The Innovation Challenge In The Twenty First Century – Part II
Anik Bose General Partner at BGV shares his perspective on “going back to the basics” to create successful innovation in corporations in this second part of a two-part blog (please click here to access the first part, where I discussed the increase in number of tools for sourcing corporate innovation in recent days – http://benhamouglobalventures.com/2016/09/28/the-innovation-challenge-in-the-twenty-first-century/) During my tenure at 3Com, we made several investments through 3Com Ventures that delivered solid financial returns as well as product and technology partnerships with key business units. However, the real innovative transformation of 3Com took the form of a JV in China with Huawei, which burgeoned to become a $1B revenue enterprise networking business unit within 3Com in 2006. It was the primary value creation driver. The opportunity was predicated on a few key assumptions: a) The market potential for China to become one of the largest greenfield enterprise networking markets; b) The ability to establish a world class R&D platform for switching and routing in China at a fraction of the cost of Silicon Valley; c) Being able to find the optimal partner in China – one with an aligned vision around the opportunity and complementary competencies around high quality engineering and in country go to market capabilities. Our insights for this opportunity in 2001 were based around pattern recognition derived from interactions with start-up and established company business models that were having early market success in China as well as my own understanding of the fundamental changes occurring within the enterprise networking industry at that time. I believe that the lessons learned at 3Com around the challenges for fueling innovation in a large multi billion-dollar enterprise with multiple business units are still relevant for Chief Innovation Officers today. These include:
- Resource Constraints – The CINO charter is often ambitious to drive innovation across business units, functions and regions. The typical CINO function is often a staff function with a small team (2-3 people) and limited budget. Ensuring that innovation delivers business results is a tall order with such a set up. Fostering idea generation and rapid experimentation requires a reasonable operating or balance sheet budget that can be used to test ideas with rapid experimentation often requiring technical and multi disciplinary resources. At 3Com I was fortunate to have a multi-disciplinary team of nine team members along with access to the 3Com balance sheet for 3Com Venture investments.
- Incentive Misalignment – Lines of business are often consumed by optimizing the near and mid term potential of their businesses since this is how they are measured and incentivized. Convincing them to embrace and address disruptive market opportunities that cannibalize their existing business is an uphill task. Driving innovation beyond the enterprises core business requires overcoming this large moment of inertia. Even if the CINO is successful in defining specific new opportunities and validating the technology, the challenge is go-forward scaling – should it be transferred to a business unit, set up as an adhoc business etc. The answer depends on the situation. At 3Com as my role evolved I had to take on the responsibility and ownership for the China JV initiative, as it was not one that could be transferred to a Business Unit with low risk.
- Organizational Disconnect with Strategy – To be successful innovation intelligence has to be tightly integrated with the company’s strategic plans and long term vision but the CINO function often does not own the strategic planning process that may lie with another executive or be delegated to business unit leaders. At 3Com, I was also responsible for strategy formulation – this was critical for being able to not only formulate innovation options but also to integrate them as part of the overall go forward value creation strategy.
- Rare skill set – The ideal CINO skill set is diverse and seldom found in a single person. They must have a good business understanding to balance long term strategic planning with tactical business operations. They need to have a certain level of technology understanding to enable new products and services. They must possess exceptional communication skills to successfully navigate the Executive C- Suite and be able to create alignment amongst their peers on key innovation initiatives. They also need to be empowered by the CEO to take bold risks. Finally they must be able to integrate the voice of the customer into experimental initiatives and build the eco-system relationships with both start-ups and large companies. Ultimately the CINO needs to find the balance between being an “outsider” and an “insider”. Being too much of an outsider will lead to the organization rejecting your ideas. Having too much of an “insider” approach results in too many ideas that do not represent meaningful change to customers. At 3Com, I built a world class team with both “insiders” and “outsiders” who were able to complement me in driving the innovation strategy be it through the Corporate Venture function or through partnerships or JV’s. Last but not least I was fortunate to have both 3Com CEO and Chairman as strong advocates.
- Building the right foundation – Define the role with the company specific situation in mind and then recruit the right leader with the appropriate skills
- Ensuring organizational and incentive alignment to drive culture change
- Funding and resourcing the function appropriately with the innovation goals in mind
- Selecting the optimal innovation vehicles and tools that are consistent with the specific situation and goals
- Partnering early with the appropriate eco-system partners – VC firms, accelerators etc.