Transitioning and Scaling Innovation


In his book “Collective Disruption:   How Corporations & Startups Can Co-Create Transformative New Businesses,’ Michael Docherty lays out a vision of how established companies can create a strategy for innovation that includes partnering with startups, thereby enabling an “innovation ecosystem.”   This post is the eighth of ten reviewing the various chapters of his book in preparation for the Leadership Forum 2016 event put on by the Chicagoland chapter of the Project Management Institute on May 20th, 2016.

In the first part of his book , Michael explains the reason why open innovation is the recipe for creating innovation that is truly transformative, rather than just maintaining or expanding the core business.   In the second part of his book, he lays out his prescription for “collective disruption” as a way to achieve that open innovation ecosystem.

In the sixth chapter, Michael laid out the four phases of the collective disruption process:

  1. DISCOVER:  identify transformational opportunities relevant to your business.  Bring with a customer focus and then identify the key players and the networks.   You need to provide seed funding and resources for these activities.
  2. DEFINE:   define opportunities for an initial business opportunity through an iterative process, and use assessments to decide whether to explore these opportunities further or drop them.
  3. INCUBATE:    Apply a modified version of lean methodology which can be done in one of three ways–1) inside-in (integrated), 2) inside-out (accelerators), 3) outside-in (imbedded entrepreneurs).
  4. INTEGRATE:   Design new teams and structures that are both separate from and connected to the corporation.    These teams need to be separated to allow them to operate outside of the tight financial control of the current business, but they also need to be connected so that they eventually be absorbed into the existing corporate framework or spun off as something entirely new.

In the ninth chapter of the book, he discusses the INTEGRATE phase of the collective disruption process.

Let’s say you’ve gone through the discover phase and have a particular customer focus, and in the define phase have specified an initial business opportunity.   This chapter details how to take great new business ideas that have emerged in the define phase and to nurture and develop them.   Some of the lessons learned from unsuccessful attempts are as follows:

  1. Senior-level corporate visibility and support are keys to success.    In creating a new product which may disrupt the market, you may face internal corporate “antibodies” who see it as a threat to their own security and jobs.
  2. A degree of autonomy and separation is required for incubation of new ventures.
  3. Incentives and reward systems will need to be different from those of the core business units.

With those caveats, Michael then talks about three way to structure the incubation phase.

  1. Inside-in (integrated):   This model incubates ventures within the core business structure while engaging external partners.    Within this model are a spectrum of options, from dedicated internal groups to complete distributed models where new business incubation is managed directly within the business units.   Most companies do the former than the latter, with 3M being a notable exception.
  2. Inside-out (accelerator):   This model uses corporate accelerators or corporate tie-ins to existing startup accelerators.   It can create a simple and efficient business model, but Michael does not recommend it if you want more than a typical 120-day incubation program.
  3. Outside-in (imbedded entrepreneurs):   This model imbeds external partners and entrepreneurs into existing corporate structures.   This model is difficult to pull off I you don’t have the right entrepreneur who can navigate the corporate landscape.

Which model should you choose?   First of all, understand they are not mutually exclusive.   You can try one out and see if it fits your situation.

Now let’s assume that you have the organizational model for the incubation phase.   How do you actually go about doing it?   He recommends a lean approach, where you build early versions of the product from the perspective of the absolute minimum needed rather than the traditional approach of providing many bells and whistles, which apply to smaller and smaller subsets of your potential customer base.   This is termed a minimum viable product or MVP.    This is most easily understood in the software area.    By structuring experimentation as a series of learning experiments, this will drive the learning objectives of this incubation phase.

Let’s say you come up with an MVP that a) addresses a true unmet customer need, 2) is an innovative, unique solution, and 3) answers a marketplace opportunity in terms of timing, price point, business model, etc.   How do you scale up your solution for the mass market?   That is the subject of the NEXT chapter  on the INTEGRATE phase of the collective disruption process, and is the subject of the next post.

