There’s a general assumption that radical innovation is something that large corporations can’t do- yet some corporate managers have flipped this logic on its head by building new ventures inside even the largest organizations.
Research by Andrew Binns, Charles O’Reilly, and Michael Tushman shows how the world of “real corporations innovating” is full of successful examples of corporations beating startups at their own game, driven by what they call Corporate Explorers.
In his recent session as part of Innov8rs Unconference 2022, Andrew shared the story of Krisztian Kurtisz, the Corporate Explorer behind Cherrisk.
In 2018, two-hundred-year-old Austrian insurance company UNIQA launched Cherrisk in Hungary, turning the established insurance industry on its head. Cherrisk today is a low-cost, people-centric, and lean insurance offering sold on the basis of a monthly digital subscription. Its default is to approve all claims first and ask questions later.
Krisztian Kurtisz, who was sitting as a business unit manager at UNIQA in Budapest at that time, recognized that the insurance industry had lost its core reason. This industry started as a community of risk-sharing – i.e., many people covering one another in times of hardship – and this pooling of risk was associated with the community. But now, according to Krisztian, the insurance industry is all about a tower block of people administering policies and trying to find out where customers are attempting to defraud them.
Krisztian wanted to get back to that different concept. And so, he created Cherrisk, which is now poised to disrupt insurance from a traditionally burdensome and bureaucratic offering to a streamlined one that is designed to delight customers and serve the community. It is the “Spotify of Insurance” and gives consumers control over their insurance products.
But Krisztian is not alone. Yoky Matsuoka from Panasonic and Kevin Carlin from Analog Devices are two other examples of Corporate Explorers. They have built multibillion-dollar companies inside existing corporations.
As you can tell from these examples, you can find stories of successful Corporate Explorers in different places around the world, in distinct industries, and both in large and small companies. Let's explore three questions:
· Why did these Corporate Explorers innovate inside?
· How did they succeed?
· What can we learn from that?
1. Why Innovate As An Insider?
The innovation process it's about three phases: ideation, incubation, and scaling. “My first assertion is that the answer to ‘why do it inside?’ probably sits somewhere in this story of ideation, incubation, and scaling”, says Andrew.
Innovation Process- Phase 1: Ideation
Ideation is all about solving a major customer problem the Corporate Explorers have pinpointed in their industries. Krisztian Kurtisz knew that customers found insurance products complicated and expensive. And he also saw that many of their best customers did not make claims as they found that experience time-consuming and frustrating. Eventually, this stopped them from buying insurance (unless they were forced to). So Krisztian responded to these pain points with Cherrisk- a digital insurance community with low cost to serve and excellent customer experience.
At Panasonic, Yoky Matsuoka was looking at how to ease people's lives and reduce the time they spend on unnecessary tasks. To this end, she created Yohana, an AI-enabled concierge for working parents in the USA and Japan.
Long story short, most entrepreneurs in venture-backed firms are similarly driven by some observation and problem they want to solve. At this point, there's nothing fundamentally different between the work of a Corporate Explorer and the work of the startup entrepreneur.
Innovation Process- Phase 2: Incubation
Similarly, after ideation, Corporate Explorers go on to incubation to test and do lots of experiments in order to deliver an outstanding value proposition. Corporate Explorers in the incubation phase have to challenge themselves with uncomfortable answers and constantly force themselves to test the assumptions upon which they are building their ideas.
Innovation Process- Phase 3: Scaling (the answer lies here)
In the third phase of the process, Corporate Explorers need to scale and turn ideas into revenue. And in each of the scaling stories we’ve mentioned, the corporate explorers used the core business assets to go faster.
These assets fall into three different categories:
- Customer: access to install base, channels, sales, team, and brand.
- Capabilities: ability to draw on technologies, products, skills, and business.
- Capacity: ability to do something at scale for an ever-expanding market. It’s the ability to manage volume- fulfillment, manufacturing, customer service, and call centers.
In a nutshell, leveraging from the core allows you to get started. Having channels to market already in place and counting on a solid brand reputation is a precious reassuring point that gives an advantage over a recently started company.
As you can tell, the leverage of core assets is the key behind why Corporate Explorers choose to stay inside. Taking their idea out into a small company that starts with very few of these assets may not give the same results.
2. How Do They Succeed?
“We all know that as soon as you leverage the core assets, you bump into a beast. And that beast is a legacy business”, says Andrew. In the case of UNIQA, the beast is a 200-year-old company with established routines, practices, and ways of getting things done.
As you might guess, next to stories of success are some famous failures. GE Digital, Havas Media, and UDA Today are three examples of very determined efforts to build a new venture inside a corporation that miserably failed.
Every and each corporate venture inevitably faces what Andrew calls “the silent killers of exploration”. In short, they face risk aversion and the tendency to optimize for the short term. They also must deal with the routines and practices of the core business, which are set up to manage a stable and well-ordered machine that delivers the results that exist today- i.e., the so-called “professional competence of the past”.
