The way businesses need to organize and behave has fundamentally shifted. Across industries, companies, and organizational functions, we have heard many of the world’s most innovative companies echo the same challenge: businesses must urgently embrace a more nimble and entrepreneurial approach in order to stay competitive. We call this challenge of how big companies can leverage scale while staying innovative “big entrepreneurship.” This report aims to deconstruct some of the complex challenges around big entrepreneurship and provide actionable insights for business leaders.
This report was created by Fahrenheit 212, a global innovation strategy and design firm. We define innovation strategies and develop new products, services, and experiences that create sustainable, profitable growth for our clients. We challenge the belief that innovation is inherently unreliable and have spent the last decade designing the method, building the model, and assembling the minds to make innovation a predictable driver of growth for our clients' businesses.
3. For corporations that have been built around a set way of
doing things, they must strategically navigate through the
minefield of startups, new technologies, and consumer trends
that can determine the fate of their business seemingly overnight.
Startups are achieving scale faster and in more lightweight ways
than ever before. In 6 years, Uber has expanded to 60 countries
and 300 cities worldwide. They are on track to generate $10 billion
in bookings by the end of 2015. They facilitate 1 million trips a day,
yet they have no fleet of cars and employ no drivers. And they
have spawned dozens of businesses from their service model.
The burning question big companies must face is how they
can compete with (or capitalize on) the small, nimble upstarts
that don’t have the same shareholder pressure, customer
expectations, and heavy infrastructure in place.
3Big Entrepreneurship
Companies live
in a world of
innovate or die.
Disrupt or be
disrupted.
Change or be
left behind.
4. It’s an issue that even the most innovative and
entrepreneurial large companies face. The New York
Times title for their story on Google’s reorganization
under holding company, Alphabet, says it all: “Google to
Reorganize as Alphabet to Keep Its Lead as an Innovator.”
At Fahrenheit 212, we believe that this is a golden age for
innovation. For large organizations there are massive
opportunities to become more entrepreneurial while also
leveraging scale to launch innovations that will have
widespread impact.
“Big entrepreneurship” is defining the way businesses need to
organize and behave. In this report, we will explore ways that
companies can become more entrepreneurial and innovative
through the lens of five critical components to the trend.
4Big Entrepreneurship
“As you ‘age’—even
when you’re still
a teenager like
Google—you have
to work hard to
stay innovative.”
Larry Page
Co-Founder, Google CEO, Alphabet
5. Big Entrepreneurship
The way businesses need to organize and behave has
fundamentally shifted. Across industries, companies,
and organizational functions, we have heard many of the
world’s most innovative companies echo the same challenge:
businesses must urgently embrace a more nimble and
entrepreneurial approach in order to stay competitive.
We call this challenge of how big companies can leverage
scale while staying innovative “big entrepreneurship.”
This report aims to deconstruct some of the complex
challenges around big entrepreneurship and provide
actionable insights for business leaders.
Fahrenheit 212
Fahrenheit 212 is a global innovation strategy and design
firm. We define innovation strategies and develop new
products, services, and experiences that create sustainable,
profitable growth for our clients. We challenge the belief
that innovation is inherently unreliable and have spent the
last decade designing the method, building the model, and
assembling the minds to make innovation a predictable
driver of growth for our clients’ businesses.
www.fahrenheit-212.com | marketing@fahrenheit-212.com
@fahrenheit212 | #bigentrepreneurship
5Big Entrepreneurship
6. Table of
Contents
The Paradox of Scale
How big companies can innovate in a world
that favors the underdog
01 07
Winning the Next Generation of Innovators
How to attract, engage, and retain Millennial talent
03 47
The Chief Innovation Officer, Redefined
How to hire a CINO that can build lasting
innovation capabilities
05 90
Incubating Innovation
How to cook up meaningful innovation with
an innovation lab
02 27
The Rising Billion
How multinational businesses can keep
up with the new global consumer
04 68
6Big Entrepreneurship
7. How big companies can innovate
in a world that favors the underdog
The Paradox
of Scale
9. Today, the balance of power has irrevocably shifted from
big companies in favor of both smaller, nimbler upstarts
and consumers. This is being driven by competitive market
changes as well as significant new dynamics in consumer
preferences and behaviors. The following trends are tearing
away at the traditional benefits of being big while also
turning the tables to enable small companies to flourish.
Driving
Forces
9Big Entrepreneurship The Paradox of Scale
10. 10
Across categories, consumers are turning their backs on the
industry leaders. Campbell’s CEO, Denise Morrison, summed
up the state of affairs recently when she told analysts of the
“mounting distrust of so-called Big Food” and its impact on
their bottom line. From 2009 to 2014, $18 billion in sales
of consumer packaged goods have shifted from large to
small companies.
Consumers are losing
trust in big brands
Driving Forces
Big Entrepreneurship The Paradox of Scale
As of 2014, only 29% of
consumers said they believe
that name brands are better
quality products, down from
43% just two years prior.
11. 11
Today’s consumers are more willing to embrace the smaller,
local, and unique products and services that are tailored
to their tastes.
Consumers place more
value on being unique
Driving Forces
Big Entrepreneurship The Paradox of Scale
12. 12
Digital services as varied as Google Now
for intelligent recommendations, Flipboard
for tailored news, and Glow for data-driven
fertility advice all enable increased person-
alization. Consumers have come to expect
the companies they interact with to know
who they are and what they prefer. It’s a
move back to the day of the local shop-
keeper that knew your preferences,
powered by digital and the troves of data
available on us. In the age of what Forbes
has coined “me-commerce,” companies
capitalizing on personalization are
poised to win.
For the first time since Interbrand began
issuing their Best Global Brands Report
15 years ago, the top retail brand on the
list was a brand that mostly does not even
sell its own products. Ranking above Louis
Vuitton and HM was Amazon, which
has an entire team dedicated towards
personalization and recommendations.
(At the time of writing this, there were
several openings in the personalization
and recommendations team.)
People desire more
personalized interactions
Driving Forces
Big Entrepreneurship The Paradox of Scale
13. 13
Technology has given small companies the
ability to punch well above their weight.
They can now conceptualize, fund, develop,
market, and sell their goods/services at a
pace and cost base the big companies simply
can’t match.
One look at the Pebble smartwatch reveals
how the nature of competition has changed.
After surpassing their Kickstarter fund-
raising goal of $500,000 in just 17 minutes,
they went on to raise $20 million for their
latest watch, Pebble Time.
The Pebble Time project will
show that the real power
and utility of our platform
is not in money; it’s in
community and distribution.”
Yancey Strickler, CEO, Kickstarter
“The truth is that Kickstarter, in addition
to being a fundraising platform, has
also become a mega marketing platform
for product companies. Add to that the
principles of lean and iterative product
development that many small companies
are able to integrate, the speed and agility
at which today’s new competition can enter
the market is faster than ever before.
The ankle biters are
becoming serious competition
Driving Forces
Big Entrepreneurship The Paradox of Scale
14. 14
Business strategies are
rapidly evolving
Driving Forces
Big Entrepreneurship The Paradox of Scale
Here it’s important to consider two points. First, consumer demand
for videos didn’t fundamentally change. The movies people rented
from Netflix were the same ones they bought from Blockbuster.
Second, streaming videos was not unique to Netflix; in fact,
consumers could stream videos from Blockbuster in 2008. What
changed was that Reed Hastings made a strategic decision to go
all-in on streaming. He knew the decision would hurt Netflix badly
(leading to a 77% drop in stock price the 4 months after spinning off
the DVD service), but he was betting on the fact that it would crush
Blockbuster because their traditional advantages—retail network,
inventory, sales staff—would quickly become unsustainable
liabilities. It was a brilliant move that shows how quickly small
companies can make the size of big companies work against them.
Across many industries, access has begun to supersede
ownership. Companies ranging from Spotify to Lending Club
to Task Rabbit have shown how businesses that enable the
sharing, borrowing, and “renting” of goods and services can
create major competitive advantage in markets where the
established leaders are burdened by high fixed costs, legacy
technology, and organizational structures designed for the
traditional competitive dynamic.
A now classic example is Netflix. As late as 2008, former
Blockbuster CEO Jim Keyes stated that Netflix was not “even on
the radar screen in terms of competition.” And yet within 2 years
Blockbuster was bankrupt and Netflix was on pace to acquire
over 65 million global streaming subscribers.
15. Given this dynamic commercial and consumer environment,
it is little surprise that big companies are facing a situation
in which their scale has been transformed from a killer
asset into a real liability. So the real question is: as a big
company, how can you take action in a way that gives you
a good chance of succeeding? More specifically, in a world
that favors the underdog and where change is inevitable,
how can you embrace a new, more nimble approach while
still harnessing your inherent scale?
