Creating Urgency around Corporate Innovation

This article was originally published on KelloggInsight.

In 2011, Red­box made video-game rentals avail­able at each of its thou­sands of kiosks. The games were a suc­cess in their own right: games like “Call of Duty” often rent­ed as well as block­buster movies.

The inno­va­tion also had a pro­found effect on the per­for­mance of oth­er prod­ucts the com­pa­ny offered. Cus­tomers rent­ed more fre­quent­ly, increased the size of their rentals (select­ing both a movie and a game, per­haps), and kept rentals out longer because games take longer to play than movies — all of which made a direct dif­fer­ence to a com­pa­ny that charges per night for rentals.

“We blew away our num­bers on video games, but it also had a finan­cial impact on our core busi­ness,” says Mark Achler, an adjunct lec­tur­er of man­age­ment and orga­ni­za­tions at the Kel­logg School and for­mer senior vice pres­i­dent of new busi­ness, strat­e­gy, and inno­va­tion at Red­box. “When we start­ed, we didn’t know that would hap­pen. It was an unin­tend­ed consequence.”

Inno­va­tions like this are crit­i­cal if a com­pa­ny is to remain com­pet­i­tive. But for many larg­er firms, this may not nec­es­sar­i­ly align with past prac­tices. “Most com­pa­nies spend decades build­ing up a core busi­ness and the bureau­cra­cy to sup­port that core busi­ness,” Achler says. That struc­ture is a great advan­tage for intrapre­neurs in terms of hav­ing estab­lished chan­nels of dis­tri­b­u­tion and a brand that has a hard-fought trust with their cus­tomers, “but it also means that everybody’s time and atten­tion is focused on that core busi­ness. So if you don’t cre­ate urgency around inno­va­tion, then it’s real­ly easy to put it off.”

While most com­pa­nies say they are com­mit­ted to inno­vat­ing in a quick­ly evolv­ing indus­try, there is always a pull between what is work­ing and what is still unproven. Suc­cess depends upon get­ting a true com­pa­ny-wide com­mit­ment to the inno­va­tion agen­da. Because cor­po­ra­tions have a low tol­er­ance for fail­ure — and face it, inno­va­tion car­ries risks — get­ting the true buy-in need­ed to see inno­va­tions through can be dif­fi­cult. After all, it is easy to focus ener­gy and resources on a proven cash cow. It is hard­er to ded­i­cate some of those resources to new concepts.

“You’re not going to hit it out of the park on the first try, and if you do, your sec­ond try is not going to hit out of the park.”

“You’re not going to hit it out of the park on the first try,” Achler says, “and if you do, your sec­ond try is not going to hit out of the park.” But what com­pa­nies may find — as did Red­box — is that a strong inno­va­tion that rolls out at the right time can do more than just add a new rev­enue stream — it can have resid­ual effects on oth­er aspects of the business.

Get­ting Buy-In on Innovation

So what can intrapre­neurs do to ensure that new projects get the buy-in they need?

First, because peo­ple grav­i­tate to how they will be com­pen­sat­ed, Achler sug­gests that com­pa­nies incen­tivize inno­va­tion. At Red­box, that meant hav­ing the com­pa­ny include inno­va­tion as one of its five cor­po­rate-wide goals that were tied to everyone’s annu­al bonus.

Build­ing the Right Team to Scale a Startup

“That told every sin­gle employ­ee that inno­va­tion mat­ters,” Achler says. “Here’s our vision. Here’s why it mat­ters. Here’s why it mat­ters today. And this is now part of your bonus struc­ture. It’s not enough for the CEO to just say, ‘inno­va­tion mat­ters.’ They have to back it up.”

That sup­port extends beyond bonus­es into the organization’s bud­get. “Not only do you need a bud­get, you need a pro­tect­ed bud­get,” Achler says. “When you’re part of the inno­va­tion team, you have scarce resources inside a large com­pa­ny. You don’t have your own account­ing or legal depart­ments, so you’re always depen­dent upon oth­er peo­ple to do your work.” Carv­ing out ded­i­cat­ed resources — and get­ting a com­mit­ment to the secu­ri­ty of those resources — gives intrapre­neurs the tools they need to cre­ate. With­out a pro­tect­ed bud­get, one soft quar­ter may lead to that bud­get being siphoned off to shore up a cur­rent cash cow.

In order to suc­ceed, inno­va­tion in estab­lished com­pa­nies needs to be mate­r­i­al. By that, Achler means that it has to be sub­stan­tial enough to make a marked dif­fer­ence to the company’s top-line rev­enue. In short, it has to mat­ter. Ded­i­cat­ing lim­it­ed resources to small-bore projects is not enough. Now, what defines mate­r­i­al varies from com­pa­ny to com­pa­ny — at Red­box, Achler knew that if he cre­at­ed some­thing new that gen­er­at­ed $100 mil­lion annu­al­ly, it would meet the threshold.

How patient do com­pa­nies need to be with their intrapre­neur­ship efforts? Pro­vid­ing inno­va­tion teams with an ample time hori­zon allows the com­pa­ny to see ideas through. “Innovation’s not one- or two-year chunks,” Achler says. “You’ve got to have a three- to five-year time hori­zon because it takes time to source and vet ideas.”

Final­ly, com­pa­nies should con­sid­er cre­at­ing a frame­work of eval­u­a­tion. Red­box, for instance, adopt­ed a 20-cri­te­ria crit­i­cal matrix. “That matrix says, ‘here’s our process for how we’re going to eval­u­ate ideas,’” Achler says. “When fin­ger-point­ing hap­pens — and fin­ger-point­ing always hap­pens — peo­ple can fault the exe­cu­tion, but not the process, because every­one had bought in on the process.”

Tak­ing Courage

Beyond these five ele­ments, accord­ing to Achler, suc­cess­ful inno­va­tion efforts in estab­lished com­pa­nies require lead­ers who have the guts to see oppor­tu­ni­ties and go after them — even if that means fail­ing some of the time.

“I think courage is real­ly impor­tant, espe­cial­ly in intrapre­neur­ship,” Achler says. “It takes courage to stand up, put your neck out on the line, and fight for what you believe in. It’s that moral imper­a­tive that says, “I have to do this. We have to do this,” and to do so with a sense of urgency.”

“What sep­a­rates the intrapre­neur is not only that will­ing­ness to take the leap, but to feel like you have to, like you can’t help yourself.”