 

 

 

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Evolving and Accelerating Incubation


In his book “Collective Disruption:   How Corporations & Startups Can Co-Create Transformative New Businesses,’ Michael Docherty lays out a vision of how established companies can create a strategy for innovation that includes partnering with startups, thereby enabling an “innovation ecosystem.”   This post is the eighth of ten reviewing the various chapters of his book in preparation for the Leadership Forum 2016 event put on by the Chicagoland chapter of the Project Management Institute on May 20th, 2016.

In the first part of his book , Michael explains the reason why open innovation is the recipe for creating innovation that is truly transformative, rather than just maintaining or expanding the core business.   In the second part of his book, he lays out his prescription for “collective disruption” as a way to achieve that open innovation ecosystem.

In the sixth chapter, Michael laid out the four phases of the collective disruption process:

  1. DISCOVER:  identify transformational opportunities relevant to your business.  Bring with a customer focus and then identify the key players and the networks.   You need to provide seed funding and resources for these activities.
  2. DEFINE:   define opportunities for an initial business opportunity through an iterative process, and use assessments to decide whether to explore these opportunities further or drop them.
  3. INCUBATE:    Apply a modified version of lean methodology which can be done in one of three ways–1) inside-in (integrated), 2) inside-out (accelerators), 3) outside-in (imbedded entrepreneurs).
  4. INTEGRATE:   Design new teams and structures that are both separate from and connected to the corporation.    These teams need to be separated to allow them to operate outside of the tight financial control of the current business, but they also need to be connected so that they eventually be absorbed into the existing corporate framework or spun off as something entirely new.

This is the eighth chapter of the book, which discusses the INCUBATE phase of the collective disruption process.

Let’s say you’ve gone through the discover phase and have a particular customer focus, and in the define phase have specified an initial business opportunity.   This chapter details how to take great new business ideas that have emerged in the define phase and to nurture and develop them.   Some of the lessons learned from unsuccessful attempts are as follows:

  1. Senior-level corporate visibility and support are keys to success.    In creating a new product which may disrupt the market, you may face internal corporate “antibodies” who see it as a threat to their own security and jobs.
  2. A degree of autonomy and separation is required for incubation of new ventures.
  3. Incentives and reward systems will need to be different from those of the core business units.

With those caveats, Michael then talks about three way to structure the incubation phase.

  1. Inside-in (integrated):   This model incubates ventures within the core business structure while engaging external partners.    Within this model are a spectrum of options, from dedicated internal groups to complete distributed models where new business incubation is managed directly within the business units.   Most companies do the former than the latter, with 3M being a notable exception.
  2. Inside-out (accelerator):   This model uses corporate accelerators or corporate tie-ins to existing startup accelerators.   It can create a simple and efficient business model, but Michael does not recommend it if you want more than a typical 120-day incubation program.
  3. Outside-in (imbedded entrepreneurs):   This model imbeds external partners and entrepreneurs into existing corporate structures.   This model is difficult to pull off I you don’t have the right entrepreneur who can navigate the corporate landscape.

Which model should you choose?   First of all, understand they are not mutually exclusive.   You can try one out and see if it fits your situation.

Now let’s assume that you have the organizational model for the incubation phase.   How do you actually go about doing it?   He recommends a lean approach, where you build early versions of the product from the perspective of the absolute minimum needed rather than the traditional approach of providing many bells and whistles, which apply to smaller and smaller subsets of your potential customer base.   This is termed a minimum viable product or MVP.    This is most easily understood in the software area.    By structuring experimentation as a series of learning experiments, this will drive the learning objectives of this incubation phase.

Let’s say you come up with an MVP that a) addresses a true unmet customer need, 2) is an innovative, unique solution, and 3) answers a marketplace opportunity in terms of timing, price point, business model, etc.   How do you scale up your solution for the mass market?   That is the subject of the NEXT chapter  on the INTEGRATE phase of the collective disruption process, and is the subject of the next post.

 

 

 

Opportunities and Business Models for Innovation


companies can create a strategy for innovation that includes partnering with startups, thereby enabling an “innovation ecosystem.”   This post is the seventh of ten reviewing the various chapters of his book in preparation for the Leadership Forum 2016 event put on by the Chicagoland chapter of the Project Management Institute on May 20th, 2016.

