Why Companies are Not Startups

In the last few years we’ve recognized that a startup is not a smaller version of a large company. We’re now learning that companies are not larger versions of startups.

There’s been lots written about how companies need to be more innovative, but very little on what stops them from doing so.

Companies looking to be innovative face a conundrum: Every policy and procedure that makes them efficient execution machines stifles innovation.

This first post will describe some of the structural problems companies have; follow-on posts will offer some solutions.

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Facing continuous disruption from globalization, China, the Internet, the diminished power of brands, changing workforce, etc., existing enterprises are establishing corporate innovation groups. These groups are adapting or adopting the practices of startups and accelerators – disruption and innovation rather than direct competition, customer development versus more product features, agility and speed versus lowest cost.

But paradoxically, in spite of all their seemingly endless resources, innovation inside of an existing company is much harder than inside a startup. For most companies it feels like innovation can only happen by exception and heroic efforts, not by design. The question is – why?

The Enterprise: Business Model Execution
We know that a startup is a temporary organization designed to search for a repeatable and scalable business model. The corollary for an enterprise is:

A company is a permanent organization designed to execute a repeatable and scalable business model.

Once you understand that existing companies are designed to execute then you can see why they have a hard time with continuous and disruptive innovation.

Every large company, whether it can articulate it or not, is executing a proven business model(s). A business model guides an organization to create and deliver products/service and make money from it. It describes the product/service, who is it for, what channel sells/deliver it, how demand is created, how does the company make money, etc.

Somewhere in the dim past of the company, it too was a startup searching for a business model. But now, as the business model is repeatable and scalable, most employees take the business model as a given, and instead focus on the execution of the model – what is it they are supposed to do every day when they come to work. They measure their success on metrics that reflect success in execution, and they reward execution.

It’s worth looking at the tools companies have to support successful execution and explain why these same execution policies and processes have become impediments and are antithetical to continuous innovation.

20th century Management Tools for Execution
In the 20th century business schools and consulting firms developed an amazing management stack to assist companies to execute. These tools brought clarity to corporate strategy, product line extension strategies, and made product management a repeatable process.

bcg matrix

For example, the Boston Consulting Group 2 x 2 growth-share matrix was an easy to understand strategy tool – a market selection matrix for companies looking for growth opportunities.

Strategy Maps from Robert Kaplan

Strategy Maps

Strategy Maps are a visualization tool to translate strategy into specific actions and objectives, and to measure the progress of how the strategy gets implemented.

StageGate

StageGate Process

Product management tools like Stage-Gate® emerged to systematically manage Waterfall product development. The product management process assumes that product/market fit is known, and the products can get spec’d and then implemented in a linear fashion.

Strategy becomes visible in a company when you draw the structure to execute the strategy. The most visible symbol of execution is the organization chart. It represents where employees fit in an execution hierarchy; showing command and control hierarchies – who’s responsible, what they are responsible for, and who they manage below them, and report to above them.

GM 1925 org chart

All these tools – strategy, product management and organizational structures, have an underlying assumption – that the business model – which features customers want, who the customer is, what channel sells/delivers the product or service, how demand is created, how does the company make money, etc – is known, and that all the company needed is a systematic process for execution.

Driven by Key Performance Indicators (KPI’s) and Processes
Once the business model is known, the company organizes around that goal and measures efforts to reach the goal, and seeks the most efficient ways to reach the goal. This systematic process of execution needs to be repeatable and scalable throughout a large organization by employees with a range of skills and competencies. Staff functions in finance, human resources, legal departments and business units developed Key Performance Indicators, processes, procedures and goals to measure, control and execute.

Paradoxically, these very KPIs and processes, which make companies efficient, are the root cause of corporations’ inability to be agile, responsive innovators. 

This is a big idea.

Finance  The goals for public companies are driven primarily by financial Key Performance Indicators (KPI’s). They include: return on net assets (RONA), return on capital deployed, internal rate of return (IRR), net/gross margins, earnings per share, marginal cost/revenue, debt/equity, EBIDA, price earning ratio, operating income, net revenue per employee, working capital, debt to equity ratio, acid test, accounts receivable/payable turnover, asset utilization, loan loss reserves, minimum acceptable rate of return, etc.

