4 Things Innovators Do

All of the really successful innovators do four things that help them discover new markets and product offerings: they keep score differently, they frame product creation as a study, they innovate on product, market, and method, and they manage athree-maxima portfolio. Some of these patterns are at the core of this investigation into Intrapreneurship, so We’ll get into a bit more detail on each of them.

Different ways of keeping score

One of the biggest challenges Intrapreneurs face is that of competing metrics. Large businesses have annual budgets, and tie compensation and bonuses to the attainment of known goals rather than to the discovery of new ones.

Companies that manage to innovate recognize that tomorrow’s businesses look bad when seen through today’s lenses. Consider Blockbuster and Netflix. Blockbuster made much of its revenue from late fees; Netflix had none, so it looked less attractive to the incumbent.

To deal with this, companies create new metrics (such as the number of assumptions confirmed or repudiated) and different time frames (such as weekly or monthly budgeting.) Data on innovation projects is reported in aggregate on an annual basis to the host company, but the individual projects are shielded from the tyranny of long budget cycles.

It’s not innovation, it’s research

To tackle the stigma of failure, some of the companies I’ve talked with treat innovation as a form 

of research. Small start-ups might be surprised at how much primary research costs large businesses. A global study, conducted by a large research company, requires many months and hundreds of thousands of dollars to complete.

Rather than saying, “we’re going to create a new division to sell widgets,” some Intrapreneurs say, “we’re going to study the widget market.” Then they use the budget for the study to enter the market with a minimum viable product and learn quickly.

This has two key consequences:

    First, it provides more direct understanding of users and emergent markets. The project is free to talk to anyone—and more often than not, in truly disruptive innovation, the new users aren’t part of the current business.

    Second, it satisfies the organization’s need for predictability and success. If the innovation is a failure, the Intrapreneur can say, “great news, we now know all about the widget market, and here’s why we shouldn’t enter it.” If, on the other hand, the innovation is promising, then she can say, “the widget market is attractive, and we’ve already created a beach-head product.”

Product, market, method

Start-ups often talk about product/market fit, the moment when you’ve found the right product for the right market and things just snap into place.

Three are big dimensions, and the third one—method—is often overlooked.

Consider Amazon as a book publisher:

    In its early days, it sold books (an existing product) to readers (an existing market.) What was new was the method it employed: centralized distribution and web-based ordering.

    Later, the company introduced the Kindle e-reader - -a new product to the existing market (readers) through now-existing methods (online purchase.)

    And finally, because e-readers had variable font size, the company could reach a new-market (the legally blind) with an existing product (e-readers) and channel (online purchase.)

There have only been a few other truly fundamental changes in written history, such as the replacement of muscle power with steam power, and the resulting industrial age; or the replacement of word-of-mouth with mass printing and literacy. Both of these changes offered an entirely new method of doing things, and triggered a flurry of innovation.

Three-tiered portfolios

Big companies don’t work on one thing at a time. They have a portfolio of innovation projects, and they manage them much as an investor might manage investment, balancing risk and novelty with predictability and familiarity. The best companies put innovation into three distinct portfolios: sustaining, adjacent, and disruptive.

    Sustaining innovation means doing more of the same, better than before. It’s focused on continuous improvement and optimization, and it’s required to remain competitive against known threats. Sergio Zyman, CMO of Coca-Cola, once described the role of marketing as “selling more things to more people for more money more often more efficiently,” which is a good summary of companies in the first tier of a portfolio. Traditional accounting metrics and KPIs apply in this tier; execution matters.

    Adjacent innovation involves changing one aspect of a business model—either the product, the market, or the method. There is risk and uncertainty involved, but it’s close enough to the existing business that it’s familiar to the organization. The metrics in this tier are different, however, so it’s important to learn quickly. Iteration matters most. Projects “graduate” to the first tier of the portfolio when they become predictable and find a home within the existing organization.

    Truly disruptive innovation involves changing many aspects of the business at once. It’s unfamiliar to the existing business, and needs buy-in from the very top of the company to happen. Metrics here deal with the speed at which the organization is identifying and testing new ideas, and discovery matters most. Projects either “graduate” to the second tier of the portfolio when they become measurable, or they warrant the creation of an entirely new business group—often one that has made the existing one completely irrelevant.