Handing Over the Keys to Corporate Innovation

As they face today’s rapidly changing marketplace, established and successful firms have two somewhat contradictory characteristics. On the one hand, by virtue of their incumbency, they have brand recognition, customers, revenue, products and a management infrastructure, all clearly assets that any organization would envy. But too often, they also have an inability to take the sort of risks that are usually associated with innovation, putting them at a distinct disadvantage to nimble startups that can pivot strategies on a moment’s notice.

Finding the path that will allow established companies to take advantage of their strengths while also giving them the flexibility to innovate is thus one of the most pressing concerns of many executives. And it was the theme of the Mack Institute’s Spring Conference, titled “Incubating Innovation in Established Firms” and held earlier this month at the Wharton | San Francisco campus.

The day featured presentations from Wharton professors, from representatives of big companies with a reputation for innovation and from consultants known for their work in helping businesses maintain a tradition of innovation even as they grow in size.

Saikat Chaudhuri, ENG’97, W’97, the institute’s executive director and adjunct associate professor of management, kicked off the event by discussing the efficiency/effectiveness trade-off that incumbent firms need to balance.

Mack Institute Executive Director Saikat Chaudhuri addresses the Spring Conference at Wharton | San Francisco.

Mack Institute Executive Director Saikat Chaudhuri addresses the Spring Conference at Wharton | San Francisco.

“It’s not necessary to have a crystal ball and always aim to be the first,” he said. Instead, companies should focus on tracking developments and reacting to them quickly, rather than trying to forecast where the world is headed. But when firms do foresee a threat to their core business, they should act boldly: “It’s better to cannibalize yourself than be cannibalized by others,” he cautioned.

Following Chaudhuri was the keynote speaker Chunka Mui, well-known as managing director of the Devil’s Advocate Group, which helps companies test their innovation strategies before proceeding with them. Mui is also the author of a number of best-selling business books, notably The New Killer Apps: How Large Companies Can Out-Innovate Start-Ups.

While acknowledging the difficulties that established companies have with innovation, Mui urged his audience to avoid the “grass is always greener” fallacy when they think about startups. He noted, for example, that while nearly half the members of the Fortune 500 from 10 years ago are no longer on the list, the mortality rate among new companies is much higher, exceeding 95 percent.

By contrast, innovation failures are those businesses that think small, bet big and learn too slowly, he said.

 

 

Watch Chunka Mui discuss how large firms can re-invest themselves for innovation.

 

Mui’s presentation was geared at helping top executives have the right framework for approaching innovation. The next presentation took a different tack and examined the role that hiring practices in general, and human resources departments in particular, can play in the effort. Featured were top HR officials from two companies with well-established reputations for innovation: Peggy Tayloe, associate vice president for human resources and talent acquisition at the India-based outsourcing company Infosys, and Prasad Setty, WG’99, Google vice president for what the famously data-oriented company calls “People Analytics and Compensation.”

Infosys, Tayloe said, has a special challenge in innovation, in that it must maintain the innovative spark in a workforce of 160,000 people from 100 cultures who operate in 30 different counties.

Much of the nearly 25-year-old firm’s emphasis on innovation, she said, stems from the vision of Narayana Murthy, its co-founder and chairman. Murthy’s advocacy of constant innovation and a well-trained workforce led him to create the company’s corporate university, currently the biggest in the world and a source of training for more than 13,000 people every day.

“We put a very strong focus on continuous learning,” she said.

Infosys has a number of innovation-fostering internal programs, said Tayloe, mentioning one by which employees can call out the accomplishments of their colleagues with postings on the company’s internal network.

Another conference highlight was the panel from Intel and Amazon on how those two companies structure themselves to maintain their innovative edge.

Neil Blecherman, EE’85, WG’89, who works at Intel as a global director for business development, is responsible for shepherding the company’s foray into the “Internet of Things” and spent much of his presentation discussing the world’s exploding market for “connected devices,” when everything from smoke alarms to refrigerators becomes controllable via the Web from a mobile phone.

“There will be dramatic new business opportunities,” he said.

 

Watch Neil Blecherman talk about maintaining an innovative corporate culture.

 

But gathering the right people to address this market poses special challenges, Blecherman said, notably the need to recognize business opportunities in unlikely places. That, he said, requires good listening skills, which Blecherman said is one of the main attributes he looks for when he brings new people onto his team.

Speaking for Amazon, Chris Phillips, director of product management and user experience for the company’s digital music service, explained Amazon’s lesser-known secrets for success: “No one can say, ‘It’s not my job.’ Everyone feels a level of passion and ownership.”

But when submitting an idea, employees are required to write up the proposal in the form of the press release they imagine would be issued the day the new idea debuted. “They have to write, ‘Today Amazon announced this,’ and ‘Consumers will like it because of this’,” said Phillips. “They also have to write FAQs anticipating all the questions people might have. We’re not trying to be NASA and know every single detail up front. But we do want people to be able to point to something written and say, ‘This is our plan.’”

The daylong session was wrapped up with closing remarks first from Chaudhuri, who congratulated the group for the journey they had taken together, dealing with some of the most vexing challenges facing businesses. He reminded them of the theme of many speakers—that while innovation can be difficult, companies are behooved to attempt it.

He was followed by George Day, the institute co-director and the Geoffrey T. Boisi Professor of Marketing at Wharton, who built on some of the issues mentioned by the two experts on regulation. Day said he was concerned that considering how hard it was for industry to innovate in products, that government would find it especially challenging to innovate in its regulatory approaches.

“Government tends to take a Maginot Line approach to regulation,” he said. “They are always fighting the last war.”

Editor’s note: The original version of this post appeared on July 1, 2014, on the Mack Institute News page.

 

 

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