In the first part of his book , Michael explains the reason why open innovation is the recipe for creating innovation that is truly transformative, rather than just maintaining or expanding the core business.   In the second part of his book, he lays out his prescription for “collective disruption” as a way to achieve that open innovation ecosystem.

In the last chapter, Michael laid out the four phases of the collective disruption process:

  1. DISCOVER:  identify transformational opportunities relevant to your business.  Bring with a customer focus and then identify the key players and the networks.   You need to provide seed funding and resources for these activities.
  2. DEFINE:   define opportunities for an initial business opportunity through an iterative process, and use assessments to decide whether to explore these opportunities further or drop them.
  3. INCUBATE:    Apply a modified version of lean methodology which can be done in one of three ways–1) inside-in (integrated), 2) inside-out (accelerators), 3) outside-in (imbedded entrepreneurs).
  4. INTEGRATE:   Design new teams and structures that are both separate from and connected to the corporation.    These teams need to be separated to allow them to operate outside of the tight financial control of the current business, but they also need to be connected so that they eventually be absorbed into the existing corporate framework or spun off as something entirely new.

This is the seventh chapter of the book, which discusses the DEFINE phase of the collective disruption process.

When you want to create new sources of revenue growth, this almost always entails business model innovation.   Too much attention can be focused in the beginning of a collective disruption partnership on the relationship at the expense of a focus on external market opportunity.   Rather than hammering out agreements about who gets what, you need to start out with the external perspective of “what does the customer get?”

Here is Michael’s blueprint for managing I/P (the “who gets what” question) in such a partnership.

  1. Begin with non-confidential discussions.
  2. Proceed to nondisclosure agreements for initial discussions
  3. Move to teaming agreements that enable external exploration in the market; address existing I/P and sharing of limited new I/P creation
  4. Finally, move to co-development and option agreements and complete I/P rights for co-development AFTER companies have progressed through step 1 through 4

Now, with the “who gets what?” question out of the way, it’s time to move on to the question of “what does the customer get?”, or the creation of a business model.   Here are the phases that Michael recommends to go through here.

Step 0.  Before beginning the business model mapping effort, ensure that the venture has the following:

  • a clearly defined vision
  • measures of success
  • constraints
  • the needs of each party.

Step 1:  Identify strategic levers,  i.e., variables at your disposal for bringing a big idea to market, which are relevant to the venture.   These are the columns of the framework.   Here are some examples of such strategic levers:

  • Customer target
  • Customer problem
  • Value proposition
  • Offering(s)
  • Revenue model(s)
  • Cost model (s)
  • Distribution
  • Partnering approach

Step 2.   Identify a realistic menu of options for each strategic lever that the venture could potentially explore or pursue.   You may add to this venue later as you begin to develop strategy options.

Step 3.  Map the default strategy.   Document it right up front; this will give you a base to compare other options you may explore later.

Step 4.  This is a “mixing-and-matching exercise”.    Pick a column.  For each menu choice under that column, use that item as the “stake in the ground” for that strategy option.  Have the group develop one or more strategies that are choices from the other columns that are a logical and coherent set of choices that support that strategy option.

Step 5.  Iterate on the process above.   Creative and yet internally coherent strategies will gradually emerge.   Start broad and fast and then go back and deselect those options that don’t pass the commonsense test, and then combine and redefine some of the more promising options which have surfaced.

Step 6.  Develop a business model summary statement for the most promising of the options which have surfaced.   The core elements of each strategy summary should include:

  • Description of the strategy (target, offerings, etc.)
  • Rationale
  • Rough financial estimates (size of the potential revenue “prize”)
  • Risks/uncertainties

Step 7.   Define which specific learning objectives can reduce risk.   Conduct limited-scope experiments to test your hypotheses around customer need, product/market fit, partnering approach, and related objectives.

These steps should be iterated until you have a promising direction that is worth moving to the next phase of development.   This is the “INCUBATE” phase, which is covered in chapter 8 and in the next post.

For examples of this business model concept map in action, please refer to chapter 7 of Michael Docherty’s book “Collective Disruption.”

