Bold, audacious, brave, courageous, and trailblazing are just a few of the adjectives commonly used to describe some of the most innovative corporate leaders of our time, including Steve Jobs, Jeff Bezos, Sheryl Sandberg, and Mary Barra. These Corporate Explorers inspired their organizations to generate new ideas and then backed the resulting innovations with the resources needed to thrive.
‘Risk-averse,’ ‘slow,’ ‘indecisive,’ and ‘unable to commit’ are common qualifiers for corporate leaders that start on the path to disruptive innovation but fail to commit when resources are needed to Scale a new business. These leaders stand at the precipice and, instead of leaping into the future, they look down and withdraw.
At Change Logic, we have witnessed both phenomena—boldness and risk aversion. We aim to understand why some business leaders that invest in innovation units, corporate labs, and venture teams, act on their ambition to create new, disruptive businesses, while others spend the money but do not act.
One explanation is psychology. Some leaders are predisposed to taking risks, while others are not. A Corporate Explorer must indeed have the courage to venture into the unfamiliar waters of emerging markets. Doing so involves pursuing options that are novel, untested, and therefore risky. Corporate Explorers do not have historical data to support their exploration efforts into new markets as they do when pursuing established ones. Instead, they must be brave enough to go where others have not gone before and do so by relying on projections and educated guesses, as well as on their creativity and vision, as Jobs did when he imagined the future of mobile telephony as not just telephony, but also entertainment, social networking, photography, productivity, and as something beautiful and comfortable to hold in the palm of your hand. In the early 2000s, at a time when Nokia was the market leader of mobile telephony, Jobs had the audacity to imagine and pursue a vision that placed Apple at its center.
A problem with the psychological rationale is that it implies that successful innovation is all about bold individuals, when boldness can sometimes get you into trouble. Jeff Immelt’s bet on GE Digital and its platform for the industrial internet of things is a classic example of such trouble. His multi-billion-dollar gamble was made before the market had developed; he did not run experiments to learn, he simply committed. It was a bold bet, but it also failed, caused a crisis at GE, and Immelt lost his job. Courage, here, was not enough.
A second explanation is discipline. Corporate Explorers must be disciplined and follow a strategy-led process of Ideating, Incubating, and Scaling. This helps leaders invest at the speed of learning, forcing them to commit, not in a single bold step, but in a series of carefully planned incremental ones. This test and learn model requires subjecting your assumptions about customer needs, what customers think of your solution, and whether they are willing to pay for it, to a series of experiments. This approach permits you to make data-driven decisions about where and how much to commit, reducing your risk, and making the decision to commit less of a gamble.
Some firms adopt high participation approaches to innovation that excite employees to generate new ideas. Hundreds of ideas are created without clarity on how they will help the firm delivers its goals. The resulting innovation zoo makes it easy for a risk-averse leader to hide in the activity, without having to commit to backing a single idea.
A third explanation is leadership. Even when you have a risk-averse CEO or business unit leader, an appropriate balance of explorers and stabilizers will enable you to make progress in your innovation efforts. This Strategic Diversity approach is best articulated in Peter Robertson’s book, ‘Always Change a Winning Team.’ Peter contends that innovation is a relay-race from idea to execution and that each team member plays a role in securing success. There is no way to fully eliminate risk when pursuing emerging markets. Andy Binns, Change Logic’s Managing Principal, states that Corporate Explorers, no matter how courageous, must ‘never invest ahead of learning.’ Discipline balances psychology. Coupling courage with a disciplined and rigorous approach to exploring and growing new business ideas, with the right diversity of capabilities in the senior team, heightens a firm’s chances of success.
Albert Einstein famously stated, “Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius – and a lot of courage – to move in the opposite direction.” The same could be said of those leaders who go against the tide of merely thinking about next 12 months and, instead, set a path for the next five years. In other words, leaders must be committed to and disciplined about Ideating, Incubating, and Scaling from the start.