How to Ideate, Incubate, but Fail

 

Most organizations launch initiatives to drive growth and there are great practices available to innovate in the core business and explore new business models.  Three years ago, I met Stephen, CEO for a North American media firm. He had invested $200M to build new businesses to address the slow but consistent decline in demand for their core business.  He was frustrated by the lack of progress. 

 

Stephen wanted to know what happened and wondered, “did we involve the wrong people?” The more we talked, it became clearer that the problem was two-fold, he was:

 

1.    Using revenue and market share as indicators of success 

 

2.    Managing innovation in the core and explore as synonymous


Part of the problem was his expectations for revenue. The uncertainty about the business model and his frustration resulted in waning support from key senior stakeholders. The other part of the problem was senior management was treating all innovation as equal.  The monthly review of innovation resembled typical project reviews focused on red/yellow/green and reporting percent complete.

 

It is harder to explore beyond the core because there is more uncertainty and risk. The ambiguity and pressure to deliver revenue resulted in the teams pursuing safe bets. The teams that had started out with bold, new business ideas ended up gravitating to ideas that were more closely aligned to existing capabilities within the firm.

 

Senior management needed to give those teams the freedom to operate beyond the routine management systems. At the same time, they need to be curious about how the new business model ideas challenge the assumptions of today’s business.  That requires dialogue and transparency about what the team is learning. A checklist is insufficient. 

 

Consider the following example about providing support and free reign in the face of uncertainty and risk.

 

At WalMart, Store No. 8 is their incubator business in Silicon Valley. Within Store No. 8 is a portfolio of disruptive innovation that is managed separately from core operations. Executives from the core are involved in the governance, but the new ventures are protected from delivering lagging indicators of success, like revenue and margin. Instead, they invest significant resources to run in-market experiments to discover the business model that brings value to consumers and has profit potential for the enterprise.  

 

Growth initiatives thrive when the disciplines of innovation are applied.
 

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