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To Innovate or not? The Dilemma

For many of us with a background in startup and early stage companies, encountering the Innovator’s Dilemma when joining a larger, more well established company and product line can come as a shock. Why would a company resist and even sabotage an innovation team dedicated to meeting new market demands or adopting next generation technology to better serve their customers? And how can we respond effectively?


Introduction

Clayton Christensen coined the term Innovator’s Dilemma[i] to document and explain the challenges that incubated startups or innovation teams encounter when trying to innovate in the context of existing product line(s) with organizational investment and momentum, and the resistance and subterfuge that can undermine their best efforts.


In my experience this is not restricted to large organizations (with product lines > 5-15 or more years), since at the end of the day it is motivated by the investment different parts of the organization have made to the GTM and revenue models. Even in early stage companies, the pattern can kick in when Sales is organized to serve one product and GTM, but is not given a clear line of sight for how they will operate and make money with a new product. Similar resistance can come from Engineering where there is a divergence in foundational design patterns.


Case study

How do you know when you’ve encountered the Innovators Dilemma?


My most glaring experience with this problem occurred within a multinational data capture company. The company was highly successful developing advanced OCR technology, known for its accuracy and multilingual capabilities, and achieved a dominant (and highly profitable) position in the market.


As the market matured and new competitors emerged the company’s market share stagnated and margins came under pressure. At the same time market growth for the core products that leveraged the OCR technology was leveling off, as the world moved rapidly to SaaS and iPaaS delivery models that promised ease-of-use and ease-of-deployment.


The company made a major, multi-year investment to develop a semantic NLP technology stack as the next step beyond OCR and simple text extraction, but using the existing SDK design pattern and relying on an intensive professional services deployment model.


Feedback from customer demonstrations and market research indicated that customers were looking for an end-to-end SaaS solution that integrated the functionality that the company had spread across several standalone point products. As we built out a series of prototypes to demonstrate and test out various NLP use cases and capabilities, we encountered resistance from the Engineering and Product teams for the legacy products. Our colleagues doubled down on incremental enhancements to existing products and business models.


But the “Houston we have a problem” moment came at an international leadership conference, in which the CTO, one of the founders of the company, stated publicly in front of the entire senior leadership of the company that developing a SaaS platform to integrate legacy products and/or technology, as well as the new NLP technology that was under development, was impossible.


Were we dead in the water? How did we respond? What did we do that enabled us to ultimately build the micro-service, AI/ML NLP platform that set in motion a portfolio realignment and new GTM strategy? What lessons can we offer others based on our experience?


Politics counts

The reality for leaders facing the Innovators Dilemma is that politics count. Period, full stop.


Executives and departments from the legacy side of the business are skeptical of, if not downright hostile to, innovation that challenges the company’s status quo (whether that be architectural design patterns or revenue models). Garnering and maintaining support, protection and air-cover from the CEO and/or critical eTeam sponsors is critical. How the team interacts with other teams or departments on which it depends while spinning up is important as well.


For startup/innovation leadership this is as much a political campaign as it is an engineering and product campaign. But here the audience is internal, and what is at stake is organizational support, capital, resources, and runway. It is imperative to do everything possible to educate, align, and stay close with eTeam sponsors, while also creating a shared sense of ownership with other dependent teams.


Here are a few lessons that we learned from our experience.


1. Metrics, KPIs/OKRs, Business models. As an incubated startup we were moving very fast, with agile bi-weekly releases, and new functionality appearing quickly. It was an intense period of time. The entire team was completely focused on building out the MVP product and creating a new vision and GTM for the company.


In fact, we were living so much “in the moment” that we lost sight of the forest for the trees.


We had a well-defined, albeit rapidly evolving, product plan to guide the team. But we did not sufficiently build out OKRs and KPIs within a GTM plan that could be used with executive management to assess our progress and justify ongoing investment. Absent these shared, agreed upon metrics executives made decisions using assumptions and KPIs appropriate to the legacy business, but not for our incubated startup.


A well-developed plan with agreed upon metrics would have gone far to create alignment with skeptical executive management and ultimately the entire company.


2. Product and GTM experimentation. As in most startups, we needed to create and inhabit a culture of experimentation, to be agile, build quickly, and fail fast. But when faced with the Innovator’s Dilemma data will feature prominently in discussions with internal stakeholders who are skeptical of and possibly resistant to the new initiative.


This puts even greater pressure on the team to contextualize and humanize the data – so that executives can relate to the feedback, understand the value at issue behind the numbers, and possess a better foundation to assess the team’s priorities and decisions


Extending beyond the raw numbers to examples of customer (audio) statements and/or usability videos, for example, enable executives to better understand the challenges that you are tackling and what needs to be done.


3. Accountability, shared ownership, alignment. An incubated startup will depend in whole or in part on other teams or departments for support. These departments can withhold or drag out their support, resisting if not sabotaging the effort based on their vested interests, their legacy mission, the vision that they hold for the company, or simply standard operational practices that have solidified over the years.


Our strategy was to bring these challenges into the light of day by highlighting them in our reports shared with senior staff. I assumed that our colleagues would respond and move things forward, or that executive management would provide guidance. This was not the case, regardless of how egregious the shortcoming. Our colleagues did not share ownership of the initiative, in fact some were downright hostile to it. Yet without shared ownership we could not move towards a closer alignment.


What I learned from this experience was the fundamental need to examine and interrogate problems with the responsible leaders and their teams and agree to a plan of action (with well-defined deliverables and KPIs) moving forward. This is critical to achieve the joint commitment and alignment to shared objectives and a course of action that can make change happen.


Navigating chaos

Chaos within an organization and turbulent markets are usually givens for startups and innovation teams. An important through line underlying many of these recommendations is how they help maintain laser-focus on developing their MVP, while establishing organizational alignment that can remove internal obstacles to their success.


Bon chance!

[i] Christensen, Clayton M., The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail 2011

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