15
Taking
Action
15Big Entrepreneurship The Paradox of Scale
16. 16
As a big company, it’s imperative to identify growth opportunities that meet
two equally important criteria:
They are big and sustainable. Scale can be leveraged as an advantage when
the opportunity is a big and meaningful undertaking.
They are winnable. Chasing opportunity simply because it’s big or wide-open
can be a fool’s errand.
A compelling example of a company that has identified and invested against a
big, sustainable, and winnable core is Patagonia. Outdoor apparel companies
all lean on the consumer promise of exceeding quality: high performance, built
for the extreme. Patagonia’s promise is to build products that last — so that
consumers can have fewer, but longer-lasting things.
This commitment to do better by consumers and the environment is deeply
embedded into the organization. From their “Ironclad Guarantee” on their
products to becoming a certified B-Corporation in 2012, Patagonia continues
to invest in their mission in products that are made with the environment in
mind. The results of their commitment to transparency and environmentalism
have tripled profits since 2008.
Identify meaningful
growth opportunities
01
Big Entrepreneurship The Paradox of Scale
Create discrete but
complementary platforms
Develop a strategy
that provides real
competitive advantage
Apply a portfolio
approach to funding
Create innovations that
solve a two-sided problem
03
02
04
05
07 Recognize innovation for
the experiment that it is
06 Appoint a champion
17. 17
Identify meaningful
growth opportunities
Develop a strategy
that provides real
competitive advantage
01
02
Once you know where you can win, it’s essential to develop a strategy that
will give you a distinct advantage. Although this seems intuitive, it’s often
over-looked. Companies often chase growth for growth’s sake without
thinking about ways to create defensibility. And in today’s hyper-competitive
marketplace, that’s a counter-productive exercise because you’re simply
providing the roadmap for fast-followers.
To achieve truly valuable growth, you need an Innovation Strategy that is
designed to serve as the foundation for the business, inspire innovations and
set the new initiative up for sustainable, profitable growth.
At Fahrenheit 212 we take an approach that’s inspired by a core tenet of
value investing; namely, that the key to truly valuable growth is to identify
your defensible, profitable core, invest against it, and build competitive
barriers around it.
As such, it becomes the mechanism for making critical choices, establishes a
clear value proposition for the business and provides the inspiration for the
development of innovation.
Big Entrepreneurship The Paradox of Scale
Create discrete but
complementary platforms
Apply a portfolio
approach to funding
Create innovations that
solve a two-sided problem
03
04
05
07 Recognize innovation for
the experiment that it is
06 Appoint a champion
18. 18
Create discrete but
complementary platforms
Develop a strategy
that provides real
competitive advantage
03
02
Identify meaningful
growth opportunities
01 In order for big companies to create internal alignment and support, the
strategy needs to translate into evergreen platforms that become the
foundation for innovations over time.
Every innovation should be a new manifestation of the strategy that deepens
and expands the relationship with your customers—like the unfolding chapters
in a book. This helps with internal planning and focus, it enables you to stay
ahead of the competition (i.e., when they copy you, you are already taking the
next step) and it makes scale an advantage because each new initiative expands
and deepens the unique value you’re creating in the market, thereby
reinforcing barriers to entry.
Big Entrepreneurship The Paradox of Scale
Apply a portfolio
approach to funding
Create innovations that
solve a two-sided problem
04
05
07 Recognize innovation for
the experiment that it is
06 Appoint a champion
19. 19
Create discrete but
complementary platforms
Develop a strategy
that provides real
competitive advantage
03
02
Identify meaningful
growth opportunities
01 Since inception, Amazon has leveraged
technology to create new waves of discrete yet
inter-related platforms of innovation. They
didn’t stop by simply taking books online.
They created new value for the consumer
through their personalization algorithm, they
repurposed their backend storage capabilities
to open up a complimentary B2B revenue
stream that’s now worth over $1.2B, and they
launched a loyalty program in Amazon prime
that’s created significant lift in the lifetime value
of their customers (the average Prime member
spends $1,500 as opposed to $625 per year
for non-Prime members). In each case, the
platforms reinforced Amazon’s core strategy
but created new, discrete types of value that
drove their topline and insulated them from
competitive encroachment. Said another way,
they made their scale matter.
Big Entrepreneurship The Paradox of Scale
Create innovations that
solve a two-sided problem
05
07 Recognize innovation for
the experiment that it is
06 Appoint a champion
Apply a portfolio
approach to funding
04
20. 20
Create discrete but
complementary platforms
Develop a strategy
that provides real
competitive advantage
Apply a portfolio
approach to funding
03
02
04
Identify meaningful
growth opportunities
01 Often times, CEOs hesitate to fund innovation because it’s perceived as a very bad
bet: it’s unpredictable, requires investment in initiatives that sit outside the core
of the business, can become a distraction, and the vast majority of innovations fail
within the first two years of launch. But with the rising power of the underdogs,
the very things that made innovation a potentially irrational choice for traditional
firms now actually make it a very smart use of capital.
When thinking about risk, it’s important to remember innovation has offensive and
defensive benefits. On the offensive side of the playbook, it provides the potential for
disproportionately high returns that could compliment the existing revenue drivers,
it create synergies with the core business and can open new avenues of growth.
Defensively, innovation serves as a hedge against the potential negative impact
of an unanticipated threat knocking the core business off its axis. Therefore, the
decision to fund an innovation needs to be based on more than just the obvious risk
associated with the up front investment. It needs to involve an honest assessment
of the risk of not investing. Because in today’s dynamic markets, it’s safe to assume
two things. First, if you’ve identified a meaningful opportunity for growth, you’re
likely not alone. Second, there’s a very good chance your current and potential
competitors don’t view the corresponding risk exactly the same way that you do.
Big Entrepreneurship The Paradox of Scale
Create innovations that
solve a two-sided problem
05
07 Recognize innovation for
the experiment that it is
06 Appoint a champion
21. 21
Create discrete but
complementary platforms
Develop a strategy
that provides real
competitive advantage
Apply a portfolio
approach to funding
Create innovations that
solve a two-sided problem
03
02
04
05
Identify meaningful
growth opportunities
01 Once the growth opportunity areas, competitively defensible strategies,
and consideration for the risk of investing (and not investing) have been
defined, it’s important to create innovations that solve for the consumer and
the business simultaneously. These two-sided innovations are critical for
the success of these investments and minimizing risk of innovation failure.
A great idea that the business can’t support or a good business decision that
consumers don’t want will either never hit the market or quickly fizzle out.
Run a two-sided methodology that from day one looks at the problems
of both constituencies that count—the consumer and the business—to
build ideas that marry up an answer for each. Working this way, you
can develop ideas that deliver big value to both sides of the equation
while also ensuring necessary questions get answered up-front.
Big Entrepreneurship The Paradox of Scale
06 Appoint a champion
07 Recognize innovation for
the experiment that it is
22. 22
Create discrete but
complementary platforms
Develop a strategy
that provides real
competitive advantage
Apply a portfolio
approach to funding
Create innovations that
solve a two-sided problem
Appoint a champion
03
02
04
05
06
Identify meaningful
growth opportunities
01 As any entrepreneur knows, developing a successful innovation
requires total commitment. Therefore, it’s essential that the company
appoints a champion to lead any new innovation project. Enabling
innovation to thrive requires experience driving these innovations
from conceptualization to commercialization and a direct line to
company leaders so that the innovation is aligned with corporate
strategy and supported from the top. The more tightly aligned the
innovation champion’s personal and professional aspirations are
with the success of the innovation, the more likely it is to succeed.
Big Entrepreneurship The Paradox of Scale
07 Recognize innovation for
the experiment that it is
23. 23
03
02
04
05
06
07
01 By definition, a real innovation pushes outside the core business. Therefore,
it can’t accurately or effectively be measured using the traditional metrics.
The system should be based on the measurement of KPIs that reflect the
strategic role within the portfolio and it should enable the company to
uncover and quickly reapply insights.
Learning fast—from successes and failures—gives the company the ability to
course correct the innovation’s development. It also provides insights that
can help strengthen the core business and translate it across the company.
Create discrete but
complementary platforms
Develop a strategy
that provides real
competitive advantage
Apply a portfolio
approach to funding
Create innovations that
solve a two-sided problem
Appoint a champion
Recognize innovation for
the experiment that it is
Identify meaningful
growth opportunities
Big Entrepreneurship The Paradox of Scale
24. 24
In hospitality, the rules of engagement are changing faster than most large
companies are equipped to react to efficiently. Marriott was looking for an approach
that would enable them to remain relevant to future generations of travelers by being
more nimble and entrepreneurial as an organization. The opportunity to transform
Marriott’s entire food and beverage (FB) offering—from how it was sourced, staffed,
executed, and run—went hand-in-hand with transforming Marriott’s appeal with
Millennials.
