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Driving Innovation In Large Corporations III: Lessons Learned and Conclusions

Driving Innovation In Large Corporations III: Lessons Learned and Conclusions

Apr 20, 2010

Harnessing the Power of Proven Entrepreneurial Techniques to Drive Innovation in a Large Company.

By William K. Aulet (MIT Entrepreneurship Center), Ricardo dos Santos (Qualcomm, MIT Sloan MBA’97), Stig Poulsen (Danfoss Ventures) and William R. Wagner (Hewlett Packard, MIT PhD’83 Course V).

In each of the cases we reviewed in Part II, for a relatively low cost the Corporate Business Plan Competition (CBPC) has a high impact on improving the innovation culture, the skills of the organization and even producing tangible results from new lines of business.  Will this happen in every case?  The answer is clearly no, and so we look at the characteristics that first make an organization a good candidate for such a competition:

  1. Is innovation fundamental to your company’s business strategy?
  2. Does the CEO believe this and aggressively push for innovation?
  3. Is your company willing to take a long term view of innovation programs?
  4. Will a CBPC complement existing innovation programs in your company today?
  5. Is your organization willing to make a significant investment in a CBPC program? (>$500K out of pocket plus a material time commitment of senior executives)
  6. Will your company take seriously ideas that come out of such a competition?
  7. Is there an identified champion who is passionate about running such a CBPC program?

If your company fits this profile, then the lessons learned from our case studies would indicate the following are key design points for a successful CBPC:

  1. Clear and Aligned Objectives:  The objectives of the CBPC need to be clear and directly related to the overall strategy of the company.  As such, they should be consistent with the objectives that have been met by successful traditional independent business plan competitions, as well as being an effective catalyst to change corporate culture.  As mentioned earlier, traditional business plan competitions offer three main benefits: creation of new companies, fostering of skill development and building of cross-functional teams.  Importantly, it will take even longer to create new companies in a corporate setting: perhaps a few years because of the additional challenges in that environment.
  2. Strong Support at the Top:  In our case studies and other analysis, this is the most critical aspect for success of a CBPC.  It is easy to criticize a corporate business plan competition, and it will likely be a target for incremental managers who do not want their homeostasis threatened or resources reallocated from lower risk projects.   The only solution is to have active and committed support from the very top.  Since there will be failures before successes, CEO advocacy is critical.
  3. Sufficient Resources:  It is imperative that sufficient resources are committed to the program.  The first and most visible will be the incentive for the winners.  Is it meaningful to them?  Does it show commitment from the company?  If not, everyone may be polite but they will notice it, no matter what the decibel level of the cheerleading.  In addition, there must be sufficient resources to run the operations of the program for items like the web portal, programs and market research, which requires microfunding.  In our cases, we found a budget of at least $500K was necessary to have a positive impact.  Finally, is there an agreement or understanding on how other non-monetary company resources will be allowed to be used for the competition?  Will the employees be encouraged and given time to do this, even if it takes place after hours?  Will other company resources be made available?  Will executives willingly and gladly spend meaningful time judging, mentoring or helping the teams?  This is necessary to back up the objectives and strong top-level support for the program.
  4. Good Plan:  A solid plan must be developed that involves careful scheduling to fit with and not disrupt the schedule of the company’s core businesses.   In addition, the plan should include a web site for communicating the program broadly, consistently and at low cost.  An outreach component of the plan must also be developed to generate the awareness and excitement needed to create deal flow for the program.  Of course, the overall plan needs to involve the key stakeholders at the appropriate time and level and have their participation locked in on their schedules.  The plan should be updated annually.  We have also found it valuable to produce a theme for each year, but it should be a guideline and not a restriction.
  5. Avoid Too Much Detail in Plan:  Entrepreneurship is a creative problem-solving skill, and if the competition becomes a fill in the blanks exercise without forcing the participants to be creative, the proper skills will not be developed.  Initiative and commitment to creatively break through walls should be encouraged.  Danfoss has explicitly designed this lack of “too much detail” as one of the explicit guidelines in their competition.
  6. Strong Team to Execute:  In each instance, the CBPC takes strange, unpredictable and sometimes scary turns and twists.   It is therefore essential to have a visible, respected, passionate and committed team to lead the execution.  The team will have to make adjustments to navigate through choppy waters, especially in the early years, but in the end it will be great leadership training.
  7. Support Tools for Participants:   In reviewing the factors for success, having good mentors/coaches was very important, which seemed obvious.   It was less obvious that having a high quality web site with information, tools and communications capability was extremely important as well – and potentially even more important.  In the case of our three companies, this helped to tie together disparate geographic groups and foster cross-disciplinary teams.  It was also important since much of the work had to be done after hours.
  8. Exit Strategy:  There needs to be a clear strategy and concrete plan for what happens when the competition is over, and the exit strategy must be embraced by the executives, the organizers and the participants.  Without it, the CBPC will become an event rather than part of an integrated innovation plan.  Consequently, its value will be dramatically reduced and its longer-term impact will be disappointing.
  9. Willingness to Involve Outside Parties:  In our competitions, if expertise was lacking internally and even times when it was present, the willingness to engage outsiders to help in evaluating new ideas was critical.  Beyond generating new thinking and discussion —  which is the essence of innovation – this commitment sends a clear message that the company is open to ideas and scrutiny of their efforts by outsiders.  Another corporate business plan competition is now planning to take this a step further, opening its CBPC to outside participants.  This will be based on the model of the MIT $100K competition, where outsiders can participate as long as there is one central player from the sponsoring organization.  With a strong foundation from the other items on this checklist, this development can inject new thinking into the company.  CBPC designers should consider incorporating this new feature.
  10. Celebrate Wackiness and Even Failure in the Participants:  True innovation involves a process of mutation that at first might seem crazy, but it expands the boundaries and ultimately might (or might not) turn into a valuable innovation.  Out-of-the-box thinking should be celebrated, and entrants who “fail” should be given credit and encouraged to determine what was learned in the process.  Failure to encourage such learning may cut off a valuable line of thinking that could produce breakthrough innovation.  History shows us that the much maligned Apple Newton product failure was a seed that ultimately contributed to the DNA of the game-changing iPod and iPhone products.

