This post is written by Ray Daddazio, President of Thornton Tomasetti, from his notes that he took down during a lecture in January of this year. The event was sponsored jointly by Columbia University’s Business School in conjunction with Columbia Entrepreneurship, and was hosted by Chris McGarry, Director for Entrepreneurship in the University Office of Alumni and Development. Rita McGrath, a professor of management at the Business School known for her work on strategy, innovation and entrepreneurship, moderated the discussion. She is also teaching an online course called “Mastering Corporate Entrepreneurship.” On the panel were Steve Blank, a Senior Fellow for Entrepreneurship at Columbia and serial entrepreneur and Brian Murray, President & CEO of HarperCollins Publishers.
Innovation: Theatre or Action?
The motivation of the lecture is focused on the fact that corporate entrepreneurship is a very hot topic these days. However, despite all the talk, actual innovation performance comes nowhere near to delivering on its promise. We are perhaps five years into the latest flurry of excitement about the prospects for innovation-fueled growth. Companies have traveled to Silicon Valley in droves, sponsored innovation boot camps, trained innovation ninjas, and otherwise promised their stakeholders that innovation is front and center on their agendas.
And yet, evidence suggests much of this activity is just ‘Innovation Theater.’ Indeed, how many corporations focus their cultures around an innovation playbook, and train all staff in innovation practices? In a recent McKinsey study, approximately 65% of executives surveyed reported that they were unhappy with their organization’s inability to innovate. That said, McKinsey also discovered that, “On the contrary, senior executives almost unanimously—94 percent—say that people and corporate culture are the most important drivers of innovation.”
What’s Next for Corporate Innovation?
Similar research shows that corporations are spending a lot more of their profits on things like share buybacks and dividends than they are on innovation. So, what’s next for corporate innovation? The speakers identified five major categories of executive movement:
- Large corporations are world-class executions engines, and they now need to move at the speed of a start-up and don’t have the talent to do so. For example, Macy’s/Sears versus Amazon.
- McKinsey’s three horizons of innovation:
- Incremental innovation around core business – 60%-70% of resources
- Adjacent business (extend and tweak portfolio) – 15%-20%
- Transformational (disruptive: Kindle, iPhone, long term bets) 10%-25%
- Most CEOs come from the first horizon:
- Leaders align budgets, promotions, other incentives for execution not innovation
- Going from idea to good idea to acceleration of good idea is difficult
- Providing an incentive for innovation:
- Finance and HR are usually out of sync
- We cannot shoot the core business, because it pays the bills
- Balance (between sustaining core vs. disruptive innovation) is tricky and difficult to achieve
- Need a “re-factoring group” or process that sits between innovation and execution to help work proceed seamlessly understanding limitation of each side.
- Executives must know the difference between “innovation” and “entrepreneurship”:
- Anyone can be innovative; the CEO just needs to get rid of the obstacles
- McKinsey’s Horizons 1 and 2 just need innovation and continuous improvement
- The CEO sets and ingrains a culture of quality as a mindset of the organization
Best Chance for Success at Thornton Tomasetti
The information shared in this excellent lecture reaffirms Thornton Tomasetti’s approach. These are the driving issues that lead to success or failure of most corporate innovation attempts. Setting up the TTWiiN incubator and hiring The Combine addresses the main issues identified by panel. And, this model offers us the very best chance for success.