We helped Marriott develop an innovation platform, CANVAS. It is a global incubator
which brings together Marriott’s strengths and resources in FB with the vision and
talent of passionate young chefs, bartenders, and entrepreneurs. Using Marriott
properties as incubators for local FB experiences, they began to shift how and from
whom FB concepts are sourced around the globe—all with the goal of making the
process more efficient, less costly, and more nimble.
03
02
04
05
06
01
Create discrete but
complementary platforms
Develop a strategy
that provides real
competitive advantage
Apply a portfolio
approach to funding
Create innovations that
solve a two-sided problem
Appoint a champion
Identify meaningful
growth opportunities
Big Entrepreneurship The Paradox of Scale
07 Recognize innovation for
the experiment that it is
We wanted to try something from the bottom up, asking entrepreneurially
minded individuals who had worked in our hotels or who were part of the
local community to come up with new ways to do things.”
Wolfgang Lindlbauer, Chief Discipline Leader, Global Operations at Marriott International
“
* In full disclosure, Marriott International is a client of Fahrenheit 212
25. Key considerations
for big companies
Have you identified
sustainable, winnable
growth opportunities?
Do you have platforms
that will ground and
inspire the innovations
going forward?
Are you set up to
defeat the underdog?
Have you considered
the risk of investing
versus not investing in
innovation?
Do you have a champion?Are the innovations in
the pipeline solving the
two-sided problem?
Are you managing
innovation like the
experiment that it is?
01 0302 04
05 0706
25Big Entrepreneurship The Paradox of Scale
26. The Paradox of Scale
Incubating Innovation
Winning the Next Generation
of Innovators
The Rising Billion
The Chief Innovation Officer,
Redefined
Big Entrepreneurship
01
02
03
04
05
26Big Entrepreneurship The Paradox of Scale
As Managing Partner and Chief Growth Officer at Fahrenheit
212, Pete is responsible for driving growth for the firm and
our clients’ businesses. With over 20 years spent working with
Fortune 500 companies and private equity firms on a wide
range of growth projects, Pete knows what it takes to create real
innovation for companies and drive change in the marketplace.
Since helping to launch the firm in 2005, Pete has been involved
in more than 200 projects. Pete is committee to driving innovation
across the corporate landscape and is a well respected thought
leader. An active speaker, lecturer, and writer, Pete has been
featured in publications including the Wall Street Journal,
Financial Times, Harvard Business Review, Fast Company,
Private Equity International, and Inc.
About the author
Pete Maulik
Managing Partner, Chief Growth Officer
pmaulik@fahrenheit-212.com
27. How to cook up meaningful
innovation with an innovation lab
Incubating
Innovation
29. The rallying cries have a common ring to them:
Businesses ranging from The Guardian to CVS have
described the intent behind their labs in the same way:
We need to keep innovating in a constantly changing environment!
Google’s Government Innovation Lab puts it this way:
We need to innovate more often and more consistently!
Staples Innovation Lab says:
We need to become more nimble and respond more quickly
to customer needs!
The ethos of Staples’ lab is well embodied in their effort
to hatch a digital wallet product in just 9 weeks, the
fastest deployment in the company’s history.
The rationale for these innovation labs and incubators is clear.
The catch is that the success rates of these incubators are
wildly varied from company to company. While there is PR value
and cultural topspin in simply having an innovation lab, the point
is not to garner press clippings. It is to build more powerful
innovation pipelines and attractive ROI for the organization.
29Big Entrepreneurship Incubating Innovation
December
2014
March
2015
Mastercard
Innovation Lab
Sephora
Innovation Lab
January
2015
June
2015
Google
Innovation Lab
For Government
CVS Health
Digital Innovation
Lab
June
2015
The Guardian
Labs
30. 30
A great deal of the surging impetus to innovate is
coming from the boardroom, but it doesn’t stop there.
It’s true: boards tasked with long-term stewardship
(and that have historically biased organizations to
stick to the familiar) have adopted a healthy new
nervousness about whether or not the businesses
they’re watching over are changing fast enough.
But the impetus is also bubbling up from the street
through pronounced shifts in consumer demand.
Driving
Forces
Big Entrepreneurship Incubating Innovation
31. 31
In an era when attention spans continue to
get shorter and there is more willingness to
experiment with new products and services,
companies that once could milk a leadership
position for years without trying very hard are
now challenged to keep pace with escalating
consumer expectations in better, more
personalized, and more efficient ways.
Driving
Forces
In this pursuit, technology is a double-
edged sword for incumbent businesses.
It is simultaneously opening new possibilities
for companies to serve their customers
and create new value while also propelling
those customer expectations ever higher,
making stable customer satisfaction an
increasingly elusive thing.
Big Entrepreneurship Incubating Innovation
32. Consumers want to connect
beyond the purchase
Engagement between company and customer has changed from
a simple matter of messaging and purchase to a more fluid and
context-specific set of thin and transient connective threads.
This is why many labs aim their explorations of technology
at creating new forms of customer engagement. Technology
plays like iBeacons open up a whole new opportunity to get
hyper-contextual with consumers.
For healthcare providers, wearable fitness trackers enable a
new level of understanding of individual lifestyle habits and
behaviors. 3D printing allows for custom-created products to be
made with unprecedented speed. Companies such as Levi’s are
experimenting as well: Levi’s has partnered with Google to
create “smart pants” that tell users when they have gained weight.
Driving Forces
CVS defines the goal of their Digital Innovation Lab as giving
customers a connected health experience “when, where, and
how people want.”
32Big Entrepreneurship Incubating Innovation
33. Expectations bleed from
one experience to the next
Driving Forces
33
Across industries, there are new consumer expectations around
speed, responsiveness, and personalization. Uber is certainly a
poster child for this dynamic. In the 6 years since Uber’s launch,
it has leapt out from ride sharing to shape the future of how
physical things are delivered on-demand. Uber’s success has
inspired other innovators to mobilize their own equivalents in
other verticals, and spawned the term “Uberfication” as a strategic
encapsulation of the transformations they’re unleashing.
Big Entrepreneurship Incubating Innovation
34. Driving Forces
34
for what is acceptable: the products and services that people interact
with across other aspects of their lives do. Traditional RD practices
of benchmarking new products against things just like them have
to be called into question. The better framework is to evaluate new
offerings relative to where life and meta-expectations are headed.
You can now get errands (TaskRabbit), home cleaning
(HandyBook), babysitting (Urban Sitter), vet services (BarkCare),
deliveries (Shyp, Postmates), storage (MakeSpace) and even
bodyguards (Bannerman) on demand with the tap of a few buttons.
The permeation of these services has set expectations much further
and wider than the scope of what each service directly offers, causing
consumers to expect this same level of seamlessness anywhere.
This cross-fertilization of expectations across thoroughly unrelated
businesses seems to be playing out with unprecedented frequency
and velocity. The result is a consumer whose expectations are
not necessarily being driven by your direct competition. A poor
user experience or lack of contextual sensitivity could be all it
takes for them to move on. This is a big shift for companies to
grapple with as direct competitors are no longer setting the bar
Big Entrepreneurship Incubating Innovation
Expectations bleed from
one experience to the next
35. Since 2002, 52% of
Fortune 500 companies
have merged, been
acquired, or gone bankrupt.
The innovation
imperative is heating up
Driving Forces
35
Company leadership is anxious to prove their genuine
commitment to innovation, while also producing ongoing
results. A recent survey of senior executives conducted by
Capgemini revealed that 65% face increased pressure to
innovate. And with good reason: since 2000, 52% of
Fortune 500 companies have merged, been acquired, or
gone bankrupt. In addition, it is projected that 40% of
Fortune 500 companies will be extinct in 10 years. As
VentureBeat recently quipped, the way for big companies
to compete with startups is to “innovate or die.” Or, said
another way, the choice is simple. Disrupt or be disrupted.
Big Entrepreneurship Incubating Innovation
36. Things will keep changing—
keep up or be left behind
Driving Forces
36
Innovation labs are an answer for many companies as a way to
rapidly ignite once-moribund pipelines, foster a culture more
conducive to innovation, and also attract talent and future
innovation leaders.
It is also a way to ensure the company is keeping pace with
rapid and often unpredictable changes playing out in real
time all around them. Technology is often at the heart of
these changes.
It is little wonder then that while 38% of the world’s top 200
companies have established innovation labs, and most of them
are explicitly or implicitly focused on harnessing technology.
For leaders, this isn’t just about stirring up innovation activity;
it’s also about hedging against the omnipresent intangible
threat of disintermediation from digital startups.
38% of the world’s top 200
companies have established
innovation labs.