(A consequence of using these corporate finance metrics like RONA and IRR is that it‘s a lot easier to get these numbers to look great by 1) outsourcing everything, 2) getting assets off the balance sheet and 3) only investing in things that pay off fast. These metrics stack the deck against a company that wants to invest in long-term innovation.)

These financial performance indicators then drive the operating functions (sales, manufacturing, etc) or business units that have their own execution KPI’s (market share, quote to close ratio, sales per rep, customer acquisition/activation costs, average selling price, committed monthly recurring revenue, customer lifetime value, churn/retention, sales per square foot, inventory turns, etc.)

Corp policies and KPIs

Corporate KPI’s, Policy and Procedures: Innovation Killers

HR Process  Historically Human Resources was responsible for recruiting, retaining and removing  employees to execute known business functions with known job spec’s. One of the least obvious but most important HR Process, and ultimately the most contentious, issue in corporate innovation is the difference in incentives. The incentive system for a company focused on execution is driven by the goal of meeting and exceeding “the (quarterly/yearly) plan.”  Sales teams are commission-based, executive compensation is based on EPS, revenue and margin, business units on revenue and margin contribution, etc.

What Does this Mean?
Every time another execution process is added, corporate innovation dies a little more.

The conundrum is that every policy and procedure that makes a company and efficient execution machine stifles innovation.

Innovation is chaotic, messy and uncertain. It needs radically different tools for measurement and control. It needs the tools and processes pioneered in Lean Startups.HBR Lean Startup article

While companies intellectually understand innovation, they don’t really know how to build innovation into their culture, or how to measure its progress.

What to Do?
It may be that the current attempts to build corporate innovation are starting at the wrong end of the problem. While it’s fashionable to build corporate incubators there’s little evidence that they deliver more than “Innovation Theater.” Because internal culture applies execution measures/performance indicators to the output of these incubators and allocates resources to them same way as to executing parts of company.

Corporations that want to build continuous innovation realize that innovation happens not by exception but as integral to all parts of the corporation.

To do so they will realize that a company needs innovation KPI’s, policies, processes and incentives. (Our Investment Readiness Level is just one of those metrics.) These enable innovation to occur as an integral and parallel process to execution. By design not by exception.

We’ll have more to say about this in future posts.

Lessons Learned

  • Innovation inside of an existing company is much harder than a startup
  • KPI’s and processes are the root cause of corporations’ inability to be agile and responsive innovators
  • Every time another execution process is added, corporate innovation dies a little more
  • Intellectually companies understand innovation, they don’t have the tools to put it into practice
  • Companies need different policies,  procedures and incentives designed for innovation
  • Currently the data we use for execution models the past
  • Innovation metrics need to be predictive for the future
  • These tools and practices are coming…

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Do Pivots Matter?

There’s a sign on the wall but she wants to be sure
’
Cause you know sometimes words have two meanings
Led Zeppelin – Stairway to Heaven

In late 2013 Cowboy Ventures did an analysis of U.S.-based tech companies started in the last 10 years, now valued at $1 billion. They found 39 of these companies.  They called them the “Unicorn Club.”

Charlie

The article summarized 10 key learnings from the Unicorn club. Surprisingly one of the “learnings” said that, “…the “big pivot” after starting with a different initial product is an outlier. Nearly 90 percent of companies are working on their original product vision. The four “pivots” after a different initial product were all in consumer companies (Groupon, Instagram, Pinterest and Fab).”

One of my students sent me the article and asked, “What does this mean?”  Good question.

Since the Pivot is one of the core concepts of the Lean Startup I was puzzled. Could I be wrong? Is it possible Pivots really don’t matter if you want to be a Unicorn?

Short answer – almost all the Unicorns pivoted. The authors of the article didn’t understand what a Pivot was.

