By Brant Cooper on December 6, 2014
Innovate or die. Fail fast. Change is inevitable.
No doubt, large organizations have a big challenge facing them. According to Richard Foster, of Innosight, the average lifespan of S&P 500 enterprises as dramatically declined over the last 70 years. Most large enterprises became successful by executing well in a known market with known products. Innovation, however, happens in the unknown and you can’t execute in the unknown.
As a result, large organizations are typically not in touch with the mojo that got them started.
Here’s the trick: It’s the people, not the process.
The question is, how can a large organization re-capture the entrepreneurial spirit?
Just as there is no blueprint for startup entrepreneurs, so goes for internal entrepreneurs. What’s required is Education, Enablement and Empowerment.
Continuous Innovation Ingredients
I recently participated in a Lean Startup Conference webinar hosted by Sarah Milstein Sarah Milstein (@SarahM) | Twitter , CEO of Lean Startup Productions, with guest Carie Davis Carie Davis (@CarieDavis2) | Twitter , Global Director of Innovation and Entrepreneurship at The Coca-Cola Company. Our conversation revealed some of the ingredients necessary in the recipe for building a culture of continuous innovation. The ingredients are relevant to company product initiatives, as well as internal processes; some are relevant to practitioners and others to leaders.
#1. Create a sandbox separate from the core business.
Milstein asked whether Lean Startup practices can be integrated into day-to-day operations of the business, or whether it should be in its own sandbox. Davis said that in her experience, there is a spectrum that spans from day-to-day practices on one end to breakthrough practices on the other . In both cases, though, innovation leaders need to change behaviors in the organization.
“It’s very hard to fight against ‘We make the most money doing X, let’s not put money against doing X,” said Davis. So, to avoid continually having that fight, leaders can advocate for devoting a certain amount of resources to the innovation sandbox. The sandbox is a safe place to learn and fail. The sandbox could be a formal program, or it could be a percentage of a business unit’s time and budget devoted to Lean Startup-style experimentation outside existing markets.
It’s true that the core business needs to be protected from the wacky ideas that are welcome in the sandbox. Plus, with an area, budget, and resources devoted to lean innovation, teams feel that they have permission to experiment, fear of failure recedes, and they are able to commit to Lean Startup principles long-term. Then you start to see some wins and gain momentum for innovation initiatives. Some amount of cover from organization leaders is essential, which we discuss further in ingredient #4.
The ultimate goal is for core business to work hand-in-hand with breakthrough innovation initiatives. The sandbox ideas are only incorporated into the core, when they have demonstrated they are ready to leverage the assets that the core business brings to bare.
#2. Create a place for entrepreneurial folks to gather and share.
Even if the organization hasn’t committed to carving out resources for a sandbox, anyone can create a place for entrepreneurs within an organization to gather and collaborate. One might create an internal meetup group for Lean Startup enthusiasts. It’s likely that as people join the group, you discover some are senior leaders, who can advocate for resources from the organization.
In Davis’ experience, “There are always people who are constructively discontent. They know there’s a better way, maybe they just haven’t been exposed to it yet.” The Coca-Cola Company welcomes those kinds of people in their Entrepreneurial Innovation program. For organizations without a formal program, the creativity of those folks can still be harnessed and organized if entrepreneurial folks organize themselves.
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#3. Change the measurement and reward mechanisms for the innovation sandbox.
Our conversation in the webinar focused on the role of leaders in continuous innovation. Milstein pressed us on what leaders can and should do to make things happen for continuous innovation in an organization.
Leaders and organizations generally, need to change how they’re measuring innovation practices. Lean innovation can’t be measured on the immediate return on investment, because breakthrough innovation takes time and goes through numerous iterations (read: failures). The organization needs to encourage experimentation—which often leads to the invalidation of hypotheses. When working with lean innovation teams, leaders have to encourage the ability to fail.
