Innovation Studio: A New Method for Disruptive Innovation. R&D labs. Incubators. Crowdsourcing. Startup partnerships. Large companies have tried many different attempts to spur innovation inside their companies, with a fairly dismal track record. In this talk, Giff Constable will present a new approach to embracing disruptive innovation. The Innovation Studio builds on lessons from the startup ecosystem and Neo's direct experience working with large companies. Giff will walk through specifics on structure, team, hiring, governance, metrics, incentives, and more. http://techleadership.ca/ http://avc.com/2015/04/video-of-the-week-alberts-tedx-talk/

1. Innovation Studio
A New Method for Disruptive Innovation
Giff Constable, CEO of Neo Innovation
May 28, 2015

2. Portfolio
Team
Autonomy
Structure
@giffco

3. Who am I?
• CEO of Neo (neo.com)
• 20 years in startup ecosystem as founder,
builder or advisor
• Author used in entrepreneur programs at
Harvard, MIT, Berkeley, NIH/NSF, etc
• Spent the last 3 years focused on enterprise
innovation
@giffco

4. Analog > Digital
Image: https://www.flickr.com/photos/guysie/6095265888 @giffco

5. Image: https://www.flickr.com/photos/62693815@N03/6277209256
@giffco

6. Image: https://www.flickr.com/photos/downhilldom1984/6089311342
@giffco

7. Image: https://www.flickr.com/photos/aturkus/255736904
@giffco

8. Image: http://www.yhbm.com/
@giffco

10. Sustaining Disruptive
@giffco

11. Previous Attempts
Image: The Alto personal computer in 1973. (PARC/Xerox) @giffco

12. R&D labs
Incubators
Startup accelerators
Crowdsourcing
Shark tanks
IP Licensing
@giffco

13. Find lessons in the
startup ecosystem
Image: https://www.flickr.com/photos/sadsnaps/3731785398 @giffco

14. Portfolio
Team
Autonomy
Structure
@giffco

15. VC Results (’04-’13)
42.0%&
22.8%&
25.3%&
5.9%&
2.5%&
1.1%& 0.4%&
0.0%&
5.0%&
10.0%&
15.0%&
20.0%&
25.0%&
30.0%&
35.0%&
40.0%&
45.0%&
Fail& <=1x& 135x& 5310x& 10320x& 20350x& 50x+&
Source: Seth Levine, Correlation Ventures data, “Fail” category estimated
http://www.sethlevine.com/wp/2014/08/venture-outcomes-are-even-more-skewed-than-you-think
21,640 financings
@giffco

16. 5 Shots on Goal
2"
1" 1"
0" 0" 0" 0"
Fail" <=1x" 1,5x" 5,10x" 10,20x" 20,50x" 50x+"
@giffco
Source: Seth Levine, Correlation Ventures data, “Fail” category estimated
http://www.sethlevine.com/wp/2014/08/venture-outcomes-are-even-more-skewed-than-you-think

17. 20 Shots on Goal
8"
5" 5"
1" 1"
0" 0"
Fail" <=1x" 1-5x" 5-10x" 10-20x" 20-50x" 50x+"
@giffco
Source: Seth Levine, Correlation Ventures data, “Fail” category estimated
http://www.sethlevine.com/wp/2014/08/venture-outcomes-are-even-more-skewed-than-you-think

18. 50 Shots on Goal
21#
11#
13#
3#
1# 1#
0#
Fail# <=1x# 1-5x# 5-10x# 10-20x# 20-50x# 50x+#
@giffco
Source: Seth Levine, Correlation Ventures data, “Fail” category estimated
http://www.sethlevine.com/wp/2014/08/venture-outcomes-are-even-more-skewed-than-you-think

19. innovation
team
everything
else in the
world
Image: https://www.flickr.com/photos/wwworks/8026343276

20. This used to be
prohibitively
expensive
@giffco

21. Open source software
Cloud infrastructure
Cheaper prototyping
Cheaper initial distribution
Lean startup methods
@giffco

22. Done right, enterprise
can be more capital
efficient than VC

23. Example: Aprizi and
7 business models
@giffco

24. Portfolio
Team
Autonomy
Structure
@giffco

25. What do they look
like?
Image: https://www.flickr.com/photos/kwl/4700247712 @giffco

27. • Risk Tolerance
• Resilience
• Chaos
• Generalist
• Creative
• Action
• Experience
@giffco

