I am educated as a software engineer and for 20 years I have worked in the software domain in different roles, from engineering to project management and unit management. Keeping the focus on software nonetheless. I used to think my knowledge in software technologies is my best asset, hence I had no intention moving away from the core. Until the day I realized that my best asset become my liability. Experience was great, it made my working life so easy, but it meant as well that I was prone to do things in a certain, old way and bristle at change. It constrained me, as I was able to see the future unfolding only in a certain way. The day I understood this, I became ready to make a shift in my career, move away from my core expertise and accept the risk that I will not be able to utilize my assets anymore.

Large companies often face a similar issue. Their core expertise and best assets become, in time, liabilities [1].

In 1981 Kodak did study that accurately assessed the state of the digital photography, but executive management ignored the fact that the business is changing at a furious pace [1]. In 2012 Kodak filed for bankruptcy.

Nokia had touch phones in development long before Apple introduced the iPhone in 2007, but executive management failed to understand the emergence of mobile phones as a different product category that needed also a new user interface (hence leaving behind some core assets that Nokia had in UI technology at that moment). That product never got to market. One of the pioneers in mobile industry, in autumn 2013 Nokia accepted an offer from Microsoft to sell its mobile phone business.

If you are a middle manager in a big company trying to push forward a new product innovation, a new business model, a different market strategy – chances are you are frustrated most the time, as you face a lot of resistance to the change you are trying to bring. The reason for this? What you are actually asking from the company is to move away from core assets and expertise and get into a new and uncertain territory. You’re message (even if not explicit) is to stop doing the things that are today bringing revenue and profits to the company and invest in something that might bring money at some point in the future, but nobody would be able to guarantee it.

Would you leave your job, that you are good at and provides you with financial security, and start looking for something in a new domain that you know very little of? Would you have any chance of getting hired in a domain you have no expertise in? The answer is, most probably, no. But you might start by learning new skills and get some level of confidence (and credentials) before you move into the new career of your choice.

The same thinking helps also when proposing changes in the business in large corporations (through product, marketing, retail or any other type of innovation).

1. Have a vision for the future.

   This goes almost without saying, you need to have a picture of the future, and how it will be different given the change you are proposing.

   Define your long-term scenarios taking into consideration the emerging and converging trends, new technologies and competitive dynamics. Explore consumer and customer insight needs, both the explicitly stated ones and the latent, unrecognized ones [3]. Look at the motivations and behaviors both for the existing consumers & customers and the potential new ones. Is the shift going to alienate the current consumers and customers and if yes, how to manage the transition? Finally, there needs to be explicit understanding in how the company will build credibility in the new market.

2. Don’t look into the financials just yet. Start small.

   By early 1990s IBM had a very strict financial screening process that resulted in all the major innovation investment proposals being rejected, as nothing could measure up with the revenue and profits generated by the main business [1]. At January 19, 1993, IBM announced a US$8.10 billion loss for the 1992 financial year, which was then the largest single-year corporate loss in U.S. history and the computer industry now viewed IBM as no longer relevant [2]. However, in 1991 IBM has made a small bet to test a new domain – the services business. Some executives railed around the services and the business was building slowly. It’s not until the 1993, when Luis Gartner arrived at IBM as new CEO, that this new business got significant focus and will, in time, became one of IBM’s primary revenue stream [2]

   It is almost impossible for the disruptive innovations or market changes to pass the financial tests applied to established businesses, even when the established billion dollars business is under threat [1]. Do not use guesses dressed up as numbers, trying to make long-term financial predictions in a domain that is clearly characterized by uncertainty can be very easily dismissed by executive management. At the same time, making huge bets too soon can be dangerous for the company.

   Start small, propose an approach that is building the transition in steps. Have the first step clearly defined and outline for long-term only the decision framework and the competence and credibility building process.

3. Get everybody aligned.

   If you’d want to leave your job and go to school to learn a new trade, you’d probably need to have your wife/husband/family support. If not financially, at the very least the moral support.

   The same way, when you are making a proposal to a business board to divert investment in uncertainty – you need to make sure you have enough support inside the organization and at least one executive sponsor. And be aware, this might be the most difficult and time-consuming step in the process.

4. Learn fast and constantly challenge the assumptions

   Once the first step is outlined and the process started, the capability to learn fast, to test the technology, the market, the consumer and customer response – is critical. Design a process that will allow to test the assumptions repeatedly and implement the required changes in small increments, before asking for commitment to full investments and roll-outs.

   Conventional thinking is that “Yes, AND” people are your friends and “Yes, BUT” people add very little value. I would advise differently. Find your devil’s advocate that can help at each step to challenge and ensure that all the perspectives have been considered and no major wrong assumptions have been overlooked.

5. Be prepared to fail right

   In the start-up world, failure can build street credibility. If, as an entrepreneur, you have tried and failed with your venture, it means you have learned something about the technology, the market, about what works and what doesn’t and hence you are seen as having much better chances to succeed next time.

   Not the same is true in large corporations, where failure usually destroys your career. Is there a way for managers in large corporations to learn from the entrepreneurship world so that they get the chance to build on the learnings generated from that sphere?  It is important to be able to outline a clear picture of the reasons for the failure – bad execution is different from technology un-readiness or simply the fact that the future turned up to be different than it might have been. While the ideas that were tested well and simply didn’t meet the market future changes can and should be recognized, bad execution can never be rewarded.

6. When the time is right, be ready to jump!

   Don’t be afraid to take the step in the unknown. Don’t wait for everything to be perfect before you get your project to roll-out.

References

1. The New Killer Apps. How Large Corporations Can Out-Innovate Start-Ups. Chunka Mui, Paul B. Carroll. Cornerflot Press, 2013
2. The History of IBM. http://en.wikipedia.org/wiki/History_of_IBM
3. A framework for strategic innovation, http://www.innovation-point.com/Strategic%20Innovation%20White%20Paper.pdf

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