What’s a pivot?
A pivot is a fundamental insight of the Lean Startup. It says on day one, all you have in your new venture is a series of untested hypothesis. Therefore you need to get outside of your building and rapidly test all your assumptions. The odds are that one or more of your hypotheses will be wrong. When you you discovery your error, rather than firing executives and/or creating a crisis, you simply change the hypotheses.

What was lacking in the article was a clear definition of a Pivot.  A Pivot is not just changing the product. A pivot can change any of nine different things in your business model. A pivot may mean you changed your customer segment, your channel, revenue model/pricing, resources, activities, costs, partners, customer acquisition – lots of other things than just the product.

Definition: “A pivot is a substantive change to one or more of the 9 business model canvas components.”

Business Model
Ok, but what is a business model?

Think of a business model as a drawing that shows all the flows between the different parts of your company’s strategy. Unlike an organization chart, which is a diagram of how  job positions and  functions of a company are related, a business model diagrams how a company makes money – without having to go into the complex details of all its strategy, processes, units, rules, hierarchies, workflows, and systems.

Alexander Osterwalder’s  Business Model canvas puts all the complicated strategies of your business in one simple diagram. Each of the 9 boxes in the canvas specifies details of your company’s strategy.  (The Business Model Canvas is one of the three components of the Lean Startup. See the HBR article here.)HBR Canvas

So to answer to my students question, I pointed out that the author of the article had too narrow a definition of what a pivot meant. If you went back and analyzed how many Unicorns pivoted on any of the 9 business model components you’d likely find that the majority did so.

UnicornsTake a look at the Unicorn club and think about the changes in customer segments, revenue, pricing, channels, all those companies have made since they began: Facebook, LinkedIn – new customer segments, Meraki – new revenue models, new customer segments, Yelp – product pivot, etc. – then you’ll understand the power of the Pivot.

Lessons Learned

  • A Pivot is not just when you change the product
  • A pivot is a substantive change to one or more of the 9 business model canvascomponents
  • Almost all startups pivot on some part of their business model after founding
  • Startups focused on just product Pivots will limited their strategic choices – it’s like bringing a knife to a gunfight

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Free Reprints of “Why the Lean Startup Changes Everything”

The Harvard Business Review is offering free reprints of  the May 2013 cover article, “Why the Lean Startup Changes Everything

Available here

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When Hell Froze Over – in the Harvard Business Review

Page 1 HBR with text

“I refuse to join any club that would have me as a member.”

Groucho Marx

In my 21 years as an entrepreneur, I would come up for air once a month to religiously read the Harvard Business Review. It was not only my secret weapon in thinking about new startup strategies, it also gave me a view of the management issues my customers were dealing with. Through HBR I discovered the work of Peter Drucker and first read about management by objective. I learned about Michael Porters’s five forces. But the eye opener for me was reading Clayton Christensen HBR article on disruption in the mid 1990’s and then reading the Innovators Dilemma. Each of these authors (along with others too numerous to mention) profoundly changed my view of management and strategy. All of this in one magazine, with no hype, just a continual stream of great ideas.

HBR Differences

For decades this revered business magazine described management techniques that were developed in and were for large corporations –  offering more efficient and creative ways to execute existing business models. As much as I loved the magazine, there was little in it for startups (or new divisions in established companies) searching for a business model. (The articles about innovation and entrepreneurship, while insightful felt like they were variants of the existing processes and techniques developed for running existing businesses.) There was nothing suggesting that startups and new ventures needed their own tools and techniques, different from those written about in HBR or taught in business schools.

To fill this gap I wrote The Four Steps to the Epiphany, a book about the Customer Development process and how it changes the way startups are built. The Four Steps drew the distinction that “startups are not smaller versions of large companies.” It defined a startup as a “temporary organization designed to search for a repeatable and scalable business model.” Today its concepts of  “minimum viable product,” “iterate and pivot”, “get out of the building,” and “no business plan survives first contact with customers,” have become part of the entrepreneurial lexicon. My new book, The Startup Owners Manual, outlined the steps of building a startup or new division inside a company in far greater detail.

