Most product development processes within corporations rely on a regular transition of responsibility as an idea progresses from conceptual to final product. Some of the most common examples are transitions between inventors and feasibility assessment teams, feasibility teams and development teams and even marketing and R&D operations. Often these transitions are also where we see the product development process fail as the product idea never fully takes hold in the imagination of the new team and fades away. One of my preferred ways of visualizing the issues that can arise during transition is through an analysis of idea “ownership”.
The chart in figure 1 describes the level of ownership that a team developing a particular innovation may experience over time. As the team starts out the commitment level is relatively low, no one has spent much time on the initiative and there are many different paths to success still available to the team. Over time the team feels more commitment towards the innovation path and the sunk cost of the current program of work increases, this increases the ownership of the program.
Within every product development project there is a level of complexity that the team is expecting to encounter. This expectation can vary significantly (think landing a man on mars vs. developing a new flavour ice cream) but the important factor is that there is an expectation. Deviations from this expectation are what we call “problems” (or occasionally “lucky breaks”). Tasks that do not deviate from our expectation of complexity are what we call our day job. The chart in figure 2 describes an example of the complexity curve for a project over time.
If we begin to think about how we could measure complexity in the above example it becomes obvious that the level of complexity of a given problem could be measured by the level of commitment and effort required to solve said problem. In essence what we are saying is that every problem we encounter within the product development process will require a particular level of “ownership” in order to be overcome. This allows us to overlay the two previous charts with the common y axis of the theoretical construct “ownership”, see figure 3.
Ownership and the transition
Turning our attention to the concept of ownership as it relates to idea transition between corporate groups we can imagine a (worst case?) scenario where the ownership level of the accepting group post transition is extremely low, Fig 4. This low ownership scenario can arise for many reasons including a lack of understanding of the idea potential, a poor incentive structure (the fabled “not invented here”) or simple housekeeping such as stressed resources limiting the interest in yet another project.
Fundamentally, a project in a low ownership situation is fragile. Problems encountered during this state can cause the project to fail as those responsible for the next development stage see the hurdles as insurmountable, Fig 5. Often these same hurdles are seen in a very different light by those who continue to experience high ownership for the project.
Bridging the gap
How then to avoid issues arising from transition fragility? Obviously one cannot control when an unexpected problem may arise during a project but it is possible to influence ownership in the lead up to, and directly after a responsibility transition. Examples of how this can be achieved are numerous but a couple worth considering include shadowing programs which engage the second group in the decision processes of a project prior to transition, Fig 6. Shadowing programs allow a new transition group to develop understanding and commitment before they take ultimate responsibility for the project.
Another approach uses dovetailed leadership structures which create matrix teams during transition, Fig 7. In this instance a temporary matrix team is formed during transition consisting of the (low ownership) core of the second team reporting into the (high ownership) management of the first team. After a fixed period of time the matrix team is disbanded and reporting lines are reset. This allows for a soft transition where high ownership individuals are always present in the responsible project team.
The innovation transition process within a corporate innovation program can be a very complex procedure in which success is as much down to the personalities of the individuals as the rigor of the systems employed to control it. Companies that focus on solely on the mechanical aspects (document control, handover procedures, technology debriefings etc) may be leaving themselves open to failure through no fault other than the realities of human psychology and the timing of a project hurdle. Innovation programs that incorporate ownership management within their transition processes go a long way to reducing that risk of failure.
Start-ups are typically considered to be free-thinking, risk-taking, and open-minded – characteristics that are universally agreed as necessary for incubation of radical or disruptive innovation. Meanwhile large companies are viewed as too results-focused and risk-averse to create anything besides slow incremental innovations. Is this commonly-held assumption truth or fiction or something in-between and are start-ups or large firms better positioned to successfully commercialize innovation?
Who or where you ask these questions will generally inform the final answer. At most big corporations they focus on the extremely high failure rate for start-ups (even the ones that obtain VC funding) while in the converse situation they’ll point to the radical or disruptive work done by Twitter and Facebook and compare it to the relatively incremental product improvements being churned out by their larger counterparts.
