Corporate innovation – A survival guide

Can corporate innovation be sustainable ? Let’s talk about some of the best practices to maintaining corporate innovation through two stories.

Late 2000. Moore’s law, about shrinking transistors by half their size while doubling a chip’s processing speed every 18-24 months, is realized and Intel is in a constant race to invent a faster processor. But in Haifa, Israel a small team of engineers, led by Dedi Pelmutter, who was part of the team inventing the 8088, the first personal PC processor, is working on something totally different – low power processors for mobility.
Six months later Dedi and his team fly to Intel’s HQ in Santa Clara to present their project. Paul Otellini, head of Intel’s chip division tries to kill the project. “Clock speed is king and slower processors is not what Intel needs”. For the next few months the Israeli team flies back and forth to California frequently, trying to convince Otellini and his team. A year and a half later, in March 2003 the Banias chip is announced (and later the Intel® Core™2 Duo processor). What happened in the next 7 years is well known: New desktop computers are declining and laptops, netbooks and smartphones are taking their place.

Intel’s story is a story about successful corporate innovation (and how it saved the company) but it’s a rare one. The more familiar story goes like this:

A few young guys, sit in a garage, and come up with a crazy idea: To build a time machine (or index the internet, develop an electronic mail or a website where users upload their own movies). They work day and night from their garage to get a fist product, hire 2-3 guys who are crazy enough to join them… and customers love it ! It’s a huge success!
The few guys in a garage start a company, rent an office and get an acquisition proposal. They accept the proposal and join the large corporate. After all the corporate VP of sales is an experienced executive who leads a 10,000 sales organization while they had only 5 sales reps. The corporate CFO recently joined from a multi Billion Dollar public company while they had $10M in revenues. A year or two goes by and …their gone. Most likely they went back to working in a small office on another crazy idea they had for the last two years to which they knew the CFO wouldn’t allocate budget or the VP of sales would say customers don’t need it.

Unfortunately very few organizations are able to protect such mavericks. Those that do – are likely to be saved by them one day (remember the Intel story? Now think about Apple, Steve Jobs and the iPhone). Those that don’t – try to buy innovation outside (e.g Cisco and HP). Those that fail to do one or the other successfully – die (Sun and Nortel are such example).

Buying innovation outside is an article by itself (one of the next blogs will be dedicated to that) but how does a CEO develop in-house sustainable corporate innovation ?

Corporate Innovation

By protecting these mavericks and by recognizing the need for them. It’s not easy: You need to be patient with them, listen to their crazy ideas, and keep an open mind. The hardest part – next year’s budget: You need to cut your budget by x% and direct all your resources to existing projects and existing customers (also known as short term). You decide to cut these crazy guys’ budget. After all, none of their projects in the last 5 years was actually implemented (or maybe it was just because every time they came up with something you found a way to dismiss that).

Just before you do that remember the crazy guys in Haifa who challenged Intel’s management, who were sure about where they are heading. You might also want someone to challenge where you are heading.

Sources: “The start-up Nation”

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About shanishoham

After 14 years of General Management and incubating/scaling new businesses & organizations for enterprises (established a $55M mobile business and a $100M/400 employees global division), I became an investor Today I’m a board member/mentor with 5 incubators & micro-VCs and involved with many other private & public incubators around the world. I also founded a VC firm named 2020 and I'm a member with a number of angel groups so i get to see & work with many startups, innovation centers and other parties across the ecosystem. I’m an alumnus of the Stanford Graduate School of business - Sloan Master in Management program, a 10 months intensive program for 57 carefully selected experienced Executives and leaders from all around the world.

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