For many companies, innovation means “letting 1,000 flowers bloom” in an unfocused “blue-sky” fashion. But that is almost never the most efficient way (in terms of time, money, and output) to innovate.
To reset the digital future, to combat disruption, companies need to onboard the discipline of innovation and incubation. Since no one can predict the future, the path to success is “optionality”—placing small bets that lead to initiatives that lead to businesses, or transformative capabilities. Experiments should be linked to a strategic view of the future, to a discernable trajectory of customer behavior and demand.
This discipline of innovation, modeled on successful startups and their investors, can be the basis for a new muscle incumbents need to develop.
If you have a sense of future demand (where the puck is heading), and can place bets in a disciplined fashion that puts new sources of value in front of investors, you will change the way you are perceived. You will not be a big player being disrupted by smaller players—but a mover in a category that is growing, with an eye toward a big destination point.
The most compelling model for disciplined innovation comes from successful entrepreneurs and startups, who are among the most disciplined people in the world. They have worked with skilled investors to ensure systematic, staged growth—starting with seed capital and moving to Series A, then B, and C (and later) rounds of investment. Each round of investment provides the right to build to the next level, and in some cases, a startup matures to be the leader or disruptor of a high-growth category.
For entrepreneurs, time is the enemy and resources are finite. These constraints force entrepreneurs to allocate scarce management resources in a disciplined fashion. So, the same principles – ‘time is our enemy’ and ‘constraints are our friends’ – should be onboarded by incumbent innovators. When experimenting with new projects and products, leadership teams can play the role of skilled investor, parceling out funding in stages to incubate from experiment, to pilot initiative, and ultimately to a scale business or a transformative capability. It’s important that incumbents steer away from ROI and other short-lens corporate metrics. That said, there should be real metrics along with a high degree of transparency, and the right governance structure.
To succeed, entrepreneurs need to continually (and rapidly) course correct—pivot or persevere. The cycle time of learning is key—the faster you learn, the better. Probe, test, and learn. Get on base, and then swing for the fences. This discipline of innovation, modeled on successful startups and their investors, can be the basis for a new muscle incumbents need to develop.
How do you catch the next wave? How do you react to disruption in your industry? Look for the new trajectories of demand, a collision of digital forces and behavioral shifts; adopt a disciplined mindset and management approach, with metrics focused on optionality and cycle time of learning; and ensure that you allow the organizational space for disciplined innovation to take place, which could be a separate structure with entrepreneurial leadership loosely coupled in terms of work approach, but tightly coupled through transparency and governance. This discipline is diametrically opposed to the ‘let 1,000 flowers bloom’ or ‘more shots on goal’ mindset that often accompanies efforts in large incumbent organizations. The path to real ‘points on the board’ – net new growth and value – is paved with tenacity and rigor, with entrepreneurial verve.