Isaac Newton, Yogi Berra, and Marcia Brady
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A lecture I gave to Georgia Tech MBA program in 2016 and 2017. We discuss typical modes of failure in corporate innovation and how the three horizon model can provide an alternative.
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Isaac Newton, Yogi Berra, and Marcia Brady
- 1. Isaac Newton, Yogi Berra, and Marcia Brady A Tale of Innovation in Corporate America Joe Kleinwaechter Vice President, Innovation & Design Worldpay
- 2. “Innovation almost never fails due to a lack of creativity. It’s almost always because of a lack of discipline.” Ten Types of Innovation, Nagji, et.al.
- 3. “An object at rest tends to stay at rest. An object in motion tends to continue in the direction in which it is currently moving.” Newton’s First Law
- 7. The inertia of the present prevents us from servicing our future. Problem Statement:
- 8. Creativity is innate and natural.
- 9. Innovation is an unnatural act…. …that requires a method and discipline
- 10. Horizon 1 Horizon 2 Horizon 3 The3HorizonModel AccumulatedRevenue Time 0-12 months 12-36 months 36-72 months
- 11. Horizon 1 Horizon1 0-12 months Maximize Economic Return Trying to Maximize ROI Dominate market share Dominate wallet share But you lack… Opex
- 12. Horizon 2 Horizon2 12-36 months Become a Growing Concern Trying to Find a validating group of partners Increase sales velocity Cross the chasm But you lack… Time
- 13. Horizon 3 Horizon3 36-72 months Create a Category Trying to Find a meaningful sponsor/partner Create PR buzz But you lack… Capex
- 14. Growth/MaterialityMatrix High Growth Low Growth Material Non Material B A C D Growth Mature Emerging Declining Growth: Low=0-9% High=15%+ Material = 5%+ of Total Revenue or Profits
- 15. HorizonMovement High Growth Low Growth Material Non Material B A C DHorizon2 Horizon0 Horizon 1
- 16. HorizonResource Assignments 1 2 3 70% 20% 10% Model to be a Sustained Innovator
- 17. In theory, there is no difference between theory and practice. But in practice, there is. Yogi Berra
- 18. 2010Companies High Growth Low Growth Material Non Material B A C D Microsoft, Intel, IBM, Oracle, HP, SAP, Dell Growth: Low=0-9% High=15%+ Material = 5%+ of Total Revenue or Profits Apple, Google, NetApp, Cognizant, Sybase, Cisco
- 19. HorizonMovement High Growth Low Growth Material Non Material B A C DHorizon2 Horizon0 Horizon 1 It takes many more resources to generate $1 of revenue in H2 than in H1.
- 21. Let’s talk about why that is…
- 23. RecommendedReading *The Alchemy of Growth Mehrdad Baghai *Escape Velocity Geoffrey Moore *Managing the Innovation Portfolio Harvard Business Review May 2012 *Transformational Growth Through Innovation Research & Technology Executive Council 2010
Editor's Notes
- This talk will have a scripted slide presentation for Horizon model thinking followed by a very unscripted, slideless conversation with the audience on the realities of innovation in corporate America. Introduce my credibility on the subject.
- Speaking at such a world renowned institute of science, I would be thrown off the stage by the leaders of this school where this presentation not show deference to that which is science and those that paved our way. Let’s start this story with a little science. Audience question: what do these statements from Sir Isaac mean? Newton basically said that without outside influence, things will continue doing what they are doing – and that is the key to our talk today.
- Pose to audience. One thing we can agree is that innovation = change.
- The development cycle is like a pitching machine, it keeps on cranking, using electricity, demanding that more balls are fed to it.
- In the software development world (and many others) when a project finishes, companies create a vacuum. They have manpower available and must fill that vacuum with something. Based on the Haters Gonna Hate rule from Newton, we know the tendency is to do more of the same. But we’ve said that innovation is the opposite of that - it is about change.
- In short, this is the basic problem of innovation in the corporate world. In order to innovate we must provide external forces that perform the “unnatural” act of innovation.
- The Three Horizon model was developed by Baghai, Coley and White (1999). It is a framework that can help us create the external forces necessary to innovate. Horizon 1 – activities that create material revenue in the same year as the sourcing activities (“Material” to be defined later) Horizon 2 – activities that have the potential to create material revenue in 1-3 years Horizon 3 – activities that create options for Horizon 2, high failure rate, 3-6 years
- OPEX Keep the cows from drinking all their own milk
- Companies don’t have patience for anything longer than 1 year
- Companies don’t mind investing in minds to show off, but capital is scarce
- This is the growth/materiality matrix. It shows the lifecycle of a successful product. We’ll define material using the same guidelines outlined by Geoffrey Moore
- One of the reasons companies stop or don’t even start innovating is because of the collapse of Horizon 2/
- According to research, a true sustained innovator should approximate these ratios
- One of the reasons companies stop or don’t even start innovating is because of the collapse of Horizon 2/
- Actuals of sustained innovators versus other companies. Most non-SI is based on my rough calculations of companies I have either been with or worked closely with.
- Let’s go off script and talk about what it is really like in most companies. The content here is designed for the audience and purposefully meant to not be slideware. Topics typically include Formation of Innovation Teams and the typical failure modes as well as the rare exceptions. The death of innovators in acquisitions. Regression to the Mean UX led innovation Innovation exists at the behest of the King. King changes, innovation changes. The numbers of companies that have innovation DNA is far, far less than those that don’t. Odds are you will work for one of the many that aren’t and have to decide if you want to accept that or change it. Companies often consider normal product advancement as innovation. Horizon 2 colony collapse is real. True innovation must be separated. Creativity must be pervasive. Acquisition is an innovation strategy. Be prepared to lose your innovators. Innovation is a PR tool. Get over it. Use it to create your desired state.
- When I was growing up, the Brady Bunch was the model family. We all wanted that but very few of us had it. Many that fell short could never be happy and found themselves constantly comparing their family to the one on TV. Innovation is a lot like that. Those that are successful still want that nirvanic outcome, but we don’t despair at the reality of how corporate America and innovation intersect. Rather, we use that as part of the problem to solve. It requires innovative thinking to overcome many of the corporate challenges. I am absolutely in love with trying to build innovation practices within corporations that are struggling to do so. To do that requires a firm understanding of the realities, and not some unicorn and rainbow view. I wish you the same.