When looking at these three examples and others the authors have reviewed, it is clear that CBPC, as traditional business plan competitions have proven outside the corporate structure, can be a powerful program to promote innovation.  It is not, however, a silver bullet in all situations.  At best it is a valuable tool in a more comprehensive tool box that corporations should use to achieve their innovation goals.  If you choose to use this tool, consider carefully the ten points of guidance we have recommended in this paper and your benefits could be remarkably like they have been for the good venture capitalists who get 5X or more return on their money.  However, it is important to note that a venture capitalist approaches this process from a long-term perspective.  The innovation process is like a plum tree that at first drops many green, hard, inedible plums to the ground.  Unless you are willing to wait, you may miss the tasty, ripe plums that the tree will eventually produce.  Implementers of CBPCs must likewise have patience to see the full rewards of their efforts and investment.

 

Go back to Part I: Challenges Faced by Large Corporations or Part II: Three Case Studies.

This article has been written jointly by William Aulet (MIT Entrepreneurship Center), Ricardo dos Santos (Qualcomm), Stig Poulsen (Danfoss Ventures) and William R. Wagner (Hewlett Packard). It belongs to a series of 3 articles on the subject of Driving Innovation In Large Corporations.

  • William K. Aulet is the Managing Director of the MIT Entrepreneurship Center.
  • Ricardo dos Santos (MIT Sloan MBA’97) is the Sr. Director of Business Creation & Development, Qualcomm Innovation Network / Qualcomm Ventures / Corporate R&D.
  • Stig Poulsen is the Vice President, Danfoss A/S, & General Manager of Danfoss Ventures A/S.
  • Dr. William R. Wagner (MIT PhD’83 Course V) is the New Business Program Manager, HP Imaging and Printing Group.

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