The keys to innovation success are rooted in venture capital. Read our take on how corporations can innovate just like Silicon Valley.
My journey to fix the broken corporate innovation process has been a long one.
More than a decade ago, the McKinsey Global Innovation Survey reported that only six percent of executives said they are satisfied with their innovation performance, and my personal experience with innovation roadblocks illustrates the why.
Everywhere I went, I saw the same problems over and over. Poor process and decisions leading to poor outcomes. As an employee at a large company, I had $200 to solve a $10 million problem, but politics and silos prevented a clear way to get more funding; as an innovation consultant, I worked with leadership at large corporations that dreamed of capabilities that a startup offered but weren’t willing to take the leap and invest in testing solutions; and as an academic researcher, I spent years proving models around ideal teams and processes to drive better outcomes but never saw any of it leveraged in industry.
The roadblocks I faced a decade ago still exist today, and, not surprisingly, satisfaction with innovation performance remains stagnant. My personal experience sparked a curiosity and determination to get to the bottom of why it’s so hard to be successful at innovation, and I’ve concluded that the problems haunting innovation success aren’t the right ideas or the right innovation leadership like executives may think. The keys to innovation success are the right mindset and the right approach, ones rooted in the venture capital model.
Let me explain...
The venture capital world has innovation figured out. Unicorn companies. Winning venture capitalists. They make innovation look so easy! When I was working for Mark Cuban’s portfolio of startups, I had the chance to see venture capital up close and got to thinking about how this portfolio approach, as well as the relationship dynamics of all involved, could apply to corporate innovation.
We’ve seen corporate venture capital (CVC) do its best to mimic the capabilities of Silicon Valley, accounting for nearly a quarter of venture deals by 2018, but results tell us that even CVC isn’t the perfect replication of the venture capital model.
We at Productable have created an innovation management platform that closely replicates the venture capital model, allowing executives and innovation leaders at organizations everywhere to strategize like venture capitalists. In the same way that, say, CRM software makes a salesperson’s job so much easier, Productable is a platform that simplifies the complex to make driving innovation outcomes a whole lot easier. But to understand the backbone of Productable, you first need to understand the roles of the most important players in Silicon Valley.
The real secret to Silicon Valley success is that they tackle innovation from the top, middle and bottom. These three groups, which also exist inside corporations, symbiotically drive innovation success. With the right mindset and approach, these groups can do the same at corporations and large organizations.
How Venture Capitalists Think
Venture capitalists fund many startups, leveraging the Power Law: When a small percentage of startups in a portfolio capture a large percentage of the returns. Simply put, a venture capitalist only expects a few startups in any given portfolio to be successful, but they know the winners pay for the losers many times over.
A great example of this is the venture capital fund that invested in Uber. They didn’t just invest in Uber; they likely invested in 100 technology startups. If only Uber returned big, that’s just a 1% success rate. In a corporation, that would be seen as a failure, but in venture capital, no one cares about the 99 startups in the fund that didn’t have big returns because Uber paid for that entire portfolio and made all the investors millions.
How to apply power law to corporate innovation: Build your corporate innovation portfolio, investing in many ideas based on opportunity areas and set your expectation that only a small percentage will scale to real, revenue-driving solutions that will pay for the entire portfolio. It’s OK to lose bets because you’ll win overall.
How Advisors Facilitate Startup Growth
The pure abundance of experts contributes to Silicon Valley’s viability. Advisors from specific areas of expertise help startups grow by leveraging best practices. They intuitively build processes over time that are not dependent on each startup idea, but rather from seeing the same challenges over and over. They become experts at overcoming specific barriers and use their deep problem solving expertise to help entrepreneurs through those barriers.
How to apply this to corporate innovation: Use innovation management software such as Productable to get in-depth digitized instruction or create your own advisor program to connect the right subject-matter expert with the right project.
How Entrepreneurs Raise Capital To Scale
Entrepreneurs explore new ideas to solve problems they’re passionate about and scale new solutions. Although very challenging, there’s a clear path to success, lined with transparency around stages of funding, expected traction and standardized progress reports. Entrepreneurs set goals that align with investor outcomes and expected milestones, and they know if they hit those milestones, they’ll get the capital they need to scale.
How to apply this to corporate innovation: Create transparency around overall business and innovation goals, so everyone understands what they need to do to succeed. Then pave a clear path to resources, so intrapreneurs have a systematic process to get the funding they need to move a project forward.
I mentioned earlier that the keys to innovation success are rooted in the venture capital model and Productable has turned this process into software. We call this process Portfolio Innovation, and it’s not only the backbone of our platform, but it’s also the very thing that sets innovation teams up for success.
Over the next few weeks, we’ll take a deep dive into Portfolio Innovation, explaining each step necessary to strategize like a venture capitalist and start building your innovation portfolio.
Rachel Kuhr Conn is an entrepreneur, intrapreneur, researcher, world-traveler and lifelong academic dedicated to making true transformation easier for all. She founded Productable after perfecting her own innovation process for Mark Cuban’s portfolio of startups and is on a mission to help the world’s largest organizations drive fearless experimentation.
In the ebook, you'll learn all about how portfolio innovation sets leaders like you up for success. You'll discover how to apply basic principles of investing to your innovation strategy to mitigate risk, prioritize resource allocation and execute on desired outcomes.Download the Ebook — it's free
As Productable's head of product, Wes Galliher is kind of like our very own one-man-band, taking our software from prototype to platform.