These are raw notes for an opinion piece on how to structure an “innovation” group. Comments very welcome.
You’re a senior executive. You know “software is eating the world” and you have to embrace technology and disruption more aggressively. How do you approach it?
If you are gunning for sustaining innovation (i.e. optimizations and extensions to your current business), then you should not create an innovation group but rather build experimentation capabilities into your current operational units.
However, if you want to push the envelope further and work on ideas that are truly new business lines for your company, I recommend sandboxing a “New Business Studio” that can take a staged, portfolio approach.
NEW BUSINESS STUDIO
- What: create an “internal studio” approach, which seed-funds many ideas, kills many if not most, and has the financial resources to stage-gate funds the ones that succeed.
- Mission: create new revenue streams that benefit from the existing foundation, but are not necessarily tied to it
- Values and Methods:
- value speed of learning and iteration
- value both evidence and judgement
- hire only A players who fit the mandate
- be capital efficient (scale only when it is justified)
- don’t insist that every idea look big or get big right away
- kill mediocre ideas and double-down on promising ones
- don’t pursue something unless we have the right team for it
- use modern tools and techniques
- sandbox from organizational rules and bureaucracy
- be transparent within the team and with the broader organization
- respect the organization as partners
- be humble, because there will be a lot of failure
- Requires: patience for a 5 year horizon for things to get to scale (note: VC fund lives are typically 10 years, and if you examine the true lifespan of most successful startups, they always take longer than popular perception / media stories portray)
- Budget: the core team will probably cost up to $3M a year once it is fully up and running, not counting follow-on funding to scale ideas
- Portfolio Funding: you have to choose whether you do follow-on funding with a dedicated pool of money, not unlike a VC fund, or whether you fund on an ad-hoc, as-proven basis. The former might be necessary to safeguard the funds.