Big Entrepreneurship Incubating Innovation
37. Innovation activity goes
beyond the SKU
Driving Forces
37
For many businesses, there is also a realization that these
labs need to catalyze more than shiny new products, but
a shinier new company—which manifests as impact on
company processes, approaches, and culture. The desired
end state is a virtuous circle where the lab is not only
producing high-potential innovations ready to enter the
company pipeline, but where the organization itself is
sufficiently influenced by the brave work of the lab and more
likely to rally around its outputs, driving them to market
instead of into the ground. The hope is that inspiration and
momentum become contagious and self-perpetuating.
In the push to compete online, WalmartLabs has created small
teams of “mini-startups” that work to solve specific challenges.
This nimbler approach has led to the development of an internal
search engine that drove a 20% increase in sales.
Big Entrepreneurship Incubating Innovation
38. For innovation labs, that’s a lot of pressure to deliver to both the
needs and expectations of consumers while also helping serve
company requirements for growth and insulation in the face of
less predictable change.
An innovation lab can help push the company into new territories,
reassure stakeholders, and entice consumers. But, how that lab
is structured, funded, and run is critical to ensuring that it is able
to deliver innovations that the organization can adopt while also
meeting and foreseeing consumer demands. The key to ensure
the success of your innovation lab is to ensure the fundamentals
are clear. Here’s how we would frame those fundamentals.
Taking
Action
38Big Entrepreneurship Incubating Innovation
39. 02
01 Identify the problem
the lab is there to solve
Don’t mistake a symptom for a problem. Contrary to popular opinion, “my
pipelines are barren” isn’t actually a problem; it’s a symptom of something
else that’s broken—be it a flawed growth strategy, talent problem, or
technology gap.
Ensure the lab is designed to solve a core problem or it will fall victim to the
same issues that bogged down other innovation efforts that came before.
39
Prioritize
socialization
Define the
metrics
Motivate
your talent
Don’t let the making
overrun the thinking
Bring in the right partners
03
04
05
06
Big Entrepreneurship Incubating Innovation
40. 03
02
04
05
06
01
Prioritize
socialization
Define the
metrics
Motivate
your talent
Don’t let the making
overrun the thinking
Bring in the right partners
Identify the problem
the lab is there to solve
40
What’s measured matters. Is the primary focus of the lab on driving
strategy, revenue, adding capability, or attracting talent? Ensure
there is clarity on the goals and metrics for what the lab will measure
will be judged against. The count of colorful sticky notes and tattoos
in the lab aren’t the metrics that will give it staying power.
Big Entrepreneurship Incubating Innovation
41. 03
02
04
05
06
01
Prioritize
socialization
Define the
metrics
Motivate
your talent
Don’t let the making
overrun the thinking
Bring in the right partners
Identify the problem
the lab is there to solve
41Big Entrepreneurship Incubating Innovation
If you keep opening the oven to see if the
muffins are cooked, they never actually cook.
The lab needs runway to explore and develop
ideas without hordes of company stakeholders
looking in. But working in isolation can reduce
the odds of incubated ideas successfully
re-entering the business. Successful labs make
smart choices about when to socialize, what
to socialize, with whom, and how often.
42. Designing the careers of the talent in the lab is as important as the
working process, because without world-class talent, you’ll never have a
world-class lab. A key piece of this is defining performance metrics and
incentive schemes for lab staff. The incentive scheme put in place is essential
to having an entrepreneurial culture and behavior take root within the lab.
03
02
04
05
06
01
Prioritize
socialization
Define the
metrics
Motivate
your talent
Don’t let the making
overrun the thinking
Bring in the right partners
Identify the problem
the lab is there to solve
42Big Entrepreneurship Incubating Innovation
43. Find the balance between developing the
right strategy and building. The rush to start
prototyping can divert attention away from big,
unanswered questions around the strategic and
commercial value of an idea. A great feature
set or sexy UI on a bad idea is just a more
enjoyable bad idea. Make sure you understand
how the idea will meet customer demands
while also supporting the business first.
03
02
04
05
06
01
Prioritize
socialization
Define the
metrics
Motivate
your talent
Don’t let the making
overrun the thinking
Bring in the right partners
Identify the problem
the lab is there to solve
43Big Entrepreneurship Incubating Innovation
44. 03
02
04
05
06
01
Prioritize
socialization
Define the
metrics
Motivate
your talent
Don’t let the making
overrun the thinking
Bring in the right partners
Identify the problem
the lab is there to solve
Great labs run lean. They may not need a certain skillset full-time, but
knowing when to bring in specialized help in key moments will ensure
more effective problem solving while containing the head count in the lab.
The skill sets of external partners are widely varied, so when outside
expertise is needed, make sure you are clear on where you are in
the journey and which capabilities are best suited to that stage.
44Big Entrepreneurship Incubating Innovation
45. For the talent in the lab,
is it an outpost or a durable
career path?
When do I need to strategize,
and when do I need to build?
What are the lab’s measurable
goals and deliverables?
What’s the relationship
between the lab and the
company’s growth strategy?
What problem is my innovation
lab really trying to solve?
01 0302
04 05
45Big Entrepreneurship Incubating Innovation
Key considerations
for big companies
46. 46Big Entrepreneurship Incubating Innovation
The Paradox of Scale
Incubating Innovation
Winning the Next Generation
of Innovators
The Rising Billion
The Chief Innovation Officer,
Redefined
Big Entrepreneurship
01
02
03
04
05
As Co-Founder and President of Fahrenheit 212, Mark has
spearheaded innovation projects for Fortune 500 companies,
emerging businesses, and private equity firms. He is the architect
of the firm’s Money + Magic philosophy, its outcome-based
business model, and its breakthrough Two-Sided Innovation
Method of fusing analytical commercial strategy with user-
centered creativity. He is a front-line innovator shaping new
product and service pipelines for the world’s greatest companies.
Mark’s insights on how innovators, from big organizations
to startups, can transform the odds of innovation success
rates are captured in his book, How to Kill a Unicorn, with
behind-the-scenes stories from the firm’s work with the likes of
The Coca-Cola Company, Samsung, Procter Gamble, and GE.
About the author
Mark Payne
Founder, President
mpayne@fahrenheit-212.com
47. How to attract, engage,
and retain Millennial talent
Winning
the Next
Generation
of Innovators
49. Yet, many established brands are failing miserably at sustaining
Millennial interest. For companies looking to bring on the next
generation of innovators, they will need to become more innovative
and quickly prepare to attract this new workforce.
Innovation is imperative for revenue growth, but it’s also hugely
important for attracting and retaining talent. The longer-term
dimension of innovation is the need to maintain a culture of innovation
by bringing new innovators in that can continue to evolve the
business. To do so, companies need Millennials on their teams.
That “lazy, entitled, selfish” generation of workers is quickly becoming
a company’s most important asset: attracting the rising generation
of talent is necessary for businesses looking to stay relevant into
the future.
For established companies, this can be a daunting task: Millennials
notoriously prefer startups to corporate environments, and appealing
to their work culture would mean drastically changing one’s own.
How does a large company appeal
to the Millennial workforce when
72% of Millennials already want to
be their own boss? And with 78% of
Millennials stating they are influenced
by how innovative a company is when
deciding if they want to work there,
innovation has become necessary to
attract and retain a talented workforce
in the future.
49Big Entrepreneurship Winning the Next Generation of Innovators
50. Millennials grew up more connected to technology, are a
more diverse group, are more educated, and are also starting
out their lives with higher average debt than generations
before them. A unique set of influences impacts their
expectations and habits. It’s been easier for businesses
to brand Millennials as spoiled and entitled than make the
difficult changes that will be required to draw them in. But,
Millennials have just become the largest segment of the
workforce. The challenge has already changed from “what
will we need to do” to “how do we get them here?”
Driving
Forces
50Big Entrepreneurship Winning the Next Generation of Innovators
51. 51Big Entrepreneurship Winning the Next Generation of Innovators
The journey matters more
than the destination
Driving Forces
Despite the stereotypes, Millennials actually stay with their
employers longer than Generation X workers did at the same
ages. They are also more educated than any other generation
before them. All of these factors have massive implications on
their expectations of work and the role that work plays in their
lives. They expect work to be more fulfilling, to help them grow,
and for the company to give back to them the passion and
dedication that they give to it. Stop defining careers by the next
promotion and consider the entire journey required to grow
them into that next role.
52. It is designed to avoid allowing “HiPPO” (Highest Paid Person’s
Opinion) to inhibit innovation while also providing employees
with the tools and empowerment to share ideas. The results
have included Amazon’s shopping cart recommendations, which
was rolled out despite a HiPPO who didn’t believe in it.
