Have you ever wondered how so many big companies could be out-innovated by tiny little startups? This used to perplex me – until I became an entrepreneur within an established company. Innovation is not easy. Making it happen within an established company is even harder. Established companies have years of developed process focused at scaling and iteratively improving their existing products. Breaking out of this pattern is very challenging – yet the need to innovate in today’s fast-moving world is crucial for companies and their long term viability. This is my journey as an entrepreneur within an established company –what worked and what didn’t – in the hopes of inspiring some ideas that you can bring back to your own company.

1. Innovation in an Established Company
One entrepreneur's journey
By Andrew Frenz
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2. Setting the scene
Back six or seven years ago…
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3. A software startup guy joined an established
company
Better looking representation of
myself
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4. This company just so happened to be a 45
year old, public company
that makes mechanical test equipment
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5. and had a very mechanical engineering and
manufacturing culture.
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6. Software was important, but mechanical
ruled
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7. Being the entrepreneur type, I wanted us to
do more – to innovate – to be creative
To think like a software company
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8. But there seemed to be no time
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9. The next software release was always
happening
And there was a backlog a mile long
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10. Pitfall #1: No Time For Innovation
The development machine keeps cranking out release after release
chipping away at a seemingly infinite backlog… leaving what appears to
be no time for innovation.
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11. I read what other companies were doing
Google had 20% time… 3M had 15%...
But that seemed too big a hurdle for us to start with.

12. I read what other companies were doing
Atlassian’s FedEx Day model stood out
It only lasted 24 hours – surely we could find the time to fit that in,
right?
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13. We shamelessly stole the idea and made it
our own
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14. Here is what we did
1. We had no idea if the company would support it – so we didn’t tell
anybody above us
2. We got several software managers to agree to try it out for one day
3. We pitched it to software engineers
And here is what we came up with…
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15. Hackathon
Format
1. Told developers about it a couple weeks in advance so they could start
thinking of ideas
2. Had a kick-off on Thursday morning
1. Donuts
2. Went over rules / schedule
3. Went around the room – each person could brag about their awesome project
idea… or simply say “stealth”!
4. Sometimes people would come without an idea and team up with someone else
5. Ready, Set, Go!
3. The hacking started
1. Their schedules were cleared
2. Pizza and pop brought to common areas for lunch
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16. Hackathon
Format
4. Sleep was optional Thursday night
5. Friday at noon we had the demo session
1. Ordered lunch and reserved a massive room with projectors
2. We invited all of the software teams
3. Each person/team had 5 minutes to demo their project
4. Audience voted for best projects across 5 categories:
1. Creativity
2. Business Value
3. Technical Complexity
4. Likelihood to end up in product
5. Overall
6. The winners received $25 / $50 gift cards and the overall winner got the
travelling trophy
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17. Once we saw it had traction…
1. On Thursday, we realized that this would work and be awesome, so we
told a few people what we were doing and invited them
1. Senior VP
2. Head of R&D
3. Etc
2. They loved it!
3. From then on, we invited tons of people:
1. CEO
2. VPs
3. HR
4. Recruiting
5. Engineering
6. Etc
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18. Hackathon
Rules
1. You can’t do something that you would normally do
2. At the end, you must have working code to demo
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19. Hackathon
Principles
1. Nobody dictates what the projects can be
1. PMs / Marketing can pitch their favorite developer friend, but it is up to
the developer to do what they want to do
2. Any project is fair game
1. You never know where the innovation will come from
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20. Hackathon
Principles
3. Most Important Principle: Make something work
1. This is not about making up fancy idea slides
2. It is all about a working prototype
3. The power of a working demo is 100X the power of a compelling idea
4. You have no idea how many people will see an idea working on the
screen and suddenly the value and potential hits them – even though
they have heard the idea 10 times before
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21. What happens when you do this more than
once?
We initially feared that people had a good idea and might struggle to
think of something new and unique the next time.