HBR Cust DevIn the last decade it’s become clear that companies are facing continuous disruption from globalization, technology shifts, rapidly changing consumer tastes, etc. Business-as-usual management techniques focused on efficiency and execution are no longer a credible response. The techniques invented in what has become the Lean Startup movement are now more than ever applicable to reinventing the modern corporation. Large companies like GE, Intuit, Merck, Panasonic, and Qualcomm are leading the charge to adopt the lean approach to drive corporate innovation. And  the National Science Foundation and ARPA-E adopted it to accelerate commercialization of new science.

Today, we’ve come full circle as Lean goes mainstream. 250,0000 copies of the May issue of Harvard Business Review go in the mail to corporate and startup executives and investors worldwide. In this month’s issue, I was honored to write the cover story article, “Why the Lean Startup Changes Everything.”  The article describes Lean as the search for a repeatable and scalable business model – and business model design, customer development and agile engineering – as the way you implement it.

I’m  proud to be called the “father” of the Lean Startup Movement. But I hope at least two—if not fifty—other catalysts of the movement are every bit as proud today. Eric Ries, who took my first Customer Development class at Berkeley, had the insight that Customer Development should be paired with Agile Development. He called the combination “The Lean Startup” and wrote a great book with that name.

HBR CanvasAlexander Osterwalder‘s inspired approach to defining the business model in his book Business Model Generation provide a framework for the Customer Development and the search for facts behind the hypotheses that make up a new venture. Osterwalder’s business model canvas is the starting point for Customer Development, and the “scorecard” that monitors startups’ progress as they turn their hypotheses about what customers want into actionable facts—all before a startup or new division has spent all or most of its capital.

The Harvard Business Review is providing free access to the cover story article, “Why the Lean Startup Changes Everything.  Go read it.

Then go do it.

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Why Big Companies Can’t Innovate

My friend Ron Ashkenas interviewed me for his blog on the Harvard Business Review. Ron is a managing partner of Schaffer Consulting, and is currently serving as an Executive-in-Residence at the Haas School of Business at UC Berkeley. He is a co-author of The GE Work-Out and The Boundaryless Organization. His latest book is Simply Effective.  For what I had thought were a few simple ideas about taking what we’ve learned about startups and applying it to corporate innovation, the post has gotten an amazing reaction. Here’s Ron’s blog post.

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What’s striking about Fast Company’s 2013 list of the world’s 50 most innovative companies is the relative absence of large, established firms. Instead the list is dominated by the big technology winners of the past 20 years that have built innovation into their DNA (Apple, Google, Amazon, Samsung, Microsoft), and a lot of smaller, newer start-ups. The main exceptions are Target, Coca Cola, Corning, Ford, and Nike (the company that topped the list).

It’s not surprising that younger entrepreneurial firms are considered more innovative. After all, they are born from a new idea, and survive by finding creative ways to make that idea commercially viable. Larger, well-rooted companies however have just as much motivation to be innovative — and, as Scott Anthony has argued, they have even more resources to invest in new ventures. Sowhy doesn’t innovation thrive in mature organizations?

To get some perspective on this question, I recently talked with Steve Blank, a serial entrepreneur, co-author of The Start-Up Owner’s Manual, and father of the “lean start-up” movement. As someone who teaches entrepreneurship not only in universities but also to U.S. government agencies and private corporations, he has a unique perspective. And in that context, he cites three major reasons why established companies struggle to innovate.

First, he says, the focus of an established firm is to execute an existing business model — to make sure it operates efficiently and satisfies customers. In contrast, the main job of a start-up is to search for a workable business model, to find the right match between customer needs and what the company can profitably offer. In other words in a start-up, innovation is not just about implementing a creative idea, but rather the search for a way to turn some aspect of that idea into something that customers are willing to pay for.