52Big Entrepreneurship Winning the Next Generation of Innovators
There is big value
in learning
Driving Forces
Only 12% of Millennials in North America put an emphasis
on being wealthy in life. Yet, 52% of them prioritize growing
and learning new things. They consistently prioritize personal
growth and a successful career over being wealthy.
Companies must embrace this shift in prioritization and
become teaching organizations. Provide constant training
and leave room for personal development. Not only can this
training make them more productive employees, but it can also
teach them to better develop and support innovative ideas.
Amazon’s data-driven culture encourages employees at all
levels to improve the company through customer insight.
53. 53Big Entrepreneurship Winning the Next Generation of Innovators
Gone are the days of
the suit, office, and
regular hours
Driving Forces
To Millennials, traditional workplaces stifle their creativity and
sense of individuality. However, the workplace can also enable
mentorship and guidance. 79% of Millennials want their boss
(if they absolutely have to have one) to be a coach or mentor,
which can set them on the path towards great leadership.
54. Unlike past generations, they also actively resist the
suit-and-tie culture and that dreary 9-to-5. In fact,
self-employment rose 24% between 2003-2013.
Not everyone can be making millions in a t-shirt in a Silicon
Valley garage, but large companies can harness that spirit,
that casual ingenuity, and collaborative work ethic in their
offices. 88% of Millennials insist on collaboration over
competitiveness in their work culture, which defies the very
cornerstone of business culture built by Baby Boomers.
54Big Entrepreneurship Winning the Next Generation of Innovators
Gone are the days of
the suit, office, and
regular hours
Driving Forces
88% of Millennials insist
on collaboration over
competitiveness in their
work culture.
55. 55Big Entrepreneurship Winning the Next Generation of Innovators
Collaboration is tearing
down cubicle walls
Driving Forces
Millennials want to be able to suggest new products to
companies, and they should be given that kind of access with
the proper nurturing. They want feedback, but they also want
to be a contributing voice in the company’s future.
The Ritz-Carlton brings their hotel staff into their innovation
process, providing each staff member a “preference pad” that
they carry with them to write down observations from studying
guest habits so that they can help better meet guest needs. One
new service launched as a result was a debit card for children of
guests to use in properties when they are not with parents.
56. 56Big Entrepreneurship Winning the Next Generation of Innovators
New workplace demographics
highlight lack of diversity
Driving Forces
Millennials are more critical of layers of
management and operational structures.
They are also more conscious of lack of
diversity because of their inherent diversity.
Another major change is the role of women
in the workforce: Millennial women have
more education than men, and their rising
professional aspirations have put their
ambitions on par with their male peers.
As these changes in employee demographic
become more pronounced, there is no
more critical time to ensure that employers
consciously address very real issues such as
the gender pay gap and workforce
diversity. Deloitte recently revealed that
one out of five Fortune 1000 organizations
still have no formal diversity efforts
structured (nearly half of respondents
saying they’re “too busy”); unsurprisingly,
talent gravitates towards entrepreneurial
companies such as Facebook and Netflix
who are consciously addressing policies
to reflect the realities of the modern
workforce. With Netflix’s new unlimited
parental leave policy for new parents, they
are setting a standard that will see other
forward-thinking companies follow.
57. Nadira Hira, author of the forthcoming book,
Misled: How a Generation of Leaders Lost the Faith (And Just What You’ll Need to Get It Back)
“Foster a culture that mirrors what start-ups do best:
be the kind of place that evaluates constantly
and stays ready to react when big challenges
or possibilities present themselves.
Encourage ideas, empower employees,
hire high-energy managers —
57Big Entrepreneurship Winning the Next Generation of Innovators
58. 58Big Entrepreneurship Winning the Next Generation of Innovators
An entrepreneurial culture
does not happen by accident
Driving Forces
Employees get 20% of their time to spend on personal projects
that align themselves with the objectives of the company. A great
opportunity for the employee, 20% time has also been equally
as rewarding for the company.
Gmail, the email service that almost 1 billion people use, is a product
that came out of 20% time. Rajen Sheth pitched the idea not after
spending 10 years in the company, but at his interview. With the help
of mentors and peers, Sheth was able to develop Gmail initially as a
side project under the codename “Caribou.” The result is one of the
most important and successful services that the company offers.
Mature organizations that grew from startups have built
themselves to be more flexible, creative, and collaborative.
As they grew, that culture had to be purposefully maintained.
Not surprisingly, Google is the number one company that
Millennials want to work in. The benefits that attract employees
revolve around a great culture of innovation, including their
20% time policy.
Giving employees the equivalent of one work day a week to
spend on personal projects may sound crazy to most business
leaders, but the reality is that the flexible, creative time works
to their advantage.
59. 59Big Entrepreneurship Winning the Next Generation of Innovators
Incentives must go beyond
the cash bonus
Driving Forces
Like with other aspects of their lives, Millennials are looking
for experiences. So while cash bonuses and fiscal rewards
have worked well as incentives in the past, Millennials are
looking for slightly more creative set of incentives and perks
from employers. They want their employers to also offer them
experiences, learning opportunities, and fresh perspectives.
Tony Hsieh, CEO of the billion-dollar online retailer Zappos
has always been known for his zany office antics, but in 2013
he took things to the next level by establishing his company as
a “Holocracy,” that is, a self-governing operating system where
there are no job titles and no managers. His radical experiments
with company culture may not be for everyone, but Zappos
remains featured as one of Forbes’ Best Companies to Work
and is projected to generate $97 million in profit in 2015.
60. 60Big Entrepreneurship Winning the Next Generation of Innovators
Technology is a cornerstone
for collaboration
Driving Forces
For this tech-savvy generation, a Jetsons-like office isn’t
necessarily the answer. However, technology has facilitated
personal interaction and collaboration for a large part of this
generation’s lives. Millennials have almost always had a way
of being constantly connected to each other. In the 90s,
it was AOL Instant Messenger and email. Today, it’s
any combination of SMS, Facebook Messenger, Snapchat,
WhatsApp, Line, or Twitter.
These constant streams of communication are a basic
expectation for the way they live the rest of their lives.
This trend is hitting desks (and coffee shops and apartments)
through new professional services that help streamline
and enable remote workplace collaboration, such as Slack,
WeWork, and Box.
61. 61Big Entrepreneurship Winning the Next Generation of Innovators
Technology is a cornerstone
for collaboration
Driving Forces
Across fields, the move towards more lean and agile approaches
is changing the ways Millennials prefer to work. Slack is being
positioned as the “email killer,” which aims to take employees out
of Outlook (and a range of other services) to focus on connecting
with each other more efficiently and effectively. Looking to take
on PowerPoint, Bunkr is a presentation tool that enables any
visual content to be collected and simply organized through a web
app. Even in the digital product development realm, services like
InVision make it easier to show ideas and prototype on the fly; long
gone are the days of doing a big reveal of the concept at the end.
62. Taking
Action
A new approach to attracting, developing,
and retaining this and future generation of
employees is inevitable. But it isn’t impossible.
62Big Entrepreneurship Winning the Next Generation of Innovators
63. 63Big Entrepreneurship Winning the Next Generation of Innovators
01 A good paycheck is not on its own a big
enough carrot. Millennials are seeking a
meaningful experience in their work.
Leverage the workforce to help improve
processes and contribute to company growth.
The company will gain fresh perspectives
while employees will gain experience and
feel engaged.
03 Value results over tenure
Set Millenials free
Help your talent grow
02
64. 64Big Entrepreneurship Winning the Next Generation of Innovators
Mentorship, education, and travel are some of the most sought after
methods of personal growth, but the inherent quality in each of these
methods is flexibility. The 9-to-5 job is a tired formula, particularly for future
generations who expect to be constantly connected and able to communicate
and collaborate freely. To accommodate this need while still encouraging
productivity, give Millennials concrete targets and clear timelines, but don’t
stress about the tactics they employ. Provide them with collaboration tools
and the means to work remotely, with global teams, and more effectively.
03
02
01
Value results over tenure
Set Millenials free
Help your talent grow
65. 65Big Entrepreneurship Winning the Next Generation of Innovators
03
02
01
Value results over tenure
Set Millenials free
Help your talent grow Career advancement has historically been driven by seniority and length of
service to the company. Millennials take on a completely different mindset,
championing results over tenure. Help your company battle HiPPOs by
rewarding for results, not time.
As Millennial workforce expert Nadira Hira advises: “make your
Millennials feel like partners in that mission; there’s nothing we
won’t do—from putting in crazy hours to turning down great offers
elsewhere—when we have a sense of ownership.”
66. Do we have the right metrics
in place for measuring impact
and growth?
Do we have the mechanisms in
place for promoting personal
and professional growth?
What does our entire
employee journey look like?
Why do certain office protocols
exist? Do they need to?
Do we have a problem with
HiPPO syndrome?
