Jason talks about what corporate innovators can learn from Silicon Valley. With a background in a venture capital, experience in the entrepreneurial world of Silicon Valley, and working as a senior executive at SAP building their Global Business Incubator, Jason is qualified for the task.
Jason says that:
if you’re an entrepreneur, you fight a one-front war and that’s in the marketplace. But if you’re an intrapreneur, you fight a two-front war, one in the marketplace and the other with the corporate antibodies.
Since leaving SAP a couple of years ago, he and a number of partners started Mach49: the Y-Combinator of the Global 1000. They enable the world’s largest companies to build new lines of businesses with their own people in adjacent markets.
There’s a lot of hype, a lot of discussion these days around unicorns. People talk about how these startups are going to destroy the dinosaurs. While Jason thinks there is still plenty of room for both, it is true that innovation is no longer an option for corporations.
What Jason noticed, having grown up in Silicon Valley, is that the world’s largest companies used to come to Silicon Valley to get their technology innovation. What is different nowadays is that multinationals are coming into Silicon Valley at 10 times the number. And it’s no longer just about technology disruption, it’s also about fundamental shifts in business models, in go-to market, full disaggregation of the value chain.
So these big companies come to Silicon Valley, hoping to catch some of the fairy dust. Sadly, it doesn’t work like magic. These companies complain they spend a lot of money but never get to talk to the right people. Their experience is like drinking from a fire hose; it’s all very sexy and exciting, but in the end, the entrepreneurs and the corporations don’t speak the same language. There is no lingua franca. And while the companies are eager to behave like startups that they see around then, they don’t understand the process of moving from idea to commercialization like as a startup does.
We all know that corporates have all the resources to take on many of the new and emerging markets. There is no reason Blockbuster couldn’t have taken on the Netflix opportunity. No reason that Marriott couldn’t have conceived Airbnb or WeWork.
The not-so-secret secret of Silicon Valley is that it’s not that hard…here are some lessons corporates can adopt from Silicon Valley:
Like startups do, corporate should make the customer the center of everything – doing open-ended interviews to figure out what is their pain and be so earnest that some of them become your greatest evangelists.
Prototype and iterate; every time you run a new cycle you learn something new and reduce the risk of failing.
Drive to the moonshot; companies deal with a billion top line revenue, so you got to produce something that can contribute on a large scale. Jason, from his years of experience in Silicon Valley and in corporate innovation, thinks going for the moonshot will take just as much time and money as going for an incremental opportunity.
Though you should aim for the moonshot, you need to start small. You cannot meet 90 percent of everyone’s need, at best you can meet 70 percent, but oftentimes companies and startups try to meet 100 percent of the needs of two or three customers. You have got to find a middle way, and this is why starting small, with an MVP, to find the right product-market fit is essential.
The four takeaways from above are all part of design thinking, agile, and lean startup that corporates should adopt. Now moving on to the Big Three, which all the great entrepreneurs do: customer desirability, execution feasibility, and business viability.
Oftentimes big companies get around customer opportunities with an inside-out perspective. That needs to be flipped on its ear, to an outside-in look. This means not bringing something to the customer and asking what they think, not hiring a set of researchers to do the work for you, not asking the customer what they want (they often don’t really know – the SUV or the minivan?). What Jason means is carrying one-hundred in-person customer interviews, can be done by phone, but as long as they are voice-to-voice interviews. This is the only way to really find out what your potential customers are experiencing, and therefore what you need to create.
Secondly, execution feasibility, there is a continuum of opportunities that run from feature function to product scale opportunity, all the way to brand new business model opportunity. As you are moving towards a new business scale opportunity, by definition, you’re moving into one of a couple of what Jason calls adjacencies. An adjacency could be a new business model, a new buyer, a new users, a new go-to market, a new technology, etc.
If what you are looking to build is zero adjacencies away from the company’s core business, the good news is that the existing business units can do it. On the other hand, if what you’re looking to build is five adjacencies away from the core business, then it really begs the question, why wouldn’t you just let a startup do it?
The sweet spot is those opportunities that are one to two adjacencies away from the core. You are leveraging a profit pool, while staying close enough to be able to unfairly tap to the company’s unique assets and capabilities.
Lastly, business viability, which begs the question: is this a good market to be in? But one thing many don’t pay attention to is market timing. Typically a window to enter a new market lasts 12 to 36 months. That’s what you should aim for in order to be at the power curve, the inflection point. You don’t need to be the first, but you need to be early enough.
So while these are some of the best practices from the startup ecosystem in Silicon Valley, entrepreneurs don’t need to worry about something all intrapreneurs have to. And that is: the mothership. How you are going to ensure that you are not building the best things since sliced bread and have that abjectly killed by the corporate antibodies?
Corporates all have their certain DNA, and that doesn’t change easily, and in some cases it never does change. Changing the culture may not happen, and that is also not where you should start. You should start with building a new line of business, in fact this is all management and the board of directors really care about. First earn the credit, and then build an innovation capability within the organization.
Here are some of the preconditions for success, as a corporate trying to innovate, that Jason learnt by talking with many people involved in corporate innovation, including CEOs:
- It takes guts – tolerating risk and failure, continuously funding a portfolio of small bets, getting serious about unleashing talent, and fully embracing trends and digital disruption.
- Move fast – let intrapreneurs make decisions fast and iterate in the marketplace autonomously, leverage unique assets and capabilities of the company, and don’t take longer than 12 weeks to make a fund/no fund decision.
- Think fresh – you need to allow for exceptions to the rules and process, you need to think of new ways to measure success, and new ways of compensations, governance, resource allocation…
To sum up, here are some of the main differences between G1000 companies and startup that we can learn from:
- Scope: companies go for incremental, for small bets in terms of opportunities, while startups look to scale across new businesses.
- Innovation: companies keep the focus on a product or service but the vector of innovation consists of multiple adjacencies. They need to be changing the paradigm as startups do.
- Organization: While startups go beyond the organization, companies often try to fit into the organizational chart. But only if they manage to escape the four walls for a period of time to make their experiments and each critical mass so that they can withstand the corporate antibodies, then you can bring your innovation back to the organization and hopefully be successful.
- Team: you see corporate using the same people over and over again and expecting different outcomes, startups have small, hybrid and agile teams and this is what works.
- Funding: in corporates you see two types of funding, one is going big with putting 100 people together and 20 million bucks on the table, and the other is leaking money out every quarter until metrics are not matched and then stop. Startups, on the other hand, go for bootstrapping and milestone-based funding.
- Responsibility: usually corporate start with one person having an idea, then someone else prototypes, throws it over the fence to someone who goes to market with it…until no one really understands what is being done, and what the customer asked for. Like startups, teams need to own the innovation from idea to market.
- Outreach: corporates feel that innovation is too critical proprietary to involve outsiders, whereas startups tap their ecosystem to move quickly.
- Building: corporates (though this may be slowly changing) rely on waterfall approach, while startups focus on a customer-centric discovery-drive process.
- Governance: companies stick to their process, while startups have numerous ways of driving the innovation forward. Companies should rethink their governance, going back to the “think fresh” point above.
If large companies, just start, and adopt some of the ways startups function, they could fundamentally shift industries globally.