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Strategic Innovation Management 
In Mature Enterprises 
Tendayi Viki Dan Toma
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.
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.
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?
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.
Leanconf 2014: How large enterprises can innovate like startups - by dan toma & tendayi viki
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!
Leanconf 2014: How large enterprises can innovate like startups - by dan toma & tendayi viki
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.
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/
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?
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.
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.
In other words, 
large enterprises 
have to develop 
ambidextrous 
capabilities, 
resources, KPIs and 
governance tools
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.
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.
The Bed of 
Procrustes 
● Revenues, Profits, ROI, ARR, NPV 
● These are the wrong metrics for 
managing innovation.
“ 
For every one of 
our failures, we had 
spreadsheets that 
looked awesome. 
”
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.
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)
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.
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
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
The combination of 
these metrics can 
then be used by an 
ambidextrous 
organization 
to manage a product 
portfolio through the 
entire lifecycle
Thank You

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

  • 1. Strategic Innovation Management In Mature Enterprises Tendayi Viki Dan Toma
  • 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. 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. 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. 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.
  • 7. 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!
  • 9. 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.
  • 10. 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/
  • 11. 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?
  • 12. 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.
  • 13. 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.
  • 14. In other words, large enterprises have to develop ambidextrous capabilities, resources, KPIs and governance tools
  • 15. 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.
  • 16. 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.
  • 17. The Bed of Procrustes ● Revenues, Profits, ROI, ARR, NPV ● These are the wrong metrics for managing innovation.
  • 18. “ For every one of our failures, we had spreadsheets that looked awesome. ”
  • 19. 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.
  • 20. 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)
  • 21. 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.
  • 22. 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
  • 23. 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
  • 24. The combination of these metrics can then be used by an ambidextrous organization to manage a product portfolio through the entire lifecycle