Nelnet Innovation Week
2 Minutes of Talking Change
The Truth About Innovation No One Wants You to Know
If you heard it once, you heard it a thousand times:
- Big companies can’t innovate
- We need to innovate before we get too big and slow
- Startups are innovative. Big companies are dinosaurs. They can’t innovate.
And yet you persevere because you know the truth:
Big companies CAN innovate.
They CHOOSE not to.
Using Innovation to drive growth is a choice.
Just like choosing to grow through acquisition or expansion into new markets is a choice.
All those choices are complex, uncertain, and risky. In fact:
- 70 – 95% of innovations fail
- 70 – 90% of acquisitions fail
- ~80% of market entry efforts fail
Hold on. The odds of failure are the same!
All three growth drivers have similar failure rates, but no one says, “Big companies can’t acquire things” or “Big companies can’t expand into new markets.”
We expect big companies to engage in acquisitions and market expansion.
Failed acquisitions and market expansions prove us (or at least our expectations) wrong. Because we don’t like being wrong, we study our failures so that we can change, improve, and increase our odds of success next time.
We expect big companies to fail at innovation.
In this case, failure proves us right. We love being right, so we shrug and say, “Big companies can’t innovate.”
We let big companies off the hook.
Why are our expectations so different?
Since the dawn of commerce, businesses engaged in innovation, acquisitions, and market expansion. But innovation is different from M&A and market expansion in three fundamental ways:
- Innovation is “new” – Even though businesses have engaged in innovation, acquisitions, and market expansion since the very earliest days of commerce, innovation only recently became a topic worthy of discussion, study, and investment. In fact, it wasn’t until the 1960s that Innovation was recognized as worthy of research and deliberate investment.
- Innovation starts small – Unlike acquisitions and new markets that can be easily sized and forecasted, in the early days of an innovation, it’s hard to know how big it could be.
- Innovation takes time – Innovation doesn’t come with a predictable launch date. Even its possible launch date is usually 3 to 5 years away, unlike acquisition closing dates that are often within a year.
What can we do about this?
We can’t change what innovation is (new, small, and slow at the start), but we can change our expectations.
Finish the sentence – “Big companies can’t innovate” absolves companies of the responsibility to make a good-faith effort to try to innovate by making their struggles an unavoidable consequence of their size. But it’s not inevitable, and continuing the sentence proves it. Saying “Big companies can’t innovate because…” forces people to acknowledge the root causes of companies’ innovation struggles. In many ways, this was the great A-HA! of The Innovator’s Dilemma: Big companies can’t innovate because their focus on providing better (and more expensive) solutions to their best customers results in them ceding the low-end of the market and non-consumers to other companies.
Be honest – Once you’ve identified the root cause, you can choose to do something different (and get different results) or do everything the same (and get the same results). If you choose to keep doing the same things in the same ways, that’s fine. Own the decision.
Change your choice. Change your expectations – If you do choose to do things differently, address the root causes, and resolve the barriers, then walk the talk. Stop expecting innovation to fail and start expecting it to be as successful as your acquisition and market expansion efforts. Stop investing two people and $10 in innovation and start investing the same quantity and quality of resources as you invest and other growth efforts.
The first step in change is admitting that change is needed. When we accept that “big companies can’t innovate” simply because they’re big, we absolve them of their responsibility to follow through on proclamations and strategies about the importance of innovation as a strategic driver of growth.
It’s time to acknowledge that innovation (or lack thereof) is a choice and expect companies to own that choice and act and invest accordingly.
After all, would it be great to stop persevering and start innovating?
3 Mind-Blowing Things I Learned in Nebraska
In the Before Times, we attended conferences to learn, make connections, and promote ourselves and our businesses. Then COVID hit, and conferences became virtual. Although that made them easier to attend, it also made them easier to skip. Because, if we’re honest, most conferences were more about connecting and promoting than learning.
Last week, I went to one of those rare, almost mythical, conferences more focused on learning and connecting than promoting. It was fantastic! It was also in Nebraska (which is a pretty interesting place, btw).
Here are my three biggest mind-blowing takeaways from Inside Outside’s IO2022 Summit:
“Strategy is the direction you take to win in the future“
Kareen Proudian, Managing Partner at Faculty of Change
It’s a bit embarrassing to admit, but if you asked me to define “Strategy,” I’d respond with a long and rambling answer. Which means I can’t define “strategy.” This admission is especially embarrassing because I have a resume littered with places where I developed, drafted, and implemented strategies, so I should have learned what the word means. But nope, I didn’t.
I suspect I’m not alone.
Asking for the definition of strategy is like asking if you must wear clothes to the office. You should know the answer. But unlike whether or not clothing is mandatory, most of us don’t know the answer, AND it’s easy to get away with never knowing the answer.
The elegant simplicity of Kareen’s definition of strategy blew my mind. It’s short, memorable, and something that most people can understand. Maybe I should share the definition with my alma maters and past employers.
“When we feel threatened, our IQ drops 50 to 70 points”
Alla Weinberg, CEO at Spoke & Wheel
When I first heard talk about Psychological Safety and Safe Spaces in today’s business world, I rolled my eyes. Hard. As a Gen X-er, I grumbled about how we didn’t need “safe spaces” when I grew up because we were tough and self-reliant, and I lamented the inevitable downfall of society caused by weak and coddled Millennials.
I was wrong.
Psychological Safety is absolutely and unquestionably essential for individuals to grow, teams to work, companies to operate and innovate, and societies to function and evolve. I’ve seen teams and businesses transform and achieve unbelievable success by discussing and living the elements they require for Psychological Safety. I’ve also seen teams and businesses fail in its absence.
These results aren’t surprising when you realize that you feel threatened when you are in a complex situation in which you cannot accurately predict the outcomes. And when you feel threatened, you are half as intelligent, effective, and creative as you are when you’re calm.
So, if you’re a manager and you’re upset that your people aren’t as intelligent, effective, or creative as they should be, it may not be their fault. It may be yours.
“Stage expertise, not industry expertise, is key to innovation success“
Sean Sheppard, Managing Partner at U+
There is deep comfort in the known. It’s why we gravitate to people like us. It’s also why companies ask job candidates and consultants about their experience in the industry and choose those with deep experience and impressive expertise. Often, there’s nothing with this question or the resulting decision.
Sometimes, it’s precisely the wrong question.
Sometimes, functional expertise is significantly more important than industry experience. After all, if you’re the hiring manager at a healthcare company looking for a Director of Finance, who would you hire – a Marketing Director from a competitor or a Finance Director from a CPG company?
That’s the case with innovation.
Decades of real-world experience (not to mention the successful launch of 100+ startups) show that successful corporate startup teams had expertise (mindsets, skillsets, executional drive) in the startup’s phase and a working knowledge of the industry rather extensive industry expertise and little to no innovation experience.
Questions are good. The right questions are better. So, the next time you’re staffing up an innovation team (or hiring a consultant), choose based on their innovation experience and willingness to learn about your industry.
Innovation happens everywhere
That’s why people from San Francisco, Austin, Washington DC, NYC, Toronto, Boston, and dozens of other places converged on Lincoln, Nebraska.
We went to see innovation in action and learn about the thriving startup community in the middle of the country. We also went to learn and connect with others committed to creating new things that create value.
Getting our minds blown was a bonus.