The Myths of Corporate Innovation-Part 3: Is CEO Support the Golden Ticket to Success?

It is easy to assume that the only way to initiate radical innovation from inside a large corporation is if you have the prefix “chief” attached to your job title. No question this can make life easier when aligning new ventures with company goals. AGC, the Japanese glass and chemicals company, exemplifies this approach. The inspirational leadership of Takuya Shimamura, first as CEO and now as chairman, has helped the company grow new ventures that now account for a quarter of the company’s profits.

The myth here is that CEO support is a guarantee of success for corporate innovation. There are just too many examples of failed radical innovation instigated by the CEO. When Jeff Immelt, the former CEO of General Electric, launched a push to be a “top 10 software company,” he made it the company’s highest priority. The same is true for David Jones, former CEO of French advertising company Havas, as he invested in building a digital advertising agency. However, in both cases, explicit CEO support was insufficient to succeed. Immelt was fired and his strategy was canceled. Jones followed a similar path.

Corporate Explorers need to take charge of their own destiny and broaden the support for the new venture inside the leadership team. Many seek to influence “upper management” by selling an optimistic, good news story: “We have a fabulous opportunity…” etc. However, the “good news story” can only take you so far inside a large corporation. Senior-level support can wane over time as the slow work of incubation consumes time and saps enthusiasm for the promise of the new business. Data from experimentation can yield repeated failures as the venture team learns about the opportunity and it is hard to demonstrate progress in a way the business understands.

The “good news story” also contrasts with the day-to-day experience of Corporate Explorers, where the need to comply with the rules and procedures of the core business can consistently hinder progress. For example, at one large corporation, procurement rules were set up for buying large quantities on a competitive tender, not small amounts on quick turnaround. This stopped the Corporate Explorer from running experiments for several months as he waited for approval for bypassing standard policy.
Second, as the project timelines extend, support for the new venture wavers. The once rock-solid commitments to help the new venture become dependent on events. We had this recently with a client whose central IT department was “fully onboard” with developing new digital business capabilities for a project. However, when the time came, the promised resources were engaged elsewhere and the commitment to the new venture would have to wait three months.

Third is the dreaded delayed decision on scaling the venture. When asked to green-light a planned investment, senior leaders defer, seek additional reassurance on the business, ask for more data, or engage external consultants to conduct a review. This is “death by a thousand cuts.”

The new venture starts with both Corporate Explorers and senior managers feeling equally committed to realizing the potential of the new venture. The cumulative impact of compromises imposed by the logic of the operating business undermines that support with fatal consequences for the new venture. These dynamics put the Corporate Explorer in an awkward position. They have a “good news story” about what they are achieving, without any data to back it up, and all they have to say to the organization is “You are killing me with your bureaucracy.” Pretty soon they start to sound like a spoiled teenager!

Avoid relying on the “good news story.” Corporate Explorers should go for total transparency from the start so that data from experiments and barriers in the business are openly addressed. This means keeping a high level of “constructive tension” from the start so that everyone remembers what they signed up to do and how easy it is to unintentionally kill exploration. Here are six ways to do this.

1. STORYTELLING

A former client built a new solution to reduce unplanned downtime for manufacturers. He dramatized its value proposition with the story of Charlie, whose “magic ear” could hear the tell-tale sound of a faulty motor bearing or rotor. This paved the way for his solution using temperature, vibration, and magnetic field sensing to diagnose critical motor faults.

2. SELF-ASSESSMENT

One Corporate Explorer asked his management board to assess the company’s support of the new venture using six key success factors from an HBR article. This helped them come to a shared analysis of the weaknesses without anyone getting defensive.

3. EXPERIMENT RITUALS

Share data from experiments openly, maximizing the contrast to regular performance reviews by openly discussing problems. One client uses a strict 30-day sprint approach to implementing experiments, which brings the project teams and senior leader sponsors together for evidence-led reviews. Making these conversations more transparent can create an open forum for confronting barriers to progress.

4. ADVISORY BOARDS

Form an external advisory board with well-chosen outsiders without a stake in the outcome. Their independence allows them to raise issues that an insider might struggle to mention.

5. PEER COMPARISONS

Although “best practices” are anathema to explore, an external benchmarking review of your situation versus peer companies can get previously undiscussable issues on the table with senior leaders.

6. EDUCATION WORKSHOPS

Executive education sessions can create a forum for lifting managers out of the day-to-day and inviting them to confront bigger issues. At IBM, the Strategic Leadership Forum was a vehicle for aligning middle-management support for the Emerging Business Opportunity program.

Raising constructive tension should be done without sounding like a spoiled teenager. This is about engaging people in the right conversation, not complaining that you are not getting the support you were promised.