01 0302
04 05
66Big Entrepreneurship Winning the Next Generation of Innovators
Key considerations
for big companies
67. The Paradox of Scale
Incubating Innovation
Winning the Next Generation
of Innovators
The Rising Billion
The Chief Innovation Officer,
Redefined
Big Entrepreneurship
01
02
03
04
05
67Big Entrepreneurship Winning the Next Generation of Innovators
Mary connects with innovators on a global scale to create and share
Fahrenheit 212’s stories. As a Millennial, social media advocate,
and writer, Mary helps drive conversations and offer insight on
innovation with various global audiences. She has harnessed the
power of social media to communicate with journalists overseas as
well as translate and fact check breaking news.
In addition to her role at Fahrenheit 212, Mary also writes
frequently for travel and culture publications [wherever] magazine
and Warscapes. Her love of writing has allowed her to travel to
over thirty countries as a researcher and journalist. Thanks to social
media, she continues to bring people and ideas together on the web.
About the author
Mary von Aue
Content Manager
mvonaue@fahrenheit-212.com
70. 70Big Entrepreneurship The Rising Billion
The emerging middle class is ambitious and
aspirational, and they are compelling businesses that
have traditionally underserved developing markets
to action.
This market has seen a major shift, from aid-givers
pouring money and resources into charity work
to platforms that bring together local expertise,
organizations, and money to deliver home-grown
solutions that are scalable and deliver long-term impact.
Unlike the non-profit model, these enterprises have the
commercial acumen, financial resources, and brand
reach to build and sustain their innovation platforms.
Multinationals are quickly becoming significant players in
the world of social innovation as they come to terms with
the massive opportunity that lies in solving challenges in
developing markets. But, introducing innovations that truly
help those in need while ensuring they’re self-sustaining
requires an approach that looks at the Rising Billion
as customers and their own role as more than Corporate
Social Responsibility or charity. They need to solve for
both commercial and consumer needs, which is the
bedrock of the two-sided approach to innovation.
Disruptive innovation typically happens at the intersection
of constraints and a compelling need. Because
of this, markets at the end of the socio-economic
spectrum are prime for disruption and growth.
As this consumer group strengthens its spending power,
it is also developing products and services that have the
ability to not only disrupt—but replace—how business
happens elsewhere. Leading this imperative are four
major opportunities for business.
71. 02
01Future customers are at stake. The emerging middle class in BRIC
countries is expected to add US $3.3 trillion to their consumer spending
by 2020, and improving infrastructure and technology have lowered
the barriers for these consumers to get access to basic necessities
for survival. Facebook’s investment in world connectivity under the
initiative Internet.org is equal parts virtuous and sensible. Two-thirds
of the world is not connected to the internet, which means that they
don’t have the same access to learn, enjoy, and socialize that the rest
of the developed world has. It also means that until this is solved,
two-thirds of the world will not have access to use Facebook.
Reverse innovation can build advantage in mature markets.
The challenges and constraints of developing markets can provide
solutions and insights that can improve and innovate products
with global appeal. For instance, GE Healthcare built a portable,
ultra-low cost, battery operated, easy-to-use, electrocardiograph
machine built for doctors in India and China that is now disrupting
the global market. Sold in over 90 countries, the machine is 80%
cheaper than similar products in developed markets like the U.S.
71Big Entrepreneurship The Rising Billion
“People actually
confuse Facebook
and the internet in
some places.”
Sheryl Sandberg
Chief Operating Officer, Facebook
72. 04
03
72Big Entrepreneurship The Rising Billion
Social responsibility impacts global reputation. In addition to building
credibility for companies around their global mission and role in society,
social responsibility is important for attracting the next generation
of innovators into a company’s workforce. Particularly with younger
generations, 62% of Millennials want to work for a company that makes
a positive impact on the world. Half of Millennials would prefer working at
a company that has a mission that they believe in over a higher salary.
Big problems have big markets. There are untapped and unsolved
markets for global challenges. Annually, US $54 billion is spent to provide
basic education in 46 low income countries globally. Even with the
success of M-Pesa, over 2.5 billion potential customers worldwide don’t
use or have easy access to financial services or banks. Launched by
Vodafone, M-Pesa is the most successful mobile phone based financial
service in the developing world, and as of 2012, 17 million M-Pesa
accounts had been registered in Kenya alone. In addition to giving millions
of people access to financial services, it has also contributed to the
reduction of crime in a society that has otherwise been cash-based.
73. 73Big Entrepreneurship The Rising Billion
As many multinationals have learned the hard way by not
following a two-sided innovation approach, it does not simply
work to take a successful innovation from a developed
market and drop it into an emerging one. From education
and healthcare to hygiene and clean water, developing
economies represent multi-billion dollar markets and
areas for huge impact. These emerging consumers are as
diverse as they are large. Yet while they vary geographically,
culturally, in religion, and in language, there are some shared
fundamental environmental and emotional needs.
Driving
Forces
74. 74Big Entrepreneurship The Rising Billion
This is an
aspirational group
Driving Forces
They do not want cheap things; they desire the affordable
version of the essentials they have seen other consumers
access. When Unilever entered developing markets, they
met this need by recognizing that the typical consumer could
not afford to buy the full-size version of a product, but they
were willing to buy single-use sachets of popular products at
much cheaper prices. This approach later proved successful
for declining markets as well, such as Greece and Spain.
75. 75Big Entrepreneurship The Rising Billion
Family
matters
Driving Forces
Around the world, multi-generational households
are still the norm. Every purchase made attributes
to household wealth accumulation, so those decisions
are made collectively.
76. 76Big Entrepreneurship The Rising Billion
Every item is used
until it breaks
Driving Forces
To avoid wastage and often because of the size of
the investment, people will use products over and
over until it can no longer function. Ink cartridges
will be locally refilled and disposables such as plastic
bottles and diapers are constantly reused.
77. 77Big Entrepreneurship The Rising Billion
Women’s roles
are evolving
Driving Forces
While the role of women in these markets has evolved, it
remains complicated; often despite being primary breadwinners
they aren’t heads of the household. While education and
economic growth are all contributors to change, new models like
Coca-Cola’s Splash Bar are empowering women to sell products
that were previously out of reach. By providing a kiosk where
women can sell various serving sizes of Coca-Cola, Splash
Bar enables women to sell products where many locals may
not have been able to afford an entire bottle.
* In full disclosure, Coca-Cola is a client of Fahrenheit 212
78. “BlogHer
The [Splash Bar] kiosk becomes a kind of community center
where locals gather, and the woman is not far from her home.
It’s this baby-step approach that stays with me most:
And in a country with long-held gender roles and expectations,
this is perhaps a smart strategy: Move forward by evolution,
not revolution.
All of these programs are nudging progress
ahead at a pace the communities can accept.
78Big Entrepreneurship The Rising Billion
79. Note: US data from Pew Research Center Surveys
Source: Spring 2014 Global Attitudes survey. Q66 PEW RESEARCH CENTER
Cell phone penetration in Africa (%)
100%
50%
0%
Cell phone
penetration
2002 2007 2014
Year
United States 89
South Africa 89
Ghana 83
Kenya 82
Tanzania 73
Uganda 65
64
33
10
10
9
8
79Big Entrepreneurship The Rising Billion
The speed of change
is more rapid
Driving Forces
The speed of technological change is enabling consumers
to leapfrog from technologies and systems that have
been the standard of operation for the developed world.
Because there are few existing infrastructure constraints,
the speed of adoption and change in emerging markets
can be much more rapid than in developed ones. For
instance, in Africa, landlines never hit critical mass,
enabling consumers to move straight to mobile phones.
80. 80Big Entrepreneurship The Rising Billion
It’s not just low income,
it’s also volatile income
Driving Forces
Because this consumer is unlikely to be earning a steady
paycheck, business models cannot just account for affordability;
they have to expect inconsistency in payment and purchase.
With increased wealth volatility in developed markets, this
may be a new normal for businesses to have to address
globally. Building materials company, Cemex, addressed this
by providing products on credit to help consumers finish
building their houses and avoid the waste of raw material.
81. 81Big Entrepreneurship The Rising Billion
Customer journey planning
must be end-to-end
Driving Forces
Businesses will have to think beyond the sale and find ways to
integrate with the behaviors and lifestyle of consumers. From
training and education to reuse and next purchase, brands will
need to help consumers understand the benefits and how to get
the most out of the product or service. In India, e-commerce
has taken off because of cash-on-delivery models, which
enable avoiding the need for consumers to pay in advance
via credit card, which has low penetration and little trust.
82. It’s clear that the challenges emerging markets face are
not just for non-profits and aid agencies to solve. In fact,
businesses are very well positioned to address these
challenges in a manner that will have bigger and more
sustainable consumer impact while also improving their
bottom line. However, to ensure they do both, companies
must take a two-sided innovation approach. Drawing from an
understanding for consumer and commercial requirements,
businesses entering this market must do the following.