28. Business
Design Engineering
@giffco

29. Execution, not just
ideation
@giffco

30. Can you get them?
(hint, it’s not about equity)
@giffco

31. Mission
Mastery
Autonomy
tip: read Drive, by Dan Pink
@giffco

32. Portfolio
Team
Autonomy
Structure
@giffco

33. Product ownership
is essential
(this does not have to mean equity)
@giffco

34. Autonomy comes
with accountability
@giffco

35. You need a team
captain
Image: Star Trek, Paramount @giffco

36. What does a “startup CEO”
do?
• Whatever it takes to make it successful
• They own vision, hiring, funding
• They are often product manager #1 and sales
person #1
• They keep the pace up, and make the hard
calls
@giffco

37. What do they look like in an
enterprise context?
• Product and strategic vision
• Founder-market fit
• Has been through the fire ideally as a founder (even
if startup didn’t succeed)
• Forceful enough to overcome big challenges
• Charismatic enough to keep a team motivated and
focused even through tough times
• Humble enough to build bridges to other parts of the
business
@giffco

38. Good startups also
have a board
@giffco

39. Ideally not this
Image: The Hudsucker Proxy, Warner Bros. Pictures @giffco

40. What does a “startup board”
do?
• Represents the shareholders’ interests
• Hires/fires the CEO
• Approve major investments, financings, or the
sale of the business
• Advise on strategy and assist the team
• NOT manage the business
the key point for enterprise
@giffco

41. Autonomy is not
isolation
@giffcoImage: https://www.flickr.com/photos/scragz/2715873958

42. Portfolio
Team
Autonomy
Structure
@giffco

43. Big companies have
unique challenges
Image: Monsters Inc, Pixar
@giffco

44. This requires the
right structure
@giffco

45. Image: Pixar

46. Parent
Company
Studio
@giffco

47. Parent
Company
Studio
@giffco

48. Parent
Company
Studio
IDEA
IDEA
IDEA
@giffco

49. Parent
Company
Studio
IDEA
IDEA
IDEA
Point 1: execution, not just ideation!
@giffco
Point 2: some of the team must stay with the idea!

50. Parent
Company
Studio
Team 1
CEO
Designer
Developer
(tbd)
Team 2
CEO
Designer
Developer
(tbd)
Board
GM
Product Lead
Shared
Branding
Content Strategy
BD
SME
CEO
Entrepreneurial Expert
Domain Expert
GM
Advisory Board @giffco

51. Parent
Company
Studio
Team 1
CEO
Designer
Developer
(tbd)
Team 2
CEO
Designer
Developer
(tbd)
Board
GM
Product Lead
Shared
Branding
Content Strategy
BD
SME
Advisory Board
How far to
sandbox?
@giffco

52. Sandboxing
• In most cases, reporting to CEO is
imperative
• Can structure it inside the organization
(but no matrix reporting)
• Can create a wholly-owned subsidiary
(equity flexibility and external capital
resources)
@giffco

53. Sandbox doesn’t
mean secrecy
(use transparency to build bridges)
@giffco

54. Strategic
Constraints
(company vision)
(strategic thesis)
@giffco

55. Two Levels of
Metrics
@giffco

56. Studio Level
External Headlines by 10 years Out
Better Medicine Through Better Learning
Target: 50% of practitioners using our products see better patient
outcomes because of the service ("you've made me better at my job").
We Create the Go-To Learning System for Medicine
Target: 25% of healthcare professionals in the USA are using our
new products and services.
Speeding Adoption of Medical Advances
Target: We noticeably speed not just dissemination of information
but adoption of important new breakthroughs.
Internal Headline
Innovation Studio Pays Its Own Way
Target: Products from the studio all have the potential to be break-
even by year 3.
@giffco

57. Dangerous Metrics
• Number of ideas
• Time / resources per idea
• Near-term Revenue
• Near-term Profit
@giffco

58. Idea Level Metrics
@giffco

59. What does success
look like?
Image: Back to The Future, Universal Pictures
@giffco

60. 5 Years Out
• Across the portfolio, have 1 or 2 ideas that show
signs of making a material difference to market
cap
• Another 2-4 ideas are financially strong
• Healthy bridges with the rest of the company
• Recurring capability to push the envelope and
translate that into real business
• Inspiration on speed, transparency, and fresh
thinking
@giffco

61. Failure Points to Solve
• Growth capital for the ideas that deserve it
• Hand-offs
• Quarterly EPS pressures
• Success theater
• and…
@giffco

62. Portfolio
Team
Autonomy
Structure
@giffco

63. Questions?
@giffco
giff@neo.com
neo.com
giffconstable.com