If you're a 200-year-old insurance company, you have a lot of people who've grown up as actuaries, who know how to get things done. And so, there's a professional identity that exists within your legacy business, which often is one of the most pernicious and difficult to challenge sources of resistance that exists for the Corporate Explorer to face down.
For research purposes, they interviewed a person who was building a new venture in a large bank. She came in from another company to run this new venture- and after a year, she got nowhere as nobody around her wanted to help. They were all very polite, but they wouldn't lift a finger to help this outsider do something new. “And she said” – tells Andrew – “that trying to build this new venture was like trying to navigate the Amazon with a butter knife. There's no way she’s going to make progress because of the sheer weight of inertia that exists”.
So this is definitely something to manage. The ambidextrous organization is certainly a part of a solution: undoubtedly, the degree to which you can separate out the explore venture from the operating core business is critical to your success because the former needs some degree of autonomy. However, as we’ve already referenced in the scaling discussion, you've still got to access those assets to go faster. So how do you do it?
Letting go of the way we think formal organizations work is key. We think about structure, org charts, roles, and responsibilities. Yet organizations are really informal networks. They're a massive who-talks-to-whom-about-what, who has influence in the social network, who speaks most loudly and most influentially. And sometimes these are technical leaders, sometimes product leaders, often people who've been around a long time. And they're not necessarily exerting malicious intent, but they are used to the way things are done.
And so, if you're a Corporate Explorer, you have to figure out your own way through this set of stakeholders and have an influence plan so that everybody thinks they helped make you succeed. It's not good enough to rely simply on the hierarchy to do your work. As Andrew suggests, any Corporate Explorer should at least look (and collaborate with) for:
- Angels: somebody who can support them, probably in the senior team.
- Allies: those who can give them early access to critical assets- e.g., channels, R&D, etc.
- Advocates: somebody who helps them manage their reputation. Corporate Explorers’ reputation can be very fragile, and they have to manage it with much care.
- Blockers: people from central casting who run the core business. They want to drive profit, and they're not too pleased with this new venture coming in. A Corporate Explorer has to identify them and find ways to involve them in the innovation process.
- Ambassadors: somebody who can go behind “enemy lines” and help them understand what the Corporate Explorer is doing. They can help move their way of thinking and even find ways to become helpful.
Since innovation is not simply an isolated incident, Corporate Explorers must build a movement behind innovation. Innovation for them is about shifting something in the corporation overall.
Very often, as a corporate explorer, you not only carry the burden of innovating in a new area, market, or area of opportunity. You're also a cultural incubator who shows the company a new way of working and getting things done. And so, you do bear this burden of needing to build social support inside the organization.
Of course, it's also your CEO’s responsibility. Yet the Corporate Explorer needs to get all of this started. And Andrew found that all the successful intrapreneurs are very effective at doing this.
3. What Can We Learn?
So what can we take away from these stories?
The first lesson is that the role of a Corporate Explorer is always about bringing the outside in and getting the pace of change inside an organization. This role is about exposing the organization to the pressures of the outside world. And you essentially are as much a change leader (who builds a leadership movement that supports exploration) as an innovation leader (who ideates, incubates, and scales new businesses).
It's not enough to simply either incubate and scale. You've got to do the change work as well. And that is different from being an entrepreneur, and it requires a different skill set. The rewards are rich, yet "we should never minimize the challenges that are involved”, warns Andrew.
Corporate Explorers are always running against the stream. They're always the odd fish in an organization struggling to figure out the future. And they are the ones that are taking us somewhere else. And that's why this silent killer problem is so serious: for a long time, it feels like you're the only one in the story.
But they know it’s more than an individual effort, achievement, or success. What characterizes these Corporate Explorers is that they are socially connected and able to create more connections. They’re also humble and willing to talk much more about the company and the innovation impact on the customer and less about their own achievement.
And corporate explorers also are insiders with strong social capital. They typically are not entrepreneurs coming in from the outside. “Not to say that that isn't useful and that doesn't add some value” – specifies Andrew – “but usually that is a condition of failure. People coming in from the outside struggle most because they lack knowledge of what assets to leverage, how to use the core business, and don't have the network support in the organization”.
The condition of going outside is when there's nothing to leverage. According to Andrew, when there’s nothing to leverage and corporations try to put in place some startup platforms to build businesses inside as completely independent entities could be a waste of time. After all, beating Silicon Valley and other startup ecosystems is nearly impossible.
Eventually, Andrew wraps the discussion up and says that explorers are always unpopular. Even when the Apollo lunar landing started, they were opposed by 75% of the American public. Many scientists thought that was a crazy plan. And now, it is one of the landmarks of human history. Explorers never start out popular. And you've got to live with that reality and work through it. If it's a popularity contest, you will lose from the start. Only the most successful explorers are willing to accept that and work through it.