Engage the Innovation Ecosystem


In his book “Collective Disruption:   How Corporations & Startups Can Co-Create Transformative New Businesses,’ Michael Docherty lays out a vision of how established companies can create a strategy for innovation that includes partnering with startups, thereby enabling an “innovation ecosystem.”   This post is the fourth of ten reviewing the various chapters of his book in preparation for the Leadership Forum 2016 event put on by the Chicagoland chapter of the Project Management Institute on May 20th, 2016.

In the first part of his book , Michael explains the reason why open innovation is the recipe for creating innovation that is truly transformative, rather than just maintaining or expanding the core business.   In the second part of his book, he lays out his prescription for “collective disruption” as a way to achieve that open innovation ecosystem.

In the last chapter, Michael laid out the four phases of the collective disruption process:

  1. DISCOVER:  identify transformational opportunities relevant to your business.  Bring with a customer focus and then identify the key players and the networks.   You need to provide seed funding and resources for these activities.
  2. DEFINE:   define opportunities for an initial business opportunity through an iterative process, and use assessments to decide whether to explore these opportunities further or drop them.
  3. INCUBATE:    Apply a modified version of lean methodology which can be done in one of three ways–1) inside-in (integrated), 2) inside-out (accelerators), 3) outside-in (imbedded entrepreneurs).
  4. INTEGRATE:   Design new teams and structures that are both separate from and connected to the corporation.    These teams need to be separated to allow them to operate outside of the tight financial control of the current business, but they also need to be connected so that they eventually be absorbed into the existing corporate framework or spun off as something entirely new.

This post covers the sixth chapter, which covers the DISCOVER phase of the collective disruption process.

The first key step is to be clear on your goals.   Why are you looking for and what are your partners looking for?    However, you cannot settle on detailed plans and objectives based on some preconceived notion of what you’re trying to create.

To illustrate this point, let me relate the story told in Douglas Adams’ book The Hitchhikers Guide to the Galaxy.    In the story, a group of executives who want to assist a new colony in space to organize their society get on a spaceship headed towards that colony.   Unfortunately for them, their ship gets sucked into a wormhole that takes them back to prehistoric Earth in the time of the cavemen.   Undaunted by this setback, the executives decide they are going to use their advanced technology to jumpstart the technology of these primitive people by teaching them innovations such as fire, the wheel, etc.  But their project gets off on a rocky start, because the marketing department cannot decide what color the wheel is going to be.    (Their parallel efforts with introducing fire to the cavemen are similarly stymied by the fact that they cannot communicate well enough with them to organize a focus group to find out how the cavemen relate to fire.)

Now this is, of course, a parody, but it illustrates the concept Michael is talking about regarding making plans which are too detailed at the beginning.    I’m sure the cavemen would be impressed by the wheel no matter what color is turns out to be.

The strategy should be one where the solution emerges in a meaningful way.   You should have a GENERAL idea of which direction you are going towards.   Then, you develop a number of focus areas defined by a set of related opportunities that can fuel a line of products or hopefully a whole new business.    Michael refers to these focus areas as hunting grounds, and the key elements of a productive hunting ground are:

  • it is defined by a set of consumers or customers and a set of unmet needs
  • market gaps are observed where current players are not adequately addressing current and emerging needs
  • it is narrow enough and actionable enough to enable efficient focus of resources to develop and identify solutions
  • it is broad enough to encompass a variety of opportunities and not a single product solution

There are two elements of the process of finding success with a particular hunting ground.    One is making sure that the process is an emergent one, so that you use the startup as a sensing network that, like a dousing rod, gets closer and closer to a viable solution.

And the second element is making sure that the startup has an accurate signal about where the solution is.    This is done by focusing on

  • Who the customer is (articulating a clear definition)
  • What problem the customer faces (again, with clarity)

You need to get face to face with customers, which requires getting out of the building to TALK with them.   If you cannot find the customers you need for customer development interviews, it may be that may not exist in the numbers that you’re projecting on your spreadsheets.

In other words, customers are your first and foremost reality check on whether your dream is possible or not.

The next post will cover chapter 7, which goes more into the DEFINE phase of the collective disruption process.


In his book “Collective Disruption:   How Corporations & Startups Can Co-Create Transformative New Businesses,’ Michael Docherty lays out a vision of how established companies can create a strategy for innovation that includes partnering with startups, thereby enabling an “innovation ecosystem.”   This post is the fourth of ten reviewing the various chapters of his book in preparation for the Leadership Forum 2016 event put on by the Chicagoland chapter of the Project Management Institute on May 20th, 2016.

In the first part of his book , Michael explains the reason why open innovation is the recipe for creating innovation that is truly transformative, rather than just maintaining or expanding the core business.   In the second part of his book, he lays out his prescription for “collective disruption” as a way to achieve that open innovation ecosystem.

In the last chapter, Michael shows that corporate and entrepreneurial mindsets each have positive aspects which, if combined, could create a formidable framework called “collective disruption” for creating transformative innovation.   In this chapter, Michael goes into detail about the four phases involved in the collective disruption framework.

The four phases are:

  1. DISCOVER:  identify transformational opportunities relevant to your business.  Bring with a customer focus and then identify the key players and the networks.   You need to provide seed funding and resources for these activities.
  2. DEFINE:   define opportunities for an initial business opportunity through an iterative process, and use assessments to decide whether to explore these opportunities further or drop them.
  3. INCUBATE:    Apply a modified version of lean methodology which can be done in one of three ways–1) inside-in (integrated), 2) inside-out (accelerators), 3) outside-in (imbedded entrepreneurs).
  4. INTEGRATE:   Design new teams and structures that are both separate from and connected to the corporation.    These teams need to be separated to allow them to operate outside of the tight financial control of the current business, but they also need to be connected so that they eventually be absorbed into the existing corporate framework or spun off as something entirely new.

The next four chapters of his book discuss each of these four phases in turn.   The next post will cover the DISCOVER phase covered in chapter 6 of Michael Docherty’s book.

Embracing Collective Disruption


In his book “Collective Disruption:   How Corporations & Startups Can Co-Create Transformative New Businesses,’ Michael Docherty lays out a vision of how established companies can create a strategy for innovation that includes partnering with startups, thereby enabling an “innovation ecosystem.”   This post is the fourth of ten reviewing the various chapters of his book in preparation for the Leadership Forum 2016 event put on by the Chicagoland chapter of the Project Management Institute on May 20th, 2016.

In the first part of his book , Michael explains the reason why open innovation is the recipe for creating innovation that is truly transformative, rather than just maintaining or expanding the core business.   In the second part of his book, he lays out his prescription for “collective disruption” as a way to achieve that open innovation ecosystem.

Why can’t corporations and startups partner in venture co-creation similar to value creation networks (as discussed in chapter 3).    One objection that is often raised when bringing up such a possibility is the matter of culture:    corporations and startups are often thought of as having cultures that are different as oil and water.

In order to solve complex problems, one needs to leverage polarities as an ongoing process.    The apparent paradoxes between corporate and entrepreneurial approaches are polarities that we can harness.

Corporate approaches are, on the positive end of the polarity scale:

  • disciplined
  • strategic & business-focused
  • scalable

Entrepreneurial approaches are, on the other hand:

  • fast
  • agile
  • creatively courageous

Of course, with every yin there is a yang, so corporate approaches on the negative end show the following attributes:

  • bureaucratic
  • slow
  • risk-averse

where entrepreneurial approaches have the following drawbacks

  • reactionary
  • chaotic
  • starved & desperate

Here reactionary means reacting to an event rather than moving towards a well thought out goal, as opposed to the sense of being politically reactionary.

The idea is that you want to leverage a partnership that accentuates the positive in both, and reduces the negatives on both sides as well.

Let’s go over the positive aspects of the corporate approach and entrepreneurial approach and list the action steps in parentheses that help achieve them.

  • CORPORATE:  disciplined (engagement & support from senior management)
  • CORPORATE:  strategic (aligning ventures to business strategies)
  • CORPORATE:  scalable (accessing scalability of opportunities)
  • ENTREPRENEURIAL:   fast (focus on learning & experiments)
  • ENTREPRENEURIAL:  agile (programs are pivoting based on learning)
  • ENTREPRENEURIAL:  creatively courageous (sufficient autonomy for new business teams)

In the next post, I will discuss chapter 5 which discusses the wider collective disruption framework.

The Evolution of Open Innovation


In his book “Collective Disruption:   How Corporations & Startups Can Co-Create Transformative New Businesses,’ Michael Docherty lays out a vision of how established companies can create a strategy for innovation that includes partnering with startups, thereby enabling an “innovation ecosystem.”   This post is the third of ten reviewing the various chapters of his book in preparation for the Leadership Forum 2016 event put on by the Chicagoland chapter of the Project Management Institute on May 20th, 2016.

In the last chapter, Michael showed why entrepreneurs and lean start-ups excel at transformative innovation.   In this chapter, he talks about why transformative innovation is best nurtured in an environment of “open innovation,” a concept championed by Henry Chesbrough in his seminal book with the same name.

Open innovation ignores the walls of traditional corporate structure, where companies should look both internally AND externally for ideas and work with partners to share both the risk and reward of innovation.

Michael starts the chapter with a notion that may be counterintuitive, but he says that open innovation, although most influential in the technology world, is not really about technology.   It’s about people, and creating relationships that are lateral rather than vertical by putting companies and entrepreneurs on equal footing.   Competitive advantage will not come from who has the best technologies but who has the best relationships.

Those in business still look skeptically at open innovation because they do not yet perceive clear evidence of a direct payment from it.    This perception is based on two reasons:

  1. Open innovation is quietly becoming a more natural and integrated part of doing business.    It is planting the seeds of a new ecosystem, but the fruits have in some cases not yet emerged.
  2. Open innovation has been focused on incremental core business efforts, and not yet on the truly transformative innovation that is possible with such an approach.

Open innovation requires one to make, as Michael puts it, a declaration of interdependence, where zero-sum games (I enrich you) are replaced by non-zero-sum games (we enrich each other).   But there are different ways of going about this.   here are some examples of different types of networks that can be used for innovation and collaboration.

  • Feeder networks:   proactively identifying innovators and partners who can bring technology and capabilities to your company, including suppliers.   They feed you early access to what they are working on but they are also willing to adjust their own development pipelines to align more closely with your strategic goals.
  • Internal networks:   networking within a company, but across divisions, brands, or silos.
  • Peer-to-peer networks:   Companies share insights and co-develop opportunities.
  • Events and forums:    “innovation crowdsourcing” or experimenting with a network before committing to it on a larger scale by creating discrete events aimed at creating and nurturing a network of innovators.

No matter which form of innovation network you decide to go for, Michael has the following advice for you.

  • Set clear goals:   determine what goals you hope to achieve with your innovation network
  • Identify key players:   identify and recruit a few influential and highly respected members both for the content they bring and their ability to help you further grow the network.
  • Map your network:   map your network and key players in the technology and marketing space.   Draw interconnections you know about.   Look at gaps and develop strategies to build the missing connections.
  • Informally launch:   informal event launching allows participants to create early relationships.   By making the approach informal, partners don’t feel overly pressured to make long-term commitments.   Let the network emerge and evolve naturally.
  • Formalize and expand the network:   after the network has evolved for a while, THEN you can create more formal mechanisms for matters like forums for ongoing communication.   Introduce social networks, collaboration software, and online portals, but don’t forget good old-fashioned face-to-face meetings.
  • Experiment and evolve:   create specific initiatives, projects, and co-developments efforts as catalysts.    Consumer needs, enabling technology, and marketplace opportunities are constantly changing and you need to continually look for the intersections of these three areas.

To get examples of the different types of networks and how they evolved, check out Michael Docherty’s third chapter “The Evolution of Open Innovation”!

This chapter three concludes the first part of his book “The Game Has Changed.”  In the second part of his book, he outlines the details of his solution called “Collective Disruption,” starting with chapter 4 “Embracing Collective Disruption,” which I cover in the next post.