How big companies can innovate
Who says innovation is only for start-ups?
It’s almost
conventional wisdom that innovation
springs from developers and entrepreneurs based in start-up hubs such as
Silicon Valley. But in the following video interviews, Intuit cofounder and
chairman Scott Cook, Idealab founder and CEO Bill Gross, and Autodesk president
and CEO Carl Bass contend that large, established companies can also make
innovation a priority. They discuss why a company should be prepared to spend
money on big ideas, how it can remove roadblocks to experimentation, and the
merits of creating its very own idea incubators. These interviews were
conducted by McKinsey Global Institute partner Michael Chui, and edited
transcripts of their remarks follow.
Making innovation easier: Intuit’s Scott Cook
Increasingly, smaller companies—and, in
particular, start-ups—are seen as the hotbeds of innovation. So is it now
destiny that large companies will be dull, slow-moving, slow-growing and that
all the exciting stuff will be done by small, agile start-ups? I don’t think
so. But I think large companies need things like lean start-ups even more than
small companies do.
If I had to point to one thing that’s made the
biggest difference at Intuit—and there’s a package of things—it was to change
how we make decisions, whenever possible, from decision by bureaucracy,
decision by PowerPoint, persuasion, position, power, to decision by experiment.
Normally, companies put up a phalanx of
barriers and hurdles and mountains to climb that may not seem hard for the boss
or the CEO but are intensely hard, impossibly hard, for our young innovator to
conquer. So our job as leaders is how do we get all those barriers out of the
way?
So we put in a series of systems and a culture
where the expectation is that if there’s an idea that someone’s passionate
about, we put in a system to make it easy and fast and cheap for them to run an
experiment. Strip it down to what leap-of-faith assumption you want to prove,
and how you can run an experiment next week or next month, at virtually no
resources, to test that idea. Nothing signals more strongly to your
organization that you want your employees’ ideas. And a culture of
experimentation can only work when it’s put in place by leaders. The innovators
can’t do it.
Scott Cook cofounded Intuit in 1983 and now serves
as the chairman of the executive committee. He previously worked for Bain &
Company and Procter & Gamble. Cook is a member of the board of directors of
eBay; Procter & Gamble; the Harvard Business School Dean’s Advisory Board;
the Center for Brand and Product Management at the University of Wisconsin; and
the Intuit Scholarship Foundation.
Investing in innovation: Idealab’s Bill Gross
I think it’s very, very hard for a company to
grow big and still remain innovative. There are very few leaders who can
balance the short term and the long term together, and also know how important
that growth is, and have a sufficiently long-term horizon that they’re willing
to sacrifice things.
Steve Jobs was one of those amazing people who
could do that. He was willing to cannibalize his iPod revenues, which were $5
billion a year, by putting the whole mp3 player right in every phone. And there
were some people in the company who begged him not to do that. But he said he
didn’t care.
Larry Page is doing
that at Google. He’s willing to invest in Google X,1 where they’ll work on bold, bold
new projects. And they’ll put $500 million toward that, like to the
self-driving car. Now they have the money. But there are some companies that
wouldn’t do that with the money, that wouldn’t take big, bold risks that could
be big game changers
I think big companies should visit and start
their own accelerators and incubators. A lot of big companies in Los Angeles
are doing that; Disney, actually, has an accelerator. It means looking at what
models it takes to actually give people equity stakes so that they can act like
true entrepreneurs, to give them the autonomy but still have them be connected
to the corporation.
I think that’s a model that every big company
can learn from. And I think it’s actually happening. The equitization and the
autonomy are the biggest factors. Because the thing that actually unlocks human
potential is when people feel they have control over their own destiny and they
can make a killing if they really succeed on their wild bet.
Bill Gross founded Idealab in 1996 and serves as
the company’s CEO. He started the company in order to create and build
businesses that capitalize on innovations in areas with significant growth
opportunities. A longtime entrepreneur, Gross founded a company in high school
that sold plans and kits for solar-energy products. In college, at the
California Institute of Technology, he patented a new loudspeaker design and
formed GNP Loudspeakers, Inc. And in 1991, Gross started Knowledge Adventure,
an educational-software publisher that grew to be the third largest of its kind
in the world and was eventually sold.
Taking risks to innovate: Autodesk’s Carl Bass
It’s great that there’s this thread of new
disruptors. As a matter of fact, for CEOs or management of existing companies,
it’s the greatest thing that ever happened, in some way. It’s like the
expression, “Don’t let a good crisis go to waste.”
The threat of somebody doing something is one
of the biggest tools you have to motivate, encourage, scare people into taking
risks they wouldn’t otherwise do. And most corporations are set up and, in some
ways, structured and designed to maximize profit and minimize risk.
Yet what you need to do in order to become the
disruptor, as opposed to the disrupted, is sometimes exactly the opposite. So,
for example, this year we decided for the first time to build our own 3-D
printer, which we are making with an open-source design.
It’s a reference implementation for the
software platform. In the 30-plus years that our company’s been in business,
we’ve never made a piece of hardware. So that, for me, would be new. And I
think a lot of what people substitute for innovation is trying to be three days
ahead of their competitor in the market.
Carl Bass is president and chief executive officer
of Autodesk, a leader in 3-D design, engineering, and entertainment software.
Bass joined Autodesk in 1993, when the company acquired Ithaca Software—which
Bass had cofounded—and has since held several executive positions, including
chief technology officer and chief operations officer. Bass serves on the
boards of directors of Autodesk, Quirky, and E2open.
Michael Chui is a partner at the McKinsey Global Institute and is based
in McKinsey’s San Francisco office.
http://www.mckinsey.com/insights/innovation/how_big_companies_can_innovate?cid=other-eml-alt-mip-mck-oth-1502
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