We took over a programme for a large client. We reworked it, delivered and improved all the performance metrics significantly. Except one.
When we checked in with the cohort a few months later, every single venture was dead.
“What?” we asked, genuinely shocked.
As we debriefed with the teams, it turned out that there was a huge problem in the way the programme interfaced with the rest of the organisation.
Nobody had thought to talk to anyone who ran the operational part of the business (you know the messy part where they make and sell things). Instead there had been an assumption that the innovation programme would deliver gold, and then the rest of the business would fall over themselves crying hosannas in the street.
They just didn’t care. There were lots of reasons for that. They didn’t have the KPIs to support innovation (so even if they championed the project, there was no impact on bonus, promotion or career – except the opportunity cost). There wasn’t a budget, no one owned it. The innovation team weren’t part of their business and the ventures wouldn’t deliver material impact in the short-term. And then there are shareholders focused on growth and free cash flow per share…
You could say “that’s terrible – the business units should be ashamed of themselves.” You could even point to lots of case studies from Kodak onwards about how shortsightedness kills great companies.
The truth is…
It’s rational and sensible. Business units are there to exploit opportunities in the market. Not to find new ones. In sales parlance they are farmers not hunters.
The failure is on the part of the innovation teams. They haven’t handed over exploration-ready ventures. This mindset shift is what is important for the innovation teams.
Do business units buy pre-seed startups? No. They don’t. They buy Series B and C startups with strong market traction where investment can really grow at the business unit without (too much) risk.
Given that we know what the customer wants – nicely baked loaves – innovation departments shouldn’t be handing over dough where the yeast is just starting to rise.
This isn’t easy – but it can be done – whatever the state of your innovation pipeline.