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22. Kept Getting Better and Better
We found that the ideas got better at the 2nd event, and even better at
the 3rd
Why?
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23. Hackathon
The Power of Repetition
We created a culture and pattern:
• Developers jotted down ideas when they had them
• Because for the first time- they knew they would get a chance to actually try
them out!
• People became comfortable being more creative
• They realized it was OK – and encouraged!
• There is actually a reason to come up with new ideas
• Culturally we had beaten ideas out of people with a
never-ending backlog – it took time to reverse this
• Practice makes you better
• Even at innovation!
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24. Hackathon
A Stage for Anyone
Any developer had 5 minutes to pitch the entire company, including the
CEO, on their best innovative idea.
Wow!
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25. Hackathon Results
Awesome new innovations
• better ways to do existing things
• new features
• new products
• proof-of-concept for things we had been wanting to do for years
• creative games built to demonstrate product’s flexibility
• Technology exploration
• And more!
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26. Hackathon
I ran the first Hackathon in December, 2010.
But I also participated.
Guy who doesn’t really look like
me
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27. My Project
For my project, I hacked together a way to monitor equipment in real-
time from a mobile phone and even control it
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28. My Project
It won first place
Yay!
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29. After the event, life went back to normal
Although everyone was a bit more energized
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30. But my project idea felt like it had potential
So I tried to see if management would invest to make it for real
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31. They thought it was a great idea
and put it on the roadmap to work on in 2014
(This was back at the start of 2011)
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32. They thought it was a great idea
and put it on the roadmap to work on in 2014
(This was back at the start of 2011)
UM – No WAY!!
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33. I am an entrepreneur – so I couldn’t help but
imagine the potential of this technology
A new product
A new way to enable our business
A whole future world of possibilities
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34. Making It Happen
I started down two parallel paths
Building Out
the Product
Building A
Business
Case
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35. Building Out The Product
I had a day job of normal things at work
So I worked 30 – 40 hours extra each week at
home building it out
- Nights and Weekends -
Building Out
the Product
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36. Building A
Business
Case
Building A Business Case
I built a business case for the product
And a roadmap
And a compelling vision
And pitched it to anyone who would listen
(PMs, Marketing, VPs, and even the CEO)
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37. Parallel Paths Converged
About 9 months after aggressively pursuing it
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38. Parallel Paths Converged
The business plan was compelling
The product was deployed on a customer’s site in pilot mode – and
they loved it
And so I finally got approval and budget to hire a team to do this for
real!
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39. Cool Story And Good Ending – But it
Highlighted a Problem
How do we carry Hackathon projects forward to make something of
them?
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40. Our Solution
Create an Innovation Development Fund
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41. Innovation Fund
Idea is to set aside money specifically to drive innovation ideas forward
And a team that is interested in helping develop them into something
the company can get behind and do for real
I didn’t want to depend on a crazy “hero” to drive innovation forward
on their own dime and time
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42. How The Innovation Fund Works
• After each event – a team reviews the projects
• They have money to allocate to have the person do more work
• Maybe the idea needs to be taken further
• Maybe it needs to be focused
• Maybe they need to be teamed up with someone in marketing
• A review panel reviews the advanced projects
• Can recommend more money
• Or funneling into the formal process
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43. Hackathon + Innovation Fund
This seemed to work well
We were generating tons of ideas
And carrying the most promising ones forward
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44. How My Project Played Out
That original idea and plan that I put together continued to grow
I had created a plan to bring Smart Home like technology into the Lab
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45. How It Played Out
Eventually
The company slapped a fancy marketing term on it and it has now
become a strategic priority across the company
Transforming who we are and how we show up to customers
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46. But the story doesn’t end there…
I learned a new lesson of innovation a couple of years later
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47. My 2nd Big Idea
About 3 years after I had come up with the initial project idea, I had
another.
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48. My 2nd Big Idea
Other companies in other industries also wanted to introduce mobile
monitoring – yet did not have the time or means to easily do so
What if we could allow companies to add mobile monitoring to their
product?
