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November 14, 2013

Disruptive Innovation Within the Enterprise?

Large companies often try to tackle disruptive innovation within their existing corporate structures. But when they do, it rarely works. The limitations on what can be accomplished cascade from the executive imagination (or lack thereof) down to the rank and file innovation team members, affecting every aspect of product development and marketing.

At LSM we are brought in to large companies to teach them how to do Lean Startup. We (too) frequently work with innovation teams that aren't even allowed to talk with the company's customers. Mind you these are people who are paying tens of thousands of dollars to be taught customer development! But you see, the gatekeepers to customers (sales, marketing & research departments) tend to get really nervous that someone could go "off-script" and spook a customer in some unforseen way. Maybe even with good reasons? But the bottom line is that the current state of affairs proves very frustrating to the innovation team. They end up feeling like they're crashing through roadblocks at every step of the process.

Other problems abound, not just difficulty reaching real customers. Innovation teams often can't allocate funds without approval from the finance department. Or they're stuck in situations where they can't risk failure without endangering their jobs. Or simple fear even. We've actually heard leaders at American Express say, "We can't do this because it would put us head-to-head against Intuit." And then heard their counterparts at Intuit say, "We can't do that (same thing) because it's not what Intuit is good at."


The worst examples of stifling innovation that I've personally experienced were during my stint in Dealer Services at Daimler-Chrysler, in late 2004. At that time, the two halves of the company were fighting each other tooth and nail over whose business approach would win. By the way, it absolutely didn't matter whose approach was better. The only thing that mattered was power, and the germans had a lot of it. For instance, as my team was gearing up to produce a revolutionary low-cost OBDII/wifi interface that would dramatically cut the cost of diagnostic tools for auto mechanics, a competing group at Benz bought out the entire capacity of processor chips that we had based our design on, for the following three years. Did they need the chips themselves? Nope, they were just screwing us over because they could. I have tons of stories like that, but I'm saving them for another book. Heh.

So where were we? Ah yes, the constraints of resource dependence, legacy competencies, political infighting and brand identity are absolutely deadly to creativity and risk-taking. Enterprises that seek disruptive innovation must find a way to escape those constraints or it will never match the kinds of innovations that pour out of startups of Silicon Valley, New York, Boulder, Seattle and Boston, etc.

The ability to innovate repeatedly and reliably must be carefully woven into the fabric of an organization. Innovation teams shouldn't have to think about how to navigate the corporation to get ideas approved or resources allocated. If they have to scratch their heads about how to be innovative, they've lost the war before a shot has been fired.

The goal of producing disruptive innovations demands a new organizational structure. Existing products, customers, markets, and competitors are irrelevant to the work that needs to be done. Innovation teams must be untethered from the legacy corporate mission and allowed to operate outside the corporate culture. They need a structure that not only allows but also incentivizes them to look beyond the current landscape and envision a world that doesn't yet exist. Only then will the enterprise be positioned to thrive amid chaos.

Interested in what that new organizational structure looks like? I’m writing a book that covers it in detail, along with my business partner and co-author, Trevor Owens. The book covers applying Lean Startup to corporate entrepreneurship and is called The Lean Enterprise.

Learn more on our book’s website: http://LeanEnterpriseBook.com

You can also follow The Lean Enterprise collection on Medium for regular updates and ideas on the subject.


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