Corporate researchers are managers who challenge common wisdom to create disruptive innovations within existing corporations. They come up with, incubate and scale new businesses, using the assets of existing businesses to defeat startups in their own game. This is hard work. Many corporations, such as Amazon, Microsoft and LexisNexis, are learning to succeed. Others struggle and fail. What explains the difference?
I believe there are a number of explanations. Leaders do not support innovation. Managers lack the skills to act as entrepreneurs. Companies expose decisions upside down without properly identifying customers. These are all good explanations. However, these obvious factors alone do not explain the difference. Another set of more hidden problems lies beneath the surface. These “silent killers” of innovation delay, frustrate, and often defeat corporate researchers, even if they are skilled innovators with top-notch support. I believe the story of Bill Roo of GE Digital explains why.
The movement was hired to re-invent GE, a 100-year-old industrial conglomerate, in the top 10 software firms. Jeff Immelt, then CEO, wanted to stay ahead of new digital technologies to create a whole new growth trajectory for the firm. Five years later Immelt disappeared, GE was expelled from the Dow Jones Industrial Average (DJIA), and the Movement’s digital unit was cut off. The movement began with all the obvious success factors: a mandate from the CEO and the board, a budget, its own unit, a member of the senior team. All is well, but this is not enough to isolate the Movement from the three silent killers, which are common obstacles that corporate researchers must overcome.
KEEP CORE PROFESSIONAL COMPETENCE OR IDENTITY
Each professional discipline has a set of standard ways of working that determine what “looks good” and what is normal. If there is an innovation that destabilizes these assumptions, it can be very inconvenient for leaders who have grown up in the old paradigm. This is usually why actuaries are struggling with new digital insurance business models. Electrical engineers find it difficult to adapt in a software-based world where circuits are no longer king.
The movement changed the DNA of GE managers. I believe this was a reality that Immelt probably realized too late. In his book, Hot seat, he argues: “In many respects industrial and digital had opposite norms (slow versus fast, deliberate versus flexible, prone to risk versus risk).” The movement relied on managers who grew up in GE’s traditional business model. Although they intellectually understood digital strategy, they may not have had a personal appetite for learning how to be a successful programmer company manager.
OPTIMIZATION FOR SHORT-TERM PROFITS
Risk avoidance is a strategic default for many organizations, where the priority is to perform in the short term, even in the face of imminent demise. Polaroid, for example, was still defending its film business, even as bankruptcy loomed.
Managers who make these decisions are not stupid. They accomplish what they were taught: to achieve short-term success. They know that their business expects them to support money from dairy cows: take your numbers; don’t screw up. This can work for a stable business if we know what customers want, how fast the market will grow and what competitors will do.
As I see it, Bill Roo didn’t have that kind of confidence. GE’s goal was a first-of-its-kind data analytics service to improve production productivity. There was no way to know how fast the market would develop, for which problems customers would pay, which services would get traction and at what speed. Despite this, the Movement was forced to invest in the rapid establishment of its technology platform and then monetize it to keep up with the business. GE Digital had to use as many opportunities as possible to increase profits. Although the company aimed to create a subversive business, it eventually created a digital IT service for GE’s traditional business.
Many executives know that their business is connected to the past and optimized for short-term gain. It may be harder for them to make it personal: “I’m married to the past”; “Joe is not willing to take risks.” They do not have heavy talks about the apparent loss of power and status. Instead, they make innovation dangerous so that everyone supports it. They maximize comfort in Room C, but at the same time minimize the chances of success of initiatives such as Movement Initiatives.
From my point of view, Immelt avoided stress by allowing traditional businesses to run. Although GE Digital was nominally a separate division, it had no revenue of its own; everything flowed through the existing business. This denied her legitimacy as an independent unit. Immelt received support in carrying out the transformation and maintained harmony within the organization. The transformation strategy, however, did not work because it depended on traditional business.
How can some corporate researchers overcome such insurmountable obstacles while others fail? What is the difference that the best corporate researchers are leaders of change, not just transplanted entrepreneurs? They have a compelling story about the enterprise, why it can be successful and what experiments will help them cope with high levels of uncertainty. They have deep social capital with relationships throughout the organization. I believe that “insiders” succeed more often than specially hired experts because they can recruit allies and defenders to support them.
Ultimately, silent killers are formidable, but they are also dull and slow. These are habits and reflex actions, not conscious efforts to undermine innovation. If you can expose them and the risks they pose, then they can be overcome. A corporate researcher who can build a movement for change within an organization can reset a firm’s professional identity, making innovation difficult to resist.
Andy Binns writes about innovation and change. His book Corporate Explorer was published in February 2022. He is the director of the logic of change.