And make it practically drop-in easy?
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49. My 2nd Big Idea
Just like Twilio allowed you to drop-in SMS messaging support…
We could create a product to allow desktop developers to drop-in
mobile monitoring support!
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50. My 2nd Big Idea
It would allow any company to do what we did, but 100X cheaper and
faster
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51. My 2nd Big Idea
Good thing we had Hackathon and the Innovation Fund
Hackathon Innovation Fund+
= Success?
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52. My 2nd Big Idea
This time – I didn’t need to do it on my nights and weekend
We had become the kind of company that would invest in new
innovative ideas!
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53. But There Was A Problem
That I Didn’t Expect
This new product was unlike anything we ever sold before
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54. Why Is That A Problem?
Well, established companies fall into a pattern:
Market Research -> Development -> Sell
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55. At My Company
Once a product was ready, we held a SRT (Sales Readiness Training)
On a web conference, we trained the sales teams on this new product
Then from that day forward they were expected to begin selling it
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56. And This Is Exactly What We Did Before
With the first mobile product from 2011, after making it, working with
pilot customers, we packaged it up and held a Sales Readiness Training
(SRT)
We walked the Sales force through our product and set them loose to
start selling!!
(mostly to our existing customers)
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57. But I couldn’t do that with this new product
It served a completely different market
It meant selling to completely different people
And selling in a different way
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58. Pitfall #2: Innovation isn’t just development
Established companies are optimized to sell more of the same such
that they struggle to sell new things!
They forget that innovation isn’t just development – but also sales!
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59. So I Had A Problem
My existing sales force could not just go out and sell it.
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60. I needed a new sales person
My first try:
Talk to the sales manager, pitch him on the idea, get him to hire
somebody to work on this
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61. The job opening got posted
But
It had morphed into 75% new, 25% existing products
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62. Pitfall of the Short Term
The sales manager had a big goal for next year and wanted to be able
to use this person for that goal too
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63. Then, just two weeks later
We pulled the job completely.
Why?
The big sales goal was looking even bigger and harder. They needed
someone to come in and turn the crank on traditional – and headcount
was limited.
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64. Realization
We needed a sales person focused on the long term
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65. But How Do You Protect The Organization
From Itself?
How to have a sales person without bending to short term pressure?
And without a sales person – how could we explore new markets and
market opportunities?
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66. Pitfall #3:
Succumbing to the short-term pressures
Not clearly separating short-term and long-term roles
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67. How do organizations solve the short-term /
long-term tension?
Sales is generally focused on the short term
While R&D is generally focused on the long term
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68. Idea: Business Development Reporting into
R&D
Hire a sales person reporting into R&D
Arm the long-term folks with the ability to do their job!
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69. Business Development Reporting into R&D
Give them a personal sales goal
But hide it from the sales organization
Anything they bring in is gravy as far as the sales org is concerned
The focus is figuring out how to sell new products into new markets
and creating a repeatable, scalable sales model
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70. The Handoff
Eventually, when success is found, the product can be handed off to
sales to turn the crank and drive short-term goals for it
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71. Another Realization
This problem existed the first time around
It just wasn’t so obvious
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72. Another Realization
The first time, my product was an adjacent product to existing
products. In fact, it directly sat on top of our control software.
We were going to sell it to existing customers. Pretty straight forward,
huh?
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73. Wrong
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74. It Took A New Way To Sell
Mobile and Cloud were new – these are hard to talk about if you
haven’t before
The product solved business efficiency – this was a different problem
than any of our other products solved
It took a completely different conversation to sell it – to different
people – with a different set of background experience
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75. No wonder we initially struggled to sell it
Myself and a marketing buddy basically sold it for the first year
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76. Then I realized
I started to think about some various products we had introduced that
were “innovative”.
Every one of them had a personal “hero” who took on a business
development sales role to jump start the product
If they stepped out too early, we stopped selling it.