Taking
Action
82Big Entrepreneurship The Rising Billion
83. Tap into aspiration01 Make products more affordable while still
providing full value. As the 3rd largest
smartphone distributor, Xiaomi has
quickly captured the Asian market with
smartphones that compete with the iPhone,
but at around one third of the price of one.
83Big Entrepreneurship The Rising Billion
Be prepared for customers
to hack your products
03
02
04
Build for a lifetime
Engage the entire family
Don’t assume one
size-fits all
05
84. Engage the entire family02
01 Big buying decisions affect everyone, so take into account how the
product or service will impact the family, not just the individual.
In Argentina, 77% of people over the age of 65 live with
family. In India, while this number is declining in Urban areas,
60% of households are multigenerational in rural areas.
84Big Entrepreneurship The Rising Billion
Tap into aspiration
Be prepared for customers
to hack your products
03
04
Build for a lifetime
Don’t assume one
size-fits all
05
85. Build for a lifetime
Engage the entire family
03
02
Tap into aspiration01 Commit to developing products and services that are meant to last and
withstand multiple uses, because it will be used and reused anyway.
BOP consumers in Latin America are careful in their use of diapers.
They use one or two changes per day compared to the five or six
changes per day common among the top of the pyramid consumers.
Because they can afford only one or two changes, they expect
a higher level of absorbency in the diapers and an improved
construction of the diaper that will accommodate additional load.”
Excerpt from Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits
by C.K. Prahalad
85Big Entrepreneurship The Rising Billion
Be prepared for customers
to hack your products
04
Don’t assume one
size-fits all
05
“
86. Build for a lifetime
Engage the entire family
Be prepared for customers
to hack your products
03
02
04
Tap into aspiration01 Expect that consumers will customize products to fit their
unique needs. Instead of locking things down, find ways to create
mechanisms for enabling customization or supporting it.
In India, car batteries are often converted into backup power
sources, giving rise to companies such as Su-Kam, which develop
power backup solutions and are now moving into solar.
86Big Entrepreneurship The Rising Billion
Don’t assume one
size-fits all
05
87. Be prepared for customers
to hack your products
Don’t assume one
size-fits all
03
02
04
05
01 Take the time to understand and localize to each culture and their
unique needs. McDonald’s customizes menus to meet local preferences,
serving a lamb burger in India, and using rice instead of bread buns
in Asia. Because of how well McDonald’s localizes, The Economist
has created the Big Mac Index to gauge currency exchange rates.
87Big Entrepreneurship The Rising Billion
Build for a lifetime
Engage the entire family
Tap into aspiration
88. 01 02
05
03
Are we designing our products
and services with a full
understanding of how they will
be used in context?
Do we truly understand the
needs and desires of the
market we are entering?
Are we tapping into the
aspirational nature of this
demographic?
Have we localized to the unique
needs of each culture and
market?
04
Do we understand the broader
ecosystem we exist in and how
we fit in it?
88Big Entrepreneurship The Rising Billion
Key considerations
for big companies
89. The Paradox of Scale
Incubating Innovation
Winning the Next Generation
of Innovators
The Rising Billion
The Chief Innovation Officer,
Redefined
Big Entrepreneurship
01
02
03
04
05
Sid is an Engagement Manager with Fahrenheit 212’s
Commercial Strategy team. Originally from India,
Sid brings with him a passion for building businesses
and developing breakthrough innovations that solve
big problems. He has worked with both Fortune 500
companies and entrepreneurs to develop and launch
innovation programs.
Sid’s career started at Citi in London on their Mergers
Acquisitions team. He also launched his own brand
of healthy yogurt smoothies in the UK, modeled
after popular Indian lassi drinks, which were sold
in Whole Foods Market as well as Waitrose and
Ocado. Prior to joining Fahrenheit 212, Sid was India
Program Director at STIR Education, an incubator of
grassroots micro-innovators in education.
As a Senior Strategist on Fahrenheit 212’s
New Business team, Eric works to pair Fahrenheit’s
innovation capabilities with companies seeking
sustainable, profitable growth. Eric was a founding
member of Ruder Finn’s RF Radius, the agency’s
integrated communications and marketing arm,
which drove a four-fold increase in practice revenue
and headcount in just twelve months. Eric has led
engagements with Fortune 500 companies across
financial services, food beverage, healthcare, and
technology, to craft and execute global campaigns
that delivered tangible results.
89Big Entrepreneurship The Rising Billion
About the authors
Siddharth Singh
Engagement Manager
ssingh@fahrenheit-212.com
Eric Turkington
Senior New Business Strategist
eturkington@fahrenheit-212.com
90. How to hire a CINO that can build
lasting innovation capabilities
The Chief
Innovation Officer,
Redefined
92. The urgency to innovate better, faster, and more consistently
has led many companies to look for a leader to help drive
innovation. With one in five executives touting innovation as
their top priority, they are in need of a captain to help guide
the organization through turbulent times: a rapid rise in ways
to source innovation, technological advances, potential
disruptive new entrants, and complex internal politics.
The result has been the development of a Chief Innovation Officer
(CINO) role. In fact, 43% of large organizations already have a
formally accountable innovation executive in place. However,
as with nascent roles before them (such as the CTO role in the
dot-com era), this role suffers from a lack of proper definition.
The creation of the CINO position may signal the company is
ready to institutionalize change and growth, however poor role
definition risks wasting time, resources, and ultimately the
career path of a high-potential executive.
Wall Street Journal
43% of executives who responded to
the survey said their companies have
an innovation executive, compared
with 33% last year. Yet 58% of those
companies said they did not have an
innovation strategy. In other words,
for many companies the title of chief
innovation officer is mostly for show.
It’s like a new toy. Company boards
feel that they ought to have one. They
just aren’t sure what to do with it.”
“
92Big Entrepreneurship The Chief Innovation Officer, Redefined
93. Experience in commercial innovation teaches that a CINO
role succeeds or fails based not on the hire, but on the
structure and strategic intention that surrounds it. Before
accepting resumes, know that a CINO job description
should outline a capability; it is not simply a wish-list for
company growth. As such, start by avoiding the critical
mistakes that commonly sink CINOs.
Driving
Forces
93Big Entrepreneurship The Chief Innovation Officer, Redefined
94. 94Big Entrepreneurship The Chief Innovation Officer, Redefined
The CINO needs a
dedicated budget
Driving Forces
A company’s in-place operating budget can be the enemy
of innovation. The operating budget, well… operates.
It presupposes function-specific solutions (marketing,
merchandising, etc.) before a problem or growth challenge is
properly identified. So when a new consumer behavior arises,
such as Millennials becoming socially conscious shoppers, the
organization is unable to react with agility. Budgets have been
set, and problem-solving projects “take” from each fiefdom’s
precious resources.
Without a dedicated budget, your CINO will spend a majority
of his or her time “selling” projects internally and fighting for
scraps of funding.
Put another way: you
wouldn’t buy a car without
fueling it. Don’t hire a
CINO without a dedicated
innovation budget to
empower them to act.
95. 95Big Entrepreneurship The Chief Innovation Officer, Redefined
Cultural change is
not a realistic ask
Driving Forces
Are you expecting the CINO to change your culture? Don’t. The
fact is that the CINO cannot, and should not, change the culture
of an organization. No amount of open ideation competitions,
workshops, or awkward trust falls on earth can meaningfully
shift a company culture. While CINOs can help create more
innovation activity, creating a “culture of innovation” is not
actually within the power or remit of the CINO.
Culture is driven by the CEO and his or her team and is
determined by what is rewarded, valued, and how resources
are spent across an organization. It is incredibly tempting
to write “create a culture of innovation” as part of the
CINO’s job description. Cross it off, just as you would
anything else he or she can’t control or really influence.
96. 96Big Entrepreneurship The Chief Innovation Officer, Redefined
Support must come
from the inside
Driving Forces
Innovation does not happen in a vacuum, and without the
attention and buy-in of key internal stakeholders, re-entry
of an idea into the organization can’t succeed. In addition to
C-suite champions, every CINO will require some dedicated
percentage of time from someone in every major business
unit. Each in-unit representative will help the innovation
team navigate the business, facilitate information flow,
and contribute to initiatives. These representatives are
formally accountable to the CINO and the CINO to them.
Having clear metrics and
lines of reporting help
enable this collaboration,
be that between digital,
marketing, RD, sales or
a combination of teams.
97. “Harvard Business Review
97Big Entrepreneurship The Chief Innovation Officer, Redefined
Increasingly, companies are embracing collaboration as
part of their strategy to grow, by cross-selling products
to existing customers and innovating through the
recombination of existing technologies.
across sales offices, business units, sales, product
development, and marketing.”
