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Leanconf 2014: How large enterprises can innovate like startups - by dan toma & tendayi viki

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Valiant efforts have been made by several large corporations to adopt agile and lean methodologies. A large number of these efforts have failed or struggled significantly. In order to succeed at adopting agile and lean, large organizations need to change how they operate. The challenge is most large organisations have tried to adapt these innovation methods to suit their corporate structures. In our work, The Corporate Startup, we explore the changes that large enterprises need to make with regards to people, processes, KPIs and structures. We argue that large corporations cannot successfully innovate like startups unless they become ambidextrous. The structures that are put in place to support the adoption of agile and lean have to reflect the maturity stage of the business models that are being incubated by the enterprise. In other words, a new type of corporation needs to emerge.

Published in: Business

Leanconf 2014: How large enterprises can innovate like startups - by dan toma & tendayi viki

  1. 1. Strategic Innovation Management In Mature Enterprises Tendayi Viki Dan Toma
  2. 2. Digital Disruption ● Blockbuster has now disappeared from our shopping malls. ● It failed to respond to the threat from Netflix, Lovefilm and Redbox. ● Similar stories can be told of several other companies including Kodak, HMV, Borders and Nokia.
  3. 3. Entrants & Upstarts ● The ongoing narrative about how corporations cannot innovate like startups do. ● It appears that as corporations grow, they become more bureaucratic and slow moving. ● In contrast, startups are generally smaller, less bureaucratic and fast moving.
  4. 4. A Paradigm Shift This challenge is accentuated when there is a significant paradigm shift in technology and ways of doing business. The rapid change from analog to digital caught most large enterprise by surprise, and left them unsure of how to respond. Why is this the case?
  5. 5. Climate Change Deniers ● In most companies, there are people in management who will deny that an important change is happening. ● Disruption on day one always looks like a toy. ● The very nature of Black Swan events is that they often blindside companies with traditional business models.
  6. 6. Don’t Kill The Cash Cow ● Most companies will apply their efforts to milking their cash-cow legacy products. ● Kodak invented the digital camera in 1975, but failed to benefit from the technology. ● The irony of this particular story is that the cash-cow business was killed anyway. ● By the very digital camera Kodak invented being exploited by other companies!
  7. 7. Misreading Signals ● There will be managers that will recognize the changes in technology that are happening ● But will misread what the change represents for their organization. ● Many large enterprises misread the digital revolution as simply a change in the means of production and marketing channels.
  8. 8. New Business Models ● Significant paradigm shifts often represent a change in business models and innovation principles. ● It is much more than just transforming analog products to digital products. ● The ITunes store was not just about turning CDs, tapes and vinyl into digital music. ● When paradigms shift, business models matter. Tristan Kromer, 2014 http://grasshopperherder.com/lean-enterprise-innovation-ecosystems/
  9. 9. Competing & Staying Relevant ● So how can large enterprises compete in this ever-changing environment? ● Is it possible to be a large enterprise that executes well operationally; and a nimble innovation machine at the same time? ● What are the characteristics of an ambidextrous organization?
  10. 10. The Right Lens ● Large enterprises are not startups. ● A startup is a temporary organizations set up to search for a sustainable business model. ● Large enterprises focus on executing known successful business models. ● This distinction between searching and executing was first highlighted by Steve Blank.
  11. 11. On the one hand we don’t want to kill the cash cows providing important resources; so execution and operational excellence are important. On the other hand, we want to keep the organization nimble and responsive by continually searching for innovative new products and business models. A War on Two Fronts Executing Searching Searching and executing require different cultures, behaviours, resources, KPIs and governance.
  12. 12. In other words, large enterprises have to develop ambidextrous capabilities, resources, KPIs and governance tools
  13. 13. Nagji & Tuff, 2012 Transformational Products These represent breakthrough innovation in which the company develops new products for new markets Adjacent Products These represent incremental innovation targeted at adjacent markets Core Products These are existing products that are optimized for existing customers An Ecosystem of Products ● Rather than view themselves as startups: ○ It is better for large organizations to view themselves as ecosystems containing different types of products and innovation.
  14. 14. Managing The Core Product Portfolio ● The key focus when managing the core product portfolio is execution and operational excellence. ● Remember that a product enters the core portfolio after a sustainable and profitable business model has been found. ● There is also some trading history which allows for reliable financial projections to be made. ● Revenues, Profit-Margins, ROI, ARR, NPV, Market Size, Entry Barriers, PESTLE.
  15. 15. The Bed of Procrustes ● Revenues, Profits, ROI, ARR, NPV ● These are the wrong metrics for managing innovation.
  16. 16. “ For every one of our failures, we had spreadsheets that looked awesome. ”
  17. 17. Making Little Bets ● With transformational innovation it is impossible to predict which ideas are going to win on day one. ● As such, the culture, processes and KPIs used for core product management do not apply. ● Large enterprises need to fill their innovation funnel with a lot of small bets and search for sustainable business models. ● Innovation Accounting, Customer Discovery, Lean Analytics, Pirate Metrics, Mom Test, Lean UX, Design Thinking, Lean Startup, Agile Development.
  18. 18. Innovation Accounting ● * Innovation Accounting system should be flexible ● * 2 degrees of flexibility: ii.business model maturity (p-s fit, p-m fit, scalability) ii. use (reporting, governance, global)
  19. 19. Reporting KPIs ● Designed to communicate the day-to-day progress of the incubated ventures from ideation to prod market fit ● Mainly used as communication tool between product team and 'sandbox manager' ● Example: knowledge-to-assumption ration, cost per learning, experimenting velocity.
  20. 20. Governance KPIs ● Designed to ensure the right ideas get adequate financing. ● Used as diagnostic tool for investment boards. ● Example: BareBones NPV, knowledge to assumption ration
  21. 21. Global KPIs ● Need to ensure transparency of sandbox's profitability ● Used in shareholder communication & help to make mid course corrections in correlation with the global corporate strategy ● Example: cohort performance, innovation contribution, innovation conversion
  22. 22. The combination of these metrics can then be used by an ambidextrous organization to manage a product portfolio through the entire lifecycle
  23. 23. Thank You

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