These are reading notes on Pirates in the Navy: How Innovators Lead Transformation by Tendayi Viki (Unbound, 2020). They are adapted from David Drysdale's Moby Diction notes, with a few ideas from Rumelt, Gupta and Brinker that the original notes tie in.
1The thesis
Innovation inside an established organization goes very differently from innovation in a startup. A large company has more rules. It has to find new business models while it keeps running the existing ones. It also has to work with and around entrenched cultures and attitudes. This is hard work.
To succeed, innovators must deliver innovation that fits the company strategy and gives clear benefits. A series of small wins can bring skeptics along and open the way to wider change.
2What innovation is for
Innovation does not mean coming up with the newest shiny thing. It means discovering new business models that earn long-term profit. Businesses often promote "innovation" and then produce ideas that cannot last. Three things usually cause this:
- The organization cannot absorb the idea into its existing structures.
- The idea has no place in the wider corporate strategy.
- The idea sounds good in a press release but has no profitable model behind it.
A business model that comes out of innovation work has to pass four tests: desirability, feasibility, viability and adaptability. Adaptability means the model is flexible enough for its environment and can scale when the time is right.
2.1Innovation theater
Innovation theater is a shiny workspace that produces no results. An innovation lab or team goes through the motions and never produces a sustainable business model.
It also happens at the executive level. Leaders act out of fear of missing out, or want to look innovative without knowing how to support innovation. In that case the lab is a Hail Mary pass, thrown together to save the company without the resources or the position it needs to deliver.
3Why enterprises cannot innovate like startups
A large organization is not a startup and should not act like one. It works in a different context.
- It must run an existing business model while it searches for a new one. The two jobs need different management structures.
- It has more rules to follow.
- Innovation efforts must avoid side quests such as transforming the business from the inside out. Labs and teams need focus and need to contribute to the bottom line.
- The metrics that manage the core business work poorly for innovation. Innovation needs experiments, iteration and room to fail.
- The plan-and-execute model of the core business does not suit people who design, test and iterate on ideas.
- Failure is necessary, and it can be productive and even profitable when the organization uses it to learn.
- How easily the existing structures can absorb an innovation predicts whether it will succeed. Few organizations can absorb a breakthrough into the way they run today.
- When the core business and the innovation team fight over resources, the core business wins. Clear policies for how the two collaborate are vital.
4Barriers inside the organization
4.1Inertia
Large organizations evolved to succeed in one context, so they stay invested in keeping those conditions. From top to bottom, people have incentives to hold the status quo. Long habits become entrenched and start to feel like entitlements.
Inertia is the unwillingness to adapt. It produces embedded narratives about "the way things are done" that filter what people see and limit what they do. Rumelt advises simplification to correct it, which means removing unneeded administrative layers. Inertia often arrives with its companion, entropy.
4.2Loss aversion
Organizations, like people, are loss averse. They protect what they have, even at the cost of future opportunities. They are defensive by nature and by habit. That makes it hard to do what it takes to innovate and to succeed later.
4.3Technology moves faster than organizations
Scott Brinker named Martec's law: technology changes exponentially while organizations change logarithmically. The gap creates conflict, because the organization must keep up with a world that changes faster than it can adjust. The speedboat and tanker image describes the same gap in speed.
4.4Common anti-patterns
Large organizations stifle innovation in familiar ways:
- They expect innovators to produce "cool stuff" without a guiding objective or strategy.
- They make innovators spend too much time on long-term business cases and projections.
- They make arbitrary or capricious decisions.
- They stop innovators from talking to customers.
- They do not allocate enough resources.
- They block MVPs out of fear for the brand.
- They hold teams to rigid expectations even after experiments teach something new.
4.5Common myths
- "There are no bad ideas." Innovative projects must still align with the business strategy.
- "You can keep pivoting until something works." In an enterprise, some initiatives must be killed.
- "Big bets bring big results." Small bets that you test cheaply and quickly de-risk the investment and show which ideas deserve money.
- "Research and innovation mean the same thing." Innovation turns research into a sustainable business model.
5Succeeding at innovation
Innovation is management as much as it is creativity. Leaders have to provide a vision and help the team carry it out.
5.1Fit innovation into the organization
Organizations need to decide where innovation sits in the org chart, including clear career paths for innovators. A separate lab or team rarely gives the results people want. Sunil Gupta puts it this way: launching an independent innovation or transformation unit "is like launching a speedboat to turn around a large ship. Often the speedboat takes off but does little to move the ship." Viki uses the same metaphor.
A series of experiments usually gives only short-term benefits. The experiments often lack direction, or they tackle immediate problems and leave the deeper ones alone.
Three more points from the notes:
- Innovation does better in an open ecosystem, where knowledge and ideas collide.
- Innovation work must match the broader strategy. Otherwise the traditional lines of business and the innovation teams end up in conflict.
- The tools of innovation come from agile development, new business models, lean startup and design thinking. The whole organization should use them, not small pockets.
5.2Innovation accounting
Supporting innovation needs new ways to make investment decisions. Link funding to specific, incremental goals instead of funding a long project up front. Incremental bets with metered funding de-risk innovation, but only if the setup is clear:
- Someone must own the funding decisions.
- That person must be senior enough to make meaningful decisions.
- That person must sit close enough to the innovation teams to decide well.
6What to take from it
- Judge an innovation idea against desirability, feasibility, viability and adaptability, and ask early whether the company can absorb it.
- Write down how the innovation team and the core business share resources before they collide.
- Fund in small steps tied to goals, and name one accountable decision maker.
- Check any lab or team against the anti-pattern list above.
- Treat a lab as a start, not a fix. Adopt the methods across the company.
7Sources
- Viki, Tendayi. Pirates in the Navy: How Innovators Lead Transformation. Unbound, 2020.
- Gupta, Sunil. Driving Digital Strategy: A Guide to Reimagining Your Business. Harvard Business Review Press, 2018.
- Brinker, Scott. "Martec's Law: Technology Changes Exponentially, Organizations Change Logarithmically." Chief Marketing Technologist, June 13, 2013.
- Rumelt, Richard. Good Strategy Bad Strategy. Currency, 2011.
Adapted from David Drysdale's Moby Diction notes.