Slowly over time, they would be able to train others
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77. My “crazy” new product had made an existing
problem obvious
Innovative products, even if they don’t seem that different, could
benefit from a business development role to prove them out in the
market, figure out how to sell, who to sell to, BEFORE rolling out to the
traditional sales force (if ever it is rolled out)
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78. So did it work?
Can’t tell you yet. We are in the middle of it right now.
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79. Here is what I can tell you
We will run into another road block, guaranteed
And we will find a way around it
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80. That’s just innovation
It is never pretty, especially in an established company
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81. Established Companies Have Huge
Momentum
And usually huge process all designed around cranking out more of the
same
Changing course is very hard
No wonder so many miss the boat on new technology, despite massive
budgets at their disposal
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82. Challenges at Established Companies
• Process
• Compartmentalizing roles
• Massive backlog
• Comparison to established products and revenue stream
• Short-term pressures
• Etc
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83. Is Innovation Impossible?
No way.
It just takes perseverance, awareness, and the willingness to do
something different
And a lot of work.
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84. Another Trick For Big Innovations
A really good strategy is to set up a separate “Startup” division to go
after some new opportunity
(if its big enough and game-changing enough)
Purposely break it out of the process and momentum that will stifle it
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85. OK, so let’s summarize
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86. Some Things That Worked For Us
Hackathon Events
Innovation Fund
Business Development
Breaking the Rules
Breaking Process
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87. Would this work at your company?
That’s not the point. Like Agile Development, there is no perfect
process.
Every company is different. In fact, even within one company, it should
change over time as the people, pressures, goals of that company
evolve.
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88. Would this work at your company?
But hopefully it gives you some ideas to try
And that is the point. Steal these ideas if you like them!
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89. Closing Thoughts
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90. Innovation Models Need To Keep Changing
No model works for every company
Each company is different based on situation, people, history, etc, etc
What works today might not work tomorrow
To keep innovation alive, you need to keep innovating your process
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91. Innovation is about smart people
Not about process
Innovation is not a machine. Smart people need freedom. And the
company needs to trust them and allow it to happen.
Create a process that allows for less process!
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92. Use startups as your inspiration
• No existing products to worry about
• Allowed to focus on nothing but making the innovation a success
• Individuals wear many hats
• Basically no process – relies on smart people instead
• Aim for changing the world
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93. Cool References
Must Read: Netflix’s Culture Deck
http://www.slideshare.net/reed2001/culture-1798664
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94. Papers About This
How to Prioritize Your Innovation Budget
1/11/2015 Page 98
http://blogs.hbr.org/2014/09/how-to-prioritize-your-innovation-budget/
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95. Papers About This
How to Prioritize Your Innovation Budget
“Create new organizations and controls for innovation.”
“It’s too easy for revenue-producing parts of the business to poach resources
from innovation projects and teams that are not (yet) contributing to the top line.
They need to be protected – made autonomous, with their own dedicated
budgets, resources, and leadership – until they are.”
1/11/2015 Page 99
http://blogs.hbr.org/2014/09/how-to-prioritize-your-innovation-budget/
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96. Papers About This
Lean Goes Better with Coke – the Future of Corporate Innovation
“To develop this new portfolio, companies need to provide a stable innovation funding
mechanism for new business creation, one that is simply thought of as a cost of doing business. ”
In building capability, the company should look for “starters,” not “scalers.”…. We also learned
that creating the same kinds of conditions that enable co-founders to thrive on the “outside” is
very important to maintain on the “inside.” We had to design a whole new hiring process,
compensation model, operating model, co-working spaces, etc. to find, attract and retain “starters.”
1/11/2015 Page 100
http://steveblank.com/2013/11/07/lean-goes-better-with-coke-the-future-of-corporate-innovation/
David Butler is the VP of Innovation and Entrepreneurship at The Coca-Cola Company
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97. http://hbr.org/2014/06/the-capitalists-dilemma
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98. Questions?
Let’s connect!
Andrew Frenz
andrewfrenz.com
@afrenz