation tools and by golly, then we’ll be hot doggity digital. Where’s my Agile Affirmations Poster?)
So What’s the Point?
If you are trying to do corporate innovation of any sort, you need to have the right people in the right kind of environment to get this done. Is that too much of a cliched and obvious thought after such a long setup? Well then, here’s more. Often, I think people are doing this wrong. They accept that first idea about the right entrepreneurial people being needed, but then actually select Drones or Meets or Exceeds to staff innovation projects because they look great on paper. Maybe they’ve been somewhat successful with existing initiatives. But that’s maybe not the right performance indicator. The question is, have they really looked around corners? Do they either or both sense trends through data or via depth of consumer/marketplace empathy? Anyway, the Corporation then sets up an incubator on some underused floor someplace, but subjects the employees of this new ‘venture’ to the same corporate BS, timesheets, procurement, etc. as everyone else. Maybe they even send folks offsite to some innovation retreats. You know, someplace where some external firm teaches them about Design Sprints and uses the word Agile a lot. Unfortunately, once day camp is over and everyone goes home, the excitement fades. Or maybe worse, a hot new project emerges and everyone wants on board; even those who should absolutely not be there, but have internal political skills to get themselves on the team. And the great ideas stumble through legal, procurement, and other lions and tigers and bears. And then… Oh crap. “Hey!, Did you see www.NewThing.com? That was our idea!” All of a sudden “your” product or service is out there on the market. Maybe not exactly the way you do it. Maybe not as good. But it’s first, and is grabbing market share. If you were doing real science or tech, and you’ve filed for some Intellectual Property (IP) patent protection, ok. Maybe. But if you were doing variations on a theme where a well executed First Mover Advantage was key… well… sorry Sparky. Too Late to Party. The buffet is mostly picked clean. Maybe… just maybe you can take Second Mover advantage. Or after a Five Forces analysis, you see ways your Big Corp can still swoop in and take a leadership or at least solidly profitable position in whatever the new space is. But… you’re still late. Later than you had to be.
How should it look instead? Sometimes companies just buy the small innovators and don’t bother to make the jump to great innovator themselves. (And often kill those acquisitions dead, but at least that’s one method to try.) But the other is to make sure to choose some real Entrepreneurial Mindset and Innovator’s Imperative types and set them up with some cash. (No, you can’t really just “hire” an actual entrepreneur. They won’t work for you. Or… well… maybe. That is, you could invest in one though an Angel fund or something and end up on their board. But it better be mostly their show. Else, just what were you investing in?) In any case, this group needs its own P&L. And you need to either pay them a whole lot or get a separate cap table so they have some upside from stock. After all, why would anyone leave the cushy nice job for high risk, most likely much higher hours/effort job unless there’s at least some potential reward? They should probably be at their own site. If it’s the case that they have need for internal resources from data to production tools, then make sure they get that. But… what should be avoided wherever possible is the need for them to share resources with others. If they have to wait for a web designer or a package designer or a QA person or whomever to free up from a “real” project to work on a dreamy prototype, or jump through any number of other corporate hoops, the whole project will probably be DOA before your next board meeting.
Please note the obvious. This doesn’t apply to every large corp. Some large Enterprises do just fine with innovation. Some have well-established research groups. And some have an impressive percentage of their current market offerings or coming soon pipeline that were generated as new ideas in the past handful of years. (As opposed to milking long established brands.)
The irony of the challenge here is that large Enterprise knows most of the basics involved in these endeavors. They most likely have MBAs or strategists of some sort that understand industry and firm level business strategy and industry competitive dynamics. They realize that early advantage dissolves over time as markets evolve and as intellectual property reverts to the public domain. And yes, many have significant capital resource benefits once past growth and emergent phases of a product or firm. Once in a mature phase, there should be some degree of surplus attributable to next steps. Of course, many firms do take advantage of this with well deployed R&D funding. Their advantages – besides any existing intellectual property protection – include hard won institutional knowledge that likely lead to efficiencies hard to achieve by others. (Although wholly depending on Learning Curve strategies isn’t the core point here, and has risks of its own.) Along the way, firm capabilities that have been gathered up are likely both tangible and intangible. And for some marketplaces, the cost of entry – or other Five Forces type barriers – may present non-trivial barriers. Still, over time the durability of any advantage is likely exposed to more risk of disruption. The Barriers to Imitation become less relevant than the lesser barriers to overall disruption.
They KNOW this. And yet, are often still challenged to make innovation happen. Part of it may just be that diversifying is hard. And really, doing anything truly new – even for an existing market – may seem out of scope for the current mission. Or just too small to move a needle. (Yet.) When they do build innovation teams, it seems like they may be missing the mark in terms of with whom they’re staffing such teams. Of course, not every innovation needs to be some paradigm shifting explosion of All That Is New And Cool. There’s plenty of evolutionary growth that can maintain the so-called “economic rents” that is the reason for being of any firm for quite some time. But the risk is still hiding out there. In someone’s basement. Someone with some software. Or someone with a now sub $1,000 additive manufacturing device. (I.e., in this case, typically a 3D printer.) So… maybe innovation teams don’t always need extremely disruptive entrepreneurs. How is one to judge? Maybe it’s just to look at your own teams and the world and ask, “What have they come up with in the past 1/2/3 years?” “Is it anything close to this/that/the other thing?” Hindsight may be 20/20 as they say, but what SHOULD a person or team HAVE seen when they were charged and funded specifically to look deeply into markets and technologies and look around corners? If the answer is, “This new Product!” Or these 1/2/3/10 products!” Then Great. You’ve chosen well. If the answer is “Well, more than they did,” then you know you probably have some issues.”
Bottom Line: You get the behaviors you incentivize. So again, I’m suggesting that a truly innovative team approach likely needs to be staffed – at least at the leadership level – with seriously entrepreneurial mindset types. And unless they’re willing to jump off a cliff, (and be properly compensated for the risk), their ability to get really disruptive will be… well… disrupted. How can you judge where you’re at with this? There seems to be at least two ways: 1) If upstarts have come and grabbed a bunch of your marketshare out of nowhere and you had to scramble to then overpay to acquire them, that’s a clue. (E.g., shaving clubs). 2) If you’ve had innovation teams go out to incubators or whatever, and come up with new ideas that – upon coming back to the mother ship – took you over a year to bring to light, that’s probably a problem too. (With notable exceptions for true science projects that honestly and truly require moonshot like R&D and capital.)
So really, large corp marketing managers have a choice. Start jumping off some cliffs or be ready for when you’re going to get pushed. Because these days it seems that there’s really only two kinds of ways you can be; the quick or the dead.