Finding a viable business model is not a linear, analytical process that can be guided by a business plan. Instead it requires iterative experimentation, talking to large numbers of potential customers, trying new things, and continually making adjustments. As such, discovering a new business model is inherently risky, and is far more likely to fail than to succeed. Blank explains that this is why companies need a portfolio of new business start-ups rather than putting all of their eggs into a limited number of baskets. But with little tolerance for risk, established firms want their new ventures to produce revenue in a predictable way — which only increases the possibility of failure.

Finally, Blank notes that the people who are best suited to search for new business models and conduct iterative experiments usually are not the same managers who succeed at running existing business units. Instead, internal entrepreneurs are more likely to be rebels who chafe at standard ways of doing things, don’t like to follow the rules, continually question authority, and have a high tolerance for failure. Yet instead of appointing these people to create new ventures, big companies often select high-potential managers who meet their standard competencies and are good at execution (and are easier to manage).

The bottom line of Steve Blank’s comments is that the process of starting a new business — no matter how compelling the original idea — is fundamentally different from running an existing one. So if you want your company to grow organically, then you need to organize your efforts around these differences.

Listen to the post here: or download the podcast here

Qualcomm’s Corporate Entrepreneurship Program – Lessons Learned (Part 2)

I ran into Ricardo Dos Santos and his amazing Qualcomm Venture Fest a few years ago and was astonished with its breath and depth.  From that day on, when I got asked about which corporate innovation program had the best process for idea selection, I started my list with Qualcomm.

This is part 2 of Ricardo’s “post mortem” of the life and death of Qualcomm’s corporate entrepreneurship program.  Part 1 outlining the program is here. Read it first.

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What Qualcomm corporate innovation challenges remained?
Ironically, our very success in creating radically new product and business ideas ran headlong into cultural and structural issues as well as our entrenched R&D driven innovation model:

  • Cultural Issues:  Managers approved their employees sign-up for the bootcamp, but became concerned with the open-ended decision timelines that followed for most of the radical ideas.  Employees had a different concern – they simply wanted more clarity on how to continue to be involved, since formal rules of engagement ended with the bootcamp.
  • Structural Issues:  Most of the radical ideas coming out of the 3-month bootcamp possessed a high hypotheses-to-facts ratio.  When the teams exited the bootcamp, however, it was unclear which existing business unit should evaluate them. Since there weren’t corporate resource for further evaluation, (one of our programs’ constraints was not to create new permanent infrastructures for implementation,) we had no choice but to assign the idea to a business unit and ask them to perform due diligence the best they could. (By definition, before they had a chance to fully buy into the idea and the team).

With hindsight we should have had “proof of concepts” tested in a corporate center (think ‘pop-up incubator’) where they would do extensive Customer Discovery. We should had done this before assigning the teams to a particular business unit (or had the ability to create a new business unit, or spin the team out of the company).

The last year of the program, we tried to solve this problem by requiring that the top 20 teams first seek a business unit sponsor before being admitted into the bootcamp (and we raised a $5 million fund from the BUs earmarked for initial implementation ($250K/team.) Ironically this drew criticism from some execs fearing we might have missed the more radical, out-of-the box ideas!

  • Entrenched Innovation Model Issues:  Qualcomm’s existing innovation model – wireless products were created in the R&D lab and then handed over to existing business units for commercialization – was wildly successful in the existing wireless and mobile space. Venture Fest was not integral to their success. Venture Fest was about proposing new ventures, sometimes outside the wireless realm, by stressing new business models, design and open innovation thinking, not proposing new R&D projects.These non-technical ideas ran counter to the company’s existing R&D, lab-to-market model that built on top of our internally generated intellectual property.  The result was that we couldn’t find internal homes for what would have been great projects or spinouts. (Eventually Qualcomm did create a corporate incubator to handle projects beyond the scope of traditional R&D, yet too early to hand-off to existing business unit).

We were asking the company’s R&D leads, the de-facto innovation leaders, who had an existing R&D process that served the company extremely well, to adopt our odd-ball projects. Doing so meant they would have to take risks for IP acquisition and customer/market risks outside their experience or comfort zone. So when we asked them to embrace these new product ideas, we ran into a wall of (justified) skepticism. Therefore a major error in setting up our corporate innovation program was our lack of understanding how disruptive it would be to the current innovation model and to the executives who ran the R&D Labs.

What could have been done differently?
We had relative success flowing a good portion of ideas from the bootcamp into the business and R&D units for full adoption, partial implementation or strategic learning purposes, but it was a turbulent affair.  With hindsight, there were four strategic errors and several tactical ones:

1)   We should have recruited high level executive champions for the program (besides the CEO). They could have helped us anticipate and solve organizational challenges and agree on how we planned to manage the risks.

2)   We should have had buy-in about the value of disruptive new business models, design and open innovation thinking.

3)   We unknowingly set up an organizational conflict on day one. We were prematurely pushing some of the teams in the business units. The ‘elephant in the room’ was that the Venture Fest program didn’t fit smoothly with the BU’s readiness for dealing with unexpected ‘bottoms up’ innovation, in a quarterly- centric, execution environment.

4)   Our largest customer should have been the R&D units, but the reality was that we never sold them that the company could benefit by exploring multiple innovation models to reduce the risks of disruption – we had taken this for granted and met resistance we were unprepared to handle.

Qualcomm Lessons Learned

Qualcomm Lessons Learned

  • The Venture Fest program truly was ground breaking.  Yet we never told anyone outside the company about it. We should have been sharing what we built with the leading business press, highlighting the vision and support of the program’s originator, the CEO.
  • We should have asked for a broader innovation time off and incentive policy for employees, managers, and executives.  Entrepreneurial employees must have clear opportunities to continue to own ideas through any stage of funding – that’s the major incentive they seek.  Managers and execs should be incentivized for accommodating employee involvement and funding valuable experiments.
  • We needed a for a Proof of Concept center.  Radical ideas seldom had an obvious home immediately following the bootcamp.  We lacked a formal center that could help facilitate further experiments before determining an implementation path.  A Proof of Concept center, which is not the same as a full-fledged incubator, would also be responsible to develop a companywide core competence in business model and open innovation design and a VC-like, staged-risk funding decision criteria for new market opportunities.
  • It’s hard to get ideas outside of a company’s current business model get traction (given that the projects have to get buy-in from operating execs) – encouraging spin-offs is a tactic worth considering to keep the ideas flowing.

Epilogue
The program became large enough that it came time to choose between expanding the program or making it more technology focused and closely tied to corporate R&D. In the end my time in the sun eventually ran out.

I had the greatest learning experience of my life running Qualcomm’s corporate entrepreneurship program and met amazingly brave and gracious employees with whom I’ve made a lifetime connection.  I earnestly believe that large corporations should emulate Lean Startups (Business model design, Customer Development and Agile Engineering.)  I am now eager to share and discuss the insights with other practitioners of innovation – I can be reached at ricardo_dossantos@alum.mit.edu

Lessons Learned

  • We now have the tools to build successful corporate entrepreneurship programs.
  • However, they need to match a top-level (board, CEO, exec staff) agreement on strategy and structure.
  • If I were starting a corporate innovation program today, I’d use the Lean LaunchPad classes as the starting framework.
  • Developing a program to generate new ideas is the easy part.  It gets really tough when these projects are launched and have to fight for survival against current corporate business models.

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Designing a Corporate Entrepreneurship Program – A Qualcomm Case Study (part 1 of 2)

I ran into Ricardo Dos Santos and his amazing Qualcomm Venture Fest a few years ago and was astonished with its breath and depth.  From that day on, when I got asked about which corporate innovation program had the best process for idea selection, I started my list with Qualcomm.

This is Ricardo’s “post mortem” account of the life and death of a corporate entrepreneurship program.  Part 1 outlining the program is here.  Part 2 describing the challenges and “lessons learned” will follow.

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The origin
In 2006, as a new employee of the Fortune 100 provider of wireless technology and services, San Diego’s Qualcomm, I volunteered to salvage a fledging idea management system (fancy term for an online suggestion box) by turning into a comprehensive corporate entrepreneurship program.

Qualcomm’s visionary CEO, Paul Jacobs, wanted to use internal Qualcomm ideas to find breakthrough innovation that could be turned into products, (not simply a suggestion box for creative thoughts or improving sustaining innovation.)  He gave my innovation team free reign on designing a new employee innovation program. His only request was that we keep two of the original program’s goals:

1. The program had to remain fully open to employees from all divisions.
2. The ideas were to be implemented by existing business or R&D units – i.e., no need to create new permanent infrastructures for innovation.

And he added a third goal that would ensure his greater involvement and support going forward.

3. The program had to have an efficient mechanism to bubble-up the best ideas (and their champions) to the timely attention of the top executive team.

The design challenge

We wanted to transform our simple online suggestion box into a program that encouraged employees to behave like intrapreneurs (and their managers and executives as enablers).  Our challenge was to design a program that could:

  • Teach participants on how to turn their ideas into fundable experiments.
  • Educate employees who submit ideas that in corporations, there is no magic innovation leprechaun at the end of the rainbow that turn their unsolicited suggestions into pots of gold – they themselves had to take ownership and fight for their ideas.

All while keeping in mind that employees, managers and executives have day jobs – so how could we ask them to spend significant time on new ideas while not sacrificing their present obligations?

Thus began our search for a program that would properly balance the focus on the present with the need to increase our options for the future.

Qualcomm Innovation Process

Qualcomm Innovation Process

Qualcomm’s Corporate Entrepreneurship Program – Venture Fest
In 2006 we searched outside of Qualcomm for other similar entrepreneurship programs where participants also had to balance other obligations.  We realized this mechanism had been occurring for years at University’s startup competitions, such as the MIT 100K Accelerate Contest.   In these competitions, multidisciplinary self-forming teams of students work part time to pitch new companies.  The program we implemented inside of Qualcomm ended up being very similar.  We dubbed the program Qualcomm’s Venture Fest and the process, “Collective Entrepreneurship”, a three-phase program combining crowdsourcing with entrepreneurial techniques for startup creation.

The first phase of the program leveraged the idea management system to collect a large number of competing entries then ultimately down-selected to the top 10-20 concepts with the most breakthrough potential, according to peer and expert reviews.

Qualcomm Venture Fest

Qualcomm Venture Fest

The second phase, and heart of the program, was a three-month, part time bootcamp that would prepare idea champions for the internal funding battle that followed.  The bootcamp requested that participants do what entrepreneurs do before requesting seed funding  – Discover, Network and Accelerate.  (In hindsight we were having our employees get out of the building to talk to customers, build prototypes and generate partner interest – essentially doing Customer Discovery years before Steve Blank taught his Lean LaunchPad class at Stanford and the National Science Foundation!). Our employees faced the typical impediments to corporate entrepreneurship – lack of employee time, skills, connections, pre-seed money, and official sources to discuss and manage the risk/rewards tradeoffs of sticking your neck-out. So our program staff built a support system of contextual education, mentorship, micro-funding, and hands-on coaching.

Finally, the third phase of the program, implementation, began with the top team’s pitches to the C-level executive team, which determined the competition winners, prize money and directed other promising teams to target business unit sponsors. Our program staff facilitated the handoff and disseminated the value extracted from any funded experiments, including future option, strategic and exit value.

In retrospect we designed something akin to a startup accelerator, the Lean LaunchPad classes or the National Science Foundation’s Innovation Corps, although none of these existed in 2006.

What went right?
We had C-level support. The CEO of the company embraced the program and supported the process, especially since it brought novel and thought provoking ideas to his executive team’s attention.

The program steadily generated healthy interest from Qualcomm employees – submissions grew from 82 in the first year to over 500 in its fifth and final year.  Several ideas were fully or partially implemented, (with hundreds of millions of USD invested), with a couple of genuine breakthrough successes, and hundreds of related patents were filed.  Employees reported noticeable gains in entrepreneurial skills and attitude, and the CEO seemed happy with how his baby was being raised.

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Part 2 – challenges and lessons learned – is here.
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