It’s a stereotype that enterprises struggle with innovation. Despite big budgets, deep skillsets, and lengthy timelines – or, frequently, because of them – big organizations have been getting outflanked by smaller, faster upstarts for decades. But does it need to be that way?
Before we answer that question, let’s talk about three employees at a large organization.
There’s a designer, a contractor in customer support, and a product marketer. They came to the company in different ways – acquisitions, part-time to full time, or joining right out of school – but the common factor is that they’re early in their careers but all want opportunities to grow.
In particular, they all want to build products. And their current roles don’t give them that opportunity. In the marketing guy’s case, he tries to get into a product management training program but never quite makes the cut.
So one by one, they all leave. And eventually, they all start their own companies.
No surprise there, right? Any large organization has people, talented people, who never quite stick. It’s unfortunate, but it happens. And the big company to startup pipeline is really common in technology. On the other hand… it’s a little bit different when the company is Google, and those three employees who didn’t quite fit are Biz Stone, Ben Silbermann, and Kevin Systrom, the founders of Twitter, Pinterest, and Instagram.
That’s literally billions of dollars of potential value that an innovation company missed out on because it wasn’t effectively giving opportunities to innovate to its own employees. Remember – all three were looking for opportunities to build innovative products, and all three of them felt that there was no outlet for it. And that was at Google, a company known for innovation.
The high cost of not giving your employees a chance to innovate
If enterprise companies were effective at innovating, this wouldn’t be such a big deal. But we know that they’re not. Companies will spend about $1.3 trillion in 2019 on digital innovation projects. That’s about two-thirds of the total spend on IT worldwide, and more than double what all companies worldwide will spend on advertising.
And unfortunately, most of it will be wasted. According to a 2017 survey of CIOs by Coucbase, only 10 to 20% of innovation projects succeed – and that’s by those companies’ own internal metrics.
And you can see this at work if you look back at Google. In the years since Stone, Silbermann, and Systrom moved on, Google has tried its hand at exactly the same markets as the companies they founded – and it hasn’t found much success.
For just one example – if you add up all the expenditures Google spent on Google Plus, which most people wouldn’t point to as the most successful example of a social network, it adds up to just shy of $600 million. If Google could have invested just a fraction of that in giving any of those three soon-to-be-founders a clear shot at innovation, the rewards could have been massive.
In other words, there’s a real cost when a company that needs to innovate when it can’t deploy its own people effectively.
Why the ability to pivot is essential to innovation
But that’s not the only way enterprises fail at innovation. Consider the case of Xerox PARC, an innovation lab at Xerox that played a truly massive role in the history of computing. Beginning in the Sixties and Seventies, they had a number of successes in printing, hardware, even semiconductors – but they also had a couple big whiffs.
For one especially relevant example, did you know that Xerox PARC more or less invented GUIs in the early Seventies, more than a decade before they would become commonplace? Not only that, but they also built the first personal computer that was designed from the ground up for a graphical interface. It was called the Xerox Alto, and it was actually deployed successfully at several Xerox locations. Internally, people loved it, and it seemed really promising. And shockingly, they did all this between 1972 and 1975.
Of course, if you’re familiar with the history of personal computing then you know that the Xerox Alto isn’t more than a footnote in it. And the reason is they failed to pivot.
You see, each Xerox Alto cost tens of thousands of dollars to make. And while everyone at Xerox seemed to know it was a good idea, that the tech had promise, there was no market fit for the way Xerox had deployed it. But whereas a startup might give it another go, Xerox determined that there would never be a market fit.
And so they were more than happy to show their graphical interface technology off to a young group of upstarts at another computer company, a few years later. That younger company liked it so much, they decided to hire a couple people off the Xerox PARC team and see if they could make the tech work.
Their name was Apple, and, well, the rest was history. But just like Google’s lost employees, Xerox PARC wasn’t part of it.
Rethinking how the enterprise approaches innovation
So how can companies fix this problem?
Well, to begin with, they need to stop investing so much in projects and start investing more in people. Biz Stone and his fellow Googlers didn’t have an opportunity to flex their innovation chops, so the company missed out. If they’d had that opportunity to try their hand at innovation, the history of Google might look very different.
The other problem is pursuing projects in a way that makes pivoting very difficult or even impossible. Enterprises tend to want to pick a winner, and then throw tons of resources at it. Whereas startups are always willing to throw everything out the window and try something else – and they tend to use less resources to test their ideas, so there’s less at risk if they fail.
And innovators do often fail. It’s part of the game. If companies want to really embrace innovation, they need to start building systems so that employees with a passion and talent for innovation can get the trust to try their ideas, and the forgiveness to try again when those ideas don’t work out.
Could the lean intrepreneur model be the answer?
One way to achieve this is the lean intrapreneur model. Lean intrepreneur is a derivative of the lean methodology pioneered at Toyota for manufacturing, and subsequently adopted into the startup space. Lean enterprise encourages large companies to create a democratized and fast-tracked process that gives their employees – whoever they are, from a product manager to a clerk in the mailroom – direct access to the innovation pipeline. Maybe it’s a pitch competition, or a hackathon, or a mentoring program. The key is to get people with ideas in front of potential sponsors with the power to say yes – usually executives.
And if a sponsor likes the idea or their pitch gets chosen, they get a set budget to build their idea and the freedom to try and make it work.
Of course, you don’t just throw people into the lion’s den, so you want to make sure they have the tools and resources to succeed. LinkedIn has a program like this where people participate in a 2-day innovation workshop, then get basically $1000 of seed funding to create a pitchable prototype.
But lastly, companies need to give their innovators ownership – in the same way that a startup does. And that often means a financial stake in the company. Some hospitals have successfully used this model to spin out massively successful startups, giving their doctors the opportunity to license the work they’ve done internally and transition it into a startup company of their own, with the health system as a key investor. And if their startup succeeds, they reap the very real financial benefits – and so does the enterprise.
So if you’re a mid-market or enterprise company and you’re trying to get in on this whole product innovation thing, remember to look within, first. Because intrapreneurship CAN solve a lot of these challenges – but only if you really do get on board.
Because if you empower your internal innovators, give them access to opportunities, enable their innovation by giving them ownership and resources, then even an enterprise can successfully innovate like a startup – and avoid missing out, like Google and Xerox.