Innovation in an Established Company

One entrepreneur's journey

By Andrew Frenzandrewfrenz.com

Setting the scene

Back six or seven years ago…

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A software startup guy joined an established company

Better looking representation of myself

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This company just so happened to be a 45 year old, public companythat makes mechanical test equipment

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and had a very mechanical engineering and manufacturing culture.

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Software was important, but mechanical ruled

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Being the entrepreneur type, I wanted us to do more – to innovate – to be creative

To think like a software company

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But there seemed to be no time

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The next software release was always happening

And there was a backlog a mile long

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Pitfall #1: No Time For Innovation

The development machine keeps cranking out release after release chipping away at a seemingly infinite backlog… leaving what appears to

be no time for innovation.

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I read what other companies were doing

Google had 20% time… 3M had 15%...

But that seemed too big a hurdle for us to start with.

I read what other companies were doing

Atlassian’s FedEx Day model stood out

It only lasted 24 hours – surely we could find the time to fit that in, right?

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We shamelessly stole the idea and made it our own

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Here is what we did

1. We had no idea if the company would support it – so we didn’t tell anybody above us

2. We got several software managers to agree to try it out for one day

3. We pitched it to software engineers

And here is what we came up with…

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HackathonFormat

1. Told developers about it a couple weeks in advance so they could start thinking of ideas

2. Had a kick-off on Thursday morning1. Donuts2. Went over rules / schedule3. Went around the room – each person could brag about their awesome project

idea… or simply say “stealth”!4. Sometimes people would come without an idea and team up with someone else5. Ready, Set, Go!

3. The hacking started1. Their schedules were cleared2. Pizza and pop brought to common areas for lunch

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HackathonFormat

4. Sleep was optional Thursday night5. Friday at noon we had the demo session

1. Ordered lunch and reserved a massive room with projectors2. We invited all of the software teams3. Each person/team had 5 minutes to demo their project4. Audience voted for best projects across 5 categories:

1. Creativity2. Business Value3. Technical Complexity4. Likelihood to end up in product5. Overall

6. The winners received $25 / $50 gift cards and the overall winner got the travelling trophy

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Once we saw it had traction…

1. On Thursday, we realized that this would work and be awesome, so we told a few people what we were doing and invited them

1. Senior VP2. Head of R&D3. Etc

2. They loved it!3. From then on, we invited tons of people:

1. CEO2. VPs3. HR4. Recruiting5. Engineering6. Etc

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HackathonRules

1. You can’t do something that you would normally do

2. At the end, you must have working code to demo

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HackathonPrinciples

1. Nobody dictates what the projects can be1. PMs / Marketing can pitch their favorite developer friend, but it is up to

the developer to do what they want to do

2. Any project is fair game1. You never know where the innovation will come from

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HackathonPrinciples

3. Most Important Principle: Make something work1. This is not about making up fancy idea slides

2. It is all about a working prototype

3. The power of a working demo is 100X the power of a compelling idea

4. You have no idea how many people will see an idea working on the screen and suddenly the value and potential hits them – even though they have heard the idea 10 times before

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What happens when you do this more than once?

We initially feared that people had a good idea and might struggle to think of something new and unique the next time.

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Kept Getting Better and Better

We found that the ideas got better at the 2nd event, and even better at the 3rd

Why?

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HackathonThe Power of Repetition

We created a culture and pattern:

• Developers jotted down ideas when they had them• Because for the first time- they knew they would get a chance to actually try

them out!

• People became comfortable being more creative• They realized it was OK – and encouraged!

• There is actually a reason to come up with new ideas• Culturally we had beaten ideas out of people with a

never-ending backlog – it took time to reverse this

• Practice makes you better• Even at innovation!

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HackathonA Stage for Anyone

Any developer had 5 minutes to pitch the entire company, including the CEO, on their best innovative idea.

Wow!

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Hackathon Results

Awesome new innovations

• better ways to do existing things

• new features

• new products

• proof-of-concept for things we had been wanting to do for years

• creative games built to demonstrate product’s flexibility

• Technology exploration

• And more!

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Hackathon

I ran the first Hackathon in December, 2010.

But I also participated.Guy who doesn’t really look like

me

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My Project

For my project, I hacked together a way to monitor equipment in real-time from a mobile phone and even control it

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My Project

It won first place

Yay!

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After the event, life went back to normal

Although everyone was a bit more energized

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But my project idea felt like it had potential

So I tried to see if management would invest to make it for real

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They thought it was a great idea

and put it on the roadmap to work on in 2014

(This was back at the start of 2011)

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They thought it was a great idea

and put it on the roadmap to work on in 2014

(This was back at the start of 2011)

UM – No WAY!!

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I am an entrepreneur – so I couldn’t help but imagine the potential of this technology

A new product

A new way to enable our business

A whole future world of possibilities

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Making It Happen

I started down two parallel paths

Building Out the Product

Building A Business

Case

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Building Out The Product

I had a day job of normal things at work

So I worked 30 – 40 hours extra each week at

home building it out

- Nights and Weekends -

Building Out the Product

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Building A Business

Case

Building A Business Case

I built a business case for the product

And a roadmap

And a compelling vision

And pitched it to anyone who would listen

(PMs, Marketing, VPs, and even the CEO)

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Parallel Paths Converged

About 9 months after aggressively pursuing it

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Parallel Paths Converged

The business plan was compelling

The product was deployed on a customer’s site in pilot mode – and they loved it

And so I finally got approval and budget to hire a team to do this for real!

