Top 5 Signs Your Silicon Valley Innovation Outpost Is Just Innovation Theatre

By Tytus Michalski,

It’s no secret that global companies have been building Silicon Valley Innovation Outposts, but as Steve Blank cautions, many companies will find that they will simply get entertainment value in the form of Innovation Theatre instead of tangible benefits.

So for everyone involved in or thinking about global corporate innovation and Silicon Valley Innovation Outposts, below are the top 5 signs of Innovation Theatre with a suggested solution to fix each problem.

5. There is no fast track decision making and/or budgeting process for experiments.

A typical scenario is a large company speaking with a startup and saying all the right things. Then, once it comes time to actually close a pilot deal, the big guns from global headquarters (GHQ) are brought in with the 53 page due diligence questionnaire and the external legal counsel identifies 1,000 and 1 risks which need to be negotiated. Rightfully, the startup is thinking WTF. Big guns make sense when scaling up across your entire company but they are weapons of startup destruction at the pilot stage.

Solution
Create a fast track for pilot deals with startups. You have to go through the corporate process to create the fast track once, either using a pure internal approach or with an external partner. But once you go through this process, then when you engage with startups you can move at something resembling startup speed because the fast track is already in place.

4. You have no dedicated system for keeping track of startup ecosystem interactions and information.

Corporate and startup introductions are frequently made over reply all email chains with random unrelated subject lines like “Re: Running 5 Min Late”. In addition, companies commonly have various employees in different departments writing internal research reports at regular internals that nobody has time to read. That’s not a system, that’s Innovation Theatre.

Solution
You need a dedicated system, and hacking Salesforce for the purpose would most likely make a bad situation worse. There are now dedicated systems just for this, such as Kite, which focus on the needs of corporate innovation. If that feels like too much as a first step, keep it simple with a lightweight funnel tool like Pipedrive which can get you started for the cost of one meeting per month at a trendy coffee shop in SF (disclosure, we are investors in both Kite and Pipedrive because these are real tools solving real problems for real people like you).

3. Your front office team consists of people from a single ethnic group and gender.

Let’s say your front office team consists entirely of white men. This lack of diversity will leave you with a competitive disadvantage when it comes to finding true innovation. Put simply, it’s a dumb business decision. But lack of diversity is not limited to teams of white men. Many companies from other countries also have very homogeneous teams. A team of all Chinese or all Indian or all Japanese men is similarly challenged when it comes to diversity.

Solution
Diverse perspectives give you a competitive business edge. The obvious step is to hire from a more diverse talent pool. But if corporate hiring, budget or cultural hurdles are delaying the process to infinity, then at the very least find some external partners who have a diverse team to fill your gaps.

2. You manage tours of famous places and companies in Silicon Valley.

Even CEOs of global multinationals love selfies at famous places, famous events and especially with famous people. But if top leadership is spending time at tours of Facebook, Google and Apple campuses, unfortunately that’s simply startup tourism. Which came first at Google, world leading innovation or free food? Better not to confuse correlation with causation.

Solution
Spend more time in the trenches talking to actual startups. The reality is that you won’t have enough time to do everything directly yourself because there are simply too many options, so the most effective strategy is to find partners who can help guide you to the relevant startups for your specific needs. Your selfies won’t be famous now, but if you meet the right startups those selfies will be much more valuable in the future. And, more importantly, you’ll be much closer to the edge of innovation.

1. Getting distracted by the surface level Silicon Valley lingo.

The people in Silicon Valley have their own lingo. It starts with their speaking speed: faster than fast. They also randomly sprinkle in words like big data, machine learning and blockchain, which all started with some meaning originally but have become overused buzzwords with the passage of time. Finally, everyone picks up the habit of name dropping and can figure out a pathway of connections to at least someone from the PayPal Mafia. It’s all too easy to get distracted by this lingo and miss out what’s going on underneath the surface. Coffee shop lingo talk without any outcome is an all too common form of Innovation Theatre.

Solution
You need someone either on your team or an external partner who knows how to cut through the bullshit and find the brilliance because Silicon Valley has plenty of both. Someone who can connect you to the right people at the right time and, most importantly, people you can trust.

Beyond Entertainment

When building your Silicon Valley Innovation Outpost, make sure to avoid Innovation Theatre so that you can get tangible benefits. If you want entertainment value, go watch Silicon Valley, the show. It’s cheaper, and funnier.

  Category: Innovation
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Corporate Innovation: Beyond Predicting the Future

By Tytus Michalski,

“Prediction is very difficult, especially if it’s about the future.” – Niels Bohr

The Decision

Imagine that you are a key decision maker at the dominant communication network in the world, having successfully grown through astute acquisitions and network effects. The company’s market value has increased by more than 100x in a short period of time and you are now clearly the market leader.

Along comes a new startup with a proposal, actually a founder and his angel investors who are short of money and are looking for a face saving exit. They are asking for US$100,000 in exchange for their business. Of course, their business has no revenue and their new technology looks like a toy. Your internal team is far superior and has concluded that there is nothing interesting. The chances of this new toy market taking off are extremely small. Finally, even if you needed to compete with them, you could move quickly. Therefore, you dismiss them.

This is no imaginary case. The dominant communication network is the telegraph, owned and operated by the Telegraphy Company. The investors are Gardiner Hubbard and Thomas Sanders. The founder is Alexander Graham Bell and the toy is the telephone.

Of course, it turned out that the incumbent underestimated the founder and his investors, the toy market was not a toy after all and even when the Telegraph Company entered the telephone market it could not win, finally transforming entirely to become a money transfer business.

Problems and Solutions

Why is story from history particularly relevant today? All around the world, incumbents are vulnerable like the Telegraph Company. A downward spiral can begin anytime as the number of startups continues to grow. What are the key problems and, more importantly, solutions for improving corporate innovation?

Problem #1

The smartest people are always and without exception outside of your company.

Solution #1

Build a diverse network outside of your company. This means more than simply going to conferences and collecting business cards. It means building strategic relationships with key players who have diverse networks themselves. The focus should especially be on people connected with early stage startups because that is the most diverse ecosystem and large companies are poorly equipped to try and engage directly with early stage startups.

Problem #2

The structure of power laws results in impact being more important than probability.

Solution #2

Focus on imagination, not knowledge. Knowledge deals with what has happened in the past. It anchors our reality, which is generally helpful for day to day living, but is relatively poor at dealing with power laws and high impact but low probability events. Imagination empowers us to think about the future without the constraints of knowledge. The best way to start building something like imagination is through habits, starting small at first.

Problem #3

The world is path dependent and small inflection points have significant consequences.

Solution #3

Experiment early despite limited information. It is tempting to rely on being a fast follower but, as the Telegraph Company found out, even reversing a decision quickly may already be too late. Instead, it is more helpful to have a portfolio of experiments. That way, you can be involved in potential breakthroughs before it is too late. In addition, even the unsuccessful experiments will result in some learning, building the foundation for better decision making.

Beyond Predictions

Rather than being discrete problems and solutions, all of these issues are related and can be integrated. The common theme is that large companies should to find ways to engage with the diverse startup ecosystems globally.

Of course, the actual mechanics of engagement are not trivial. Holding contests and events is helpful for marketing but does not really address the issue of deeper engagement. On the other extreme, starting a corporate venture capital fund is not simple. For most companies, the most practical route is to partner with early stage venture funds who can act as a bridge with startups.

Regardless of the implementation, all companies need to find a way to make better decisions about the future and their corporate innovation strategy in order to avoid being replaced by toys which transform into platforms.

  Category: Innovation
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