But this won’t work unless employees
work effectively across silos —
98. 98Big Entrepreneurship The Chief Innovation Officer, Redefined
The ideas are
the easy part
Driving Forces
The CINO is not an ideas collector. In fact, sourcing ideas is
hardly ever the problem. The challenges lie in tasks such as
defining what a “good” idea looks like, choosing which ones
to bring to life, how to make them ownable and defensible,
and prototyping and implementing. If you are hiring a CINO
to run innovation competitions and collect ideas, perhaps
a better investment is in good collaboration software.
Quirky, one of the best crowdsourcing platforms, has begun
shutting down despite having raised $150MM in venture
capital and a small army of top-tier innovation and design
talent. Ultimately, idea sourcing, and even the great directional
data it can produce, is just one input to the CINO’s role, as is
research, market analytics, business planning, and RD.
99. 99Big Entrepreneurship The Chief Innovation Officer, Redefined
A better job
description
for the Chief
Innovation Officer
We need a better job description for the
Chief Innovation Officer. Before starting
to re-write it, let’s understand what we
should truly be asking of a CINO.
100. 100Big Entrepreneurship The Chief Innovation Officer, Redefined
Bring the outside in The CINO is the eyes and ears of the organization, looking beyond the
company’s own data. A CINO should seek to generate cross-category insight,
pulling inspiration for growth from beyond the organization and its core
industry. The seeds of solutions to healthcare problems can be inspired by
what’s happening in financial services; the best new consumer experience for
physical retail could emerge from new behaviors around digital couponing. In
bringing on a CINO, you are not simply hiring a “big thinker”—you are hiring
a detective, a curious problem-solver looking for signals and patterns to
pursue, with the ultimate goal of readying the organization to address them.
In parallel, this outside-in orientation requires evaluating and bringing
in third-party problem solving capabilities when needed. The CINO
must recognize and quickly be able to deploy skills such as research,
innovation strategy and product and experience development, and
design and prototyping to accelerate innovation initiatives.
01
Define innovation
portfolio metrics
Cross-functional,
creative problem solving
03
02
Develop innovators,
not just innovation
04
101. 101Big Entrepreneurship The Chief Innovation Officer, Redefined
Think of the CINO not as the source of the “new,” but as the builder
and operator of an organization’s problem-solving engine. A “problem”
in this case can include a growth challenge (e.g. step-changing the
mobile experience or increasing average spend per visit), just as it can
represent an institutional weakness (e.g. improve customer service
or separate from a competitor). This requires pursuit of the C-Suite’s
top-down strategic priorities while also becoming the strategic
think-tank for the specific challenges of company divisions.
Cross-functional,
creative problem solving
02
Bring the outside in01
Citi Ventures, in this model, has the mission of accelerating innovation
at scale “by merging Citi’s strategic initiatives with the best of the
entrepreneurial ecosystem.” The arm helps partner with the different
businesses at Citi to test, pilot, and commercialize new solutions
while also investing in and solving for major challenges relevant to the
broader business. The result has been the successful introduction
of several innovative pilots and proofs-of-concepts, ranging from
big data to security, across various business units at Citi.
Develop innovators,
not just innovation
04
Define innovation
portfolio metrics
03
* In full disclosure, Citi is a client of Fahrenheit 212
102. 102Big Entrepreneurship The Chief Innovation Officer, Redefined
Institutional learning is a purposeful and valuable byproduct of innovation
initiatives. An often-overlooked component of the role, CINOs must
define, manage, and socialize this learning for the broader organization.
By considering innovation initiatives as experiments, best practice also
requires that the CINO clearly outline what metrics will inform subsequent
decisions. When launching a new in-store experience for a big-box retail
chain, how will the company measure success? Is it ROI, an NPS score,
or is it confidence that the CINO has found a consumer insight against
which the company can invest? The difference is critical, not just for
project success but the CINO’s own track record and credibility within
the organization. Many failed and fired CINOs have suffered not from
lack of ability, but from lack of properly defined measures of success.
Since the CINO owns the innovation portfolio, they also control the
metrics for what must to be met in order to release funding for the
next phase of a project. Their responsibility is to test and learn across
several experiments to optimize how and where funding and resources
are deployed in order to make better, smarter bets in the long-term.
Define innovation
portfolio metrics
Develop innovators,
not just innovation
Cross-functional,
creative problem solving
03
04
02
Bring the outside in01
103. 103Big Entrepreneurship The Chief Innovation Officer, Redefined
Innovation is a discipline. Innovators can be found, hired, and their skill sets
can be cultivated and developed. The CINO is responsible for the presence
(or lack) of this skill set within the business units and standalone innovation
groups. This role is not about discovering the next wild thinker, but instead
focusing on nurturing and enabling innovation capability development.
The CINO should assemble a diverse team that blends analytical, deductive
reasoning with creative thought and inductive leaps. The only way the
CINO’s team improves is by taking on multiple projects—with each initiative
growing the topline as well as the company capability itself. Find a CINO
that can recognize and recruit for entrepreneurial passion within the
organization. If building and nurturing an innovation skillset isn’t part of the
CINO’s job description, it simply won’t develop beyond the one executive.
Define innovation
portfolio metrics
Develop innovators,
not just innovation
Cross-functional,
creative problem solving
03
04
02
Bring the outside in01
104. Are there teams and
representatives across the
organization that report to
the CINO?
Do we cultivate and train
innovation talent on a regular
basis?
Is there a defined budget
for innovation outside of the
operating budget?
Do we have the strategy in
place to decide which ideas
to bring to life?
Do we know what innovation
skillsets we need to develop or
bring into our organization?
Have we defined the
metrics for success for the
investments across our
innovation portfolio?
01 0302
04 0605
Key considerations
for big companies
104Big Entrepreneurship The Chief Innovation Officer, Redefined
105. Todd is Managing Partner and Chief Executive Officer at
Fahrenheit 212, and the architect behind the unique theory,
capabilities, and talent that drive the company’s innovation
process. He oversees the company’s ability to predictably
unlock growth on behalf of both Fortune 500 companies and
institutional investors, and is responsible for the commercial
impact of the company’s work.
Todd is deeply dedicated to the development and training of
Fahrenheit 212’s team of innovators, driving a philosophy that
innovation is a discipline that can be analyzed, taught, and
refined. He developed the company’s teaching methodology to
transform innovation into a predictable, scalable capability.
His passion as much as profession, Todd enjoys creating the
industry’s playbook as much as running its plays.
Big Entrepreneurship
The Paradox of Scale
Incubating Innovation
Winning the Next Generation
of Innovators
The Rising Billion
The Chief Innovation Officer,
Redefined
01
02
03
04
05
105Big Entrepreneurship The Chief Innovation Officer, Redefined
About the author
Todd Rovak
Managing Partner, Chief Executive Officer
trovak@fahrenheit-212.com
107. Introduction
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The New York Times, “Google to Reorganize as Alphabet to Keep Its Lead as an Innovator” (2015)
http://www.nytimes.com/2015/08/11/technology/google-alphabet-restructuring.html?emc=edit_
na_20150810nlid=71030806ref=headline
The Paradox of Scale
Flickr, “Taxi Barn” https://www.flickr.com/photos/fattytuna/
The New York Times “Protections for Late Investors Can Inflate Start-Up Valuations” (2015) http://www.nytimes.
com/2015/06/08/business/dealbook/protections-for-late-investors-can-inflate-start-up-valuations.html
Integer, “The Checkout Issue 1.2010” (2010) http://whitepaper.integer.com/the-checkout-issue-1-2010-name-brands-
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Integer, “The Checkout Issue 3.2014” (2010) http://whitepaper.integer.com/the-checkout-issue-3-2014-private-label-
edition/
Statistia, “Forecast for CAGR of the Global Leading Food Retailers” (2015)http://www.statista.com/statistics/240553/
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Fortune, “Campbell Soup CEO says distrust of ‘Big Food’ a growing problem” (2015) http://fortune.com/2015/02/18/
campbell-soup/
Advertising Age, “Big Food’s Big Problem: Consumers Don’t Trust Brands” (2015) http://adage.com/article/cmo-
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Incubating Innovation
International Business Innovation Association, “Business Incubation FAQs” (2015) http://www.nbia.org/resources/
business-incubation-faq
Fast Company, “Breaking News: Mastercard launches innovation lab in Nairobi unlocking the benefits of a cashless
society with support from the Gates Foundation” (2014) http://www.fastcompany.com/3039332/change-agents/
breaking-news-mastercard-launches-innovation-lab-in-nairobi-unlocking-the-bene
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Winning the Next Generation of Innovators
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The Rising Billion
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The Chief Innovation Officer, Redefined
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