“’You can’t fail, we’ve got objectives!’ If you put the [innovation] process against that, it’s just going to create confusion for people. They have to know that this is something they are working on outside of their current objectives,” said Davis. “You have to change the reward mechanisms. You have to give people some runway to explore things. Why would they do it if the reward mechanisms aren’t set up to be appreciated for that?”
Organizations need to introduce a high tolerance for failure of business ideas in the innovation sandbox, which means traditional measures and rewards are counter-productive. However, validated learning can be measured, and can also be used to teach the rest of the organization.
#4. Develop leaders who give teams freedom to explore and who mentor the right way.
“In a bigger organization, is part of the role of a leader providing cover so that teams they are mentoring have room to fail, have room to behave in different ways than the organization is used to?” asked Milstein.
In response, Davis said, “My dream would be if you had a leader who has their objectives that they have to deliver for the year but as a piece of that, they’ve got to give a few teams a chance to operate differently and a explore some of these weird opportunities. And that in itself is the cover.”
To reap the most benefit from lean innovation programs, leaders need a healthy appetite for weird ideas and the comfort to give teams some autonomy.
Milstein then addressed me, saying, “You’ve told me in other contexts that one of the things you see a lot in enterprise teams is that they want to pivot very quickly. They tend to hit the pivot moment long before people would in a standalone startup. Where does that come from, and what’s the role of leaders in that?”
My response was that some people take the phrase “fail fast” too literally. You pivot only when you are done iterating—when you’ve run through all the experiments that will validate or invalidate an idea. It could be that at the first sign of failure they think it’s better to drop out and go find something else. They’re searching for validation as quickly as possible so they aren’t perceived as having failed. This is different than the startup world where people try to break down that wall and continue to persevere, look at all the angles, run a thorough number of experiments on many different types of customers. And a good mentor can help lean innovation teams in the enterprise adopt this persevering attitude.
We’re asking leaders to mentor in a fundamentally different way than they have been used to in a large organization. They need to understand when they’re in “execute” mode and when when to be in “search” mode. A good Lean Startup mentor will:
- Teach people “how to learn and how to experiment,” in Milstein’s words.
- Guide their team through the lean innovation process mindfully, because there will be failures along the way; teasing out what to do if an experiment fails is the key to discovering what does work. Good mentors help teams determine when to experiment more, when to persevere, when to iterate, and when to pivot.
- Give teams enough runway. Leaders should encourage people to go through the painful process and demolish that wall of failure after failure. Maybe that breakthrough innovation is right on the other side of that wall. Going all of the way through that process can take time, and sometimes resources. Leaders need to give their teams enough runway to see that process all the way through.
Davis told a story of a team that would be in a very different place if it weren’t for the fortitude of their mentors: “We saw a team who gave up when they found out someone else was already working on [their problem]. That was a moment of heavy coaching: ‘You guys could actually do it better, what is taking [the other company] so long? Why don’t you embrace this opportunity to really blow this thing out of the water?’ That ended up a win because the coaching turned them around.”
#5. Teach the method.
This is another ingredient that anyone in the organization can add. You can start the lean innovation conversation with leaders by buying the C-suite their own copies of The Lean Startup The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses:Amazon:Books by Eric Ries.
Organizations with formal lean innovation programs can teach a course on some of the methods, which is what Davis has done at The Coca-Cola Company. Individuals whose managers aren’t on board with their experimentation can find a sponsor from another function or business unit.
For organizations without a formal lean innovation program, Davis gave this advice: “I encourage anyone working in an environment hostile [to new innovation practices] to understand the objectives of their manager. Understand what they are worried about. Treat them as a customer, someone whose needs and pains you also have to meet.”
In other words, be a Lean Startup whose product is lean innovation practices! (Yes, it’s all rather meta.) Anyone can run small experiments and present validation results to their manager. That starts to train managers to assess projects in a different way. Get leaders to react or you’re paralyzed.
Thanks to Carie Davis for sharing her experiences! Watch or listen to the whole webcast below: