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:
- 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.
- 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.
- 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).
- 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:
- 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.
- A degree of autonomy and separation is required for incubation of new ventures.
- 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.
- 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.
- 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.
- 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.