In “Why Small Companies Have the Innovation Advantage”[i] Sam Hogg argues that small companies are more innovative because, besides differences in culture (valuing entrepreneurship more highly) and organizational structure (making faster decisions), they are built to take risks that a larger company cannot justify. However, justifying innovativeness based on risk tolerance alone just doesn’t make sense. The counter-argument could be made that big companies have a better process to balance risk – by ensuring that innovative projects with the highest potential for success are funded while those that do not meet internal standards are killed or allowed to leave for external development (where failure cannot hurt the bottom line) or that bigger companies are better positioned to understand their markets.
This counterargument leads to a point made regarding 3M in a past Schumpeter column in The Economist[ii] – that large companies “can combine the virtues of creativity and scale. 3M likes to conduct lots of small experiments, just like a start-up. But it can also mix technologies from a wide range of areas and, if an idea catches fire, summon up vast resources to feed the flames.” If one is to take this side of the discussion fully, one then assumes that large companies have the knowledge and resources to determine what areas to work in and which ideas to fund toward development and thus have the advantage in innovation.
That entrepreneurial people can have a bigger impact by leveraging the resources of a larger company to drive innovation is a sentiment shared by no-less than Sean Parker[iii], who feels that many talented engineers and product designers starting their own companies could have a bigger impact at the larger firms they are flocking away from.
So, if big companies have inherent advantages in scale, expertise, and distribution that make them more capable of capitalizing on innovation, how can we explain the downfall of Blockbuster or Kodak, two companies with market leading positions that missed the opportunity to innovate in their space? It appears the advantage in resources and skills is not enough to ensure innovation.
Some suggest that by acting like start-ups big companies can effectively utilize their strengths to make real, transformative innovation.[iv] That means taking risks, getting passionate talent that can be directed toward a single goal, interacting with the customer more often, and streamlining bureaucracy.
Steve Jobs’ own description of Apple[v] shows that he bought into this theory – that to be innovative companies, regardless of size, need to embrace a culture that encourages innovation. At Apple that culture meant a focused strategy, a willingness to tolerate tension in favor of working together, and instilling a cross-disciplinary view of how the company can succeed. All-told, this strategy hasn’t worked out too poorly for Apple but probably can’t be expected to work or be as easily deployed at other large companies lacking the strong leadership Steve Jobs’ offered.
Jobs’ would have likely agreed with a point made in the Schumpeter column mentioned earlier2; “The key to promoting innovation (and productivity in general) lies in allowing vigorous new companies to grow big, and inefficient old ones to die.”
On the balance, a fair conclusion would be that start-ups do generally embody characteristics that allow innovative ideas to succeed along with an inherently high tolerance for risk but can lack the resources and connections to effectively capitalize on them while bigger firms offer better systems, skills, and distribution channels but can stifle innovation through a reluctance to accept risk and overly-complicated bureaucracy that frustrates entrepreneurs.
Are start-ups more innovative? Only when large companies chose to stifle their ability to make meaningful innovation real.
What is the lesson for the Osmotic Innovator? Structure teams within your organization to value the things that allow innovative ideas to move forward and succeed. Even if the CEO doesn’t value a start-up culture like Steve Jobs you should do your best to encourage the same values in your teams’ innovation efforts.
– Ensure clear focus – make sure the strategy, mission, and customer for your organization is always front and center
– Tolerate tension and argument – people should be willing to speak-up, dissent with listening allows for the best ideas to move forward, product improvements to be made, and builds ownership
– Accept balanced risk –maintain a portfolio of projects that exhibit different degrees of risk, without accepting risk few disruptive or radical ideas will be allocated sufficient resources to succeed
– Give people responsibility – encourage your team to be entrepreneurs that take on leadership and ownership of the ideas they are passionate about
[iii] Eric Schonfeld. Sean Parker: “Little Startups Are Ridiculously Over-Funded” TechCruch. Nov 15, 2011. http://techcrunch.com/2011/11/15/sean-parker-little-startups-are-ridiculously-overfunded/
[iv] Tomkubilius. 4 Ways Big Companies Can Act Like Start-Ups to be More Innovative. Story of Design by Bright Innovation. March 30, 2011. http://storyofdesign.com/2011/03/30/4-ways-big-companies-can-act-like-start-ups-to-be-more-innovative/
[v] Nilofer Merchant. Apples Startup Culture. Bloomberg Businessweek. June 14, 2010. http://www.businessweek.com/innovate/content/jun2010/id20100610_525759.htm