Stuck With Creating Growth Outside of the Core?

The Problem

Of course, in some cases, missing clarity and scaling expertise might be the reason for the lack of new growth. In these cases, for example, corporate startups/scaleups:

• Lack a clear understanding of the ideal customer profile
• Have difficulty identifying pioneers and early adopters
• Are fuzzy and inconsistent in their messaging
• Keep guessing about the most effective channels
• Love their product more than the solution

However, the underlying reason is, more often than not, that your company has not yet identified an effective method of integrating its two value-creation systems. On the one hand, there is the existing business, or “NOW,” which employs 99 percent of the staff; on the other, there is the system designed to innovate outside the box, or “NEW.”

The interface between NOW and NEW is the critical piece. It is about leveraging corporate assets and capabilities for new growth, such as:

• Getting access to customers
• Using transactional data for training AI models
• Engaging functional experts to solve tough questions
• Tapping into a global supplier base
• Using the company’s negotiation power
• Providing “entrepreneurship with a safety net” for top talent

The two systems are incompatible. NOW is – for valid reasons – process-driven, short-term-focused, and risk-averse. In contrast, NEW embraces risk and uncertainty, functions in an agile style, and has a long-term view.

Furthermore, there are significant differences between NOW and NEW in KPIs, goals, structures, and hierarchies, along with governance, incentives, personnel, and culture.

NOW is the dominant system since it generates the margins that shareholders expect, and it funds NEW. Senior management is typically incentivized to deliver short-term revenues and margins in a predictable way. However, when they focus only on NOW and do not find an effective way to integrate NEW, they risk becoming the next Nokia, Kodak, Blockbuster, Yahoo, or Xerox.

This “system problem” is amplified by three more factors.

First, companies use ineffective frameworks to structure the end-to-end process from a “meaningful search field” to a scaled-up business. Most of these corporate frameworks are based on the Lean Startup – but the Lean Startup was never designed for corporates, as Steve Blank, the founder of the movement, says. In fact, the Lean Startup-based approach to innovation that many corporate innovators use deepens the gap between NOW and NEW.

Second, NOW senior managers often treat potential and emerging businesses as if they were established businesses. They ask for a perfect growth plan to be executed flawlessly. But these plans are doomed from the start. They contain big numbers because that is what senior management wants to see, and tons of unvalidated assumptions.

Third, companies define their identity by past successes and their products and past successes. It appears that senior managers often find it easier to repeat past successes than to create new ones. However, this creates organizational and cultural inertia. The company’s operating and mental models can become entrenched, like a river carved into the bedrock of a massive canyon, which cannot break out of the canyon it carved.

Designing Your Company’s NOW/NEW Interface

An effective and well-designed NOW/NEW interface helps to future-proof the company by ensuring wins in NOW while at the same time creating NEW. It allows corporate innovators to turn the theoretical advantage of having access to the company’s assets and capabilities into a real and material advantage in creating new growth.

Together with more than 100 corporate and academic experts, Frank distilled best practices in out-of-the-box innovation into one actionable framework that helps corporate innovators to design the mission-critical NOW/NEW interface. This framework, the Lean Scaleup, addresses the challenges mentioned above.

At a high level, the Lean Scaleup helps corporate innovators identify the pieces that make up the bridge between NOW and NEW that connects the two incompatible systems. This bridge has three pillars:

• Leadership
• Process and methodology
• People and culture

Each of these pillars has four modules – but each persona in the out-of-the-box innovation context (the ones mentioned at the beginning of this article and the heads of corporate startups and CEOs of corporate scaleups) needs only a subset. In this way, each persona is provided with best practices for their tasks while everyone involved is working on a coherent and consistent system.

At the working level, the modules of the Lean Scaleup provide practical guidance for designing the company-specific solution in that area. Two examples may illustrate this point.

1) Making out-of-the-box innovation digestible for NOW

Any out-of-the-box ambition that goes beyond NOW's 12–18-month operational horizon is hard to digest for the existing business. It has little chance of being reflected in NOW’s goal system and, therefore, little chance of being supported by middle managers when they need to prioritize NOW and NEW.

However, this insight also provides one lever to integrate NOW and NEW: Out-of-the-box innovations must have a clear roadmap with clear deliverables in time slices that do not stretch out for more than 12-18 months. This allows senior managers and corporate innovators to make the out-of-the-box innovation become a part of NOW’s jobs-to-be-done.

2) Arrange a well-structured “Transition to Scaling” phase

Most out-of-the-box innovation frameworks do not have a dedicated phase between Discovery/Validation and Scaling. They seem to suggest that after validation, all conflicts between NOW and NEW are magically solved, and NOW is fully prepared to support scaling the emerging business.

Of course, this is far from the reality. A well-structured transitional phase between validation and scaling supports aligning NOW and NEW by, for example:

• Highlighting and addressing “scalability debts”
• Establishing a collaboration model
• Developing a shared game plan

Use the Theory of Constraints to Find Your Leverage Point

No chain is stronger than its weakest link, and every system’s performance is determined by its tightest constraint. As described above, the NOW/NEW interface with its 12 modules is such a system. Hence, to support your ambition and maximize the chances of achieving new growth, you should start by removing the biggest impediments.

You could achieve this by:

1. Identifying the problem that you can realistically solve within that constraining module
2. Identifying and prioritizing improvement activities
3. Arrange them in 30, 90 and 180-day buckets

Since success creates more success, you will have good arguments to tackle the next constraint and increase your chances of creating new growth even more.

It may seem a daunting task in these challenging times to upgrade your organization’s NOW/NEW interface, but that makes it all the more important.