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Cool Story And Good Ending – But it Highlighted a Problem

How do we carry Hackathon projects forward to make something of them?

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Our Solution

Create an Innovation Development Fund

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Innovation Fund

Idea is to set aside money specifically to drive innovation ideas forward

And a team that is interested in helping develop them into something the company can get behind and do for real

I didn’t want to depend on a crazy “hero” to drive innovation forward on their own dime and time

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How The Innovation Fund Works

• After each event – a team reviews the projects

• They have money to allocate to have the person do more work• Maybe the idea needs to be taken further

• Maybe it needs to be focused

• Maybe they need to be teamed up with someone in marketing

• A review panel reviews the advanced projects• Can recommend more money

• Or funneling into the formal process

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Hackathon + Innovation Fund

This seemed to work well

We were generating tons of ideas

And carrying the most promising ones forward

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How My Project Played Out

That original idea and plan that I put together continued to grow

I had created a plan to bring Smart Home like technology into the Lab

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How It Played Out

Eventually

The company slapped a fancy marketing term on it and it has now become a strategic priority across the company

Transforming who we are and how we show up to customers

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But the story doesn’t end there…

I learned a new lesson of innovation a couple of years later

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My 2nd Big Idea

About 3 years after I had come up with the initial project idea, I had another.

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My 2nd Big Idea

Other companies in other industries also wanted to introduce mobile monitoring – yet did not have the time or means to easily do so

What if we could allow companies to add mobile monitoring to their product?

And make it practically drop-in easy?

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My 2nd Big Idea

Just like Twilio allowed you to drop-in SMS messaging support…

We could create a product to allow desktop developers to drop-in mobile monitoring support!

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My 2nd Big Idea

It would allow any company to do what we did, but 100X cheaper and faster

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My 2nd Big Idea

Good thing we had Hackathon and the Innovation Fund

Hackathon Innovation Fund+

= Success?

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My 2nd Big Idea

This time – I didn’t need to do it on my nights and weekend

We had become the kind of company that would invest in new innovative ideas!

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But There Was A ProblemThat I Didn’t Expect

This new product was unlike anything we ever sold before

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Why Is That A Problem?

Well, established companies fall into a pattern:

Market Research -> Development -> Sell

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At My Company

Once a product was ready, we held a SRT (Sales Readiness Training)

On a web conference, we trained the sales teams on this new product

Then from that day forward they were expected to begin selling it

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And This Is Exactly What We Did Before

With the first mobile product from 2011, after making it, working with pilot customers, we packaged it up and held a Sales Readiness Training

(SRT)

We walked the Sales force through our product and set them loose to start selling!!

(mostly to our existing customers)

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But I couldn’t do that with this new product

It served a completely different market

It meant selling to completely different people

And selling in a different way

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Pitfall #2: Innovation isn’t just development

Established companies are optimized to sell more of the same such that they struggle to sell new things!

They forget that innovation isn’t just development – but also sales!

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So I Had A Problem

My existing sales force could not just go out and sell it.

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I needed a new sales person

My first try:

Talk to the sales manager, pitch him on the idea, get him to hire somebody to work on this

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The job opening got posted

But

It had morphed into 75% new, 25% existing products

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Pitfall of the Short Term

The sales manager had a big goal for next year and wanted to be able to use this person for that goal too

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Then, just two weeks later

We pulled the job completely.

Why?

The big sales goal was looking even bigger and harder. They needed someone to come in and turn the crank on traditional – and headcount

was limited.

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Realization

We needed a sales person focused on the long term

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But How Do You Protect The Organization From Itself?

How to have a sales person without bending to short term pressure?

And without a sales person – how could we explore new markets and market opportunities?

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Pitfall #3: Succumbing to the short-term pressures

Not clearly separating short-term and long-term roles

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How do organizations solve the short-term / long-term tension?

Sales is generally focused on the short term

While R&D is generally focused on the long term

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Idea: Business Development Reporting into R&D

Hire a sales person reporting into R&D

Arm the long-term folks with the ability to do their job!

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Business Development Reporting into R&D

Give them a personal sales goal

But hide it from the sales organization

Anything they bring in is gravy as far as the sales org is concerned

The focus is figuring out how to sell new products into new markets and creating a repeatable, scalable sales model

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The Handoff

Eventually, when success is found, the product can be handed off to sales to turn the crank and drive short-term goals for it

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Another Realization

This problem existed the first time around

It just wasn’t so obvious

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Another Realization

The first time, my product was an adjacent product to existing products. In fact, it directly sat on top of our control software.

We were going to sell it to existing customers. Pretty straight forward, huh?

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Wrong

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It Took A New Way To Sell

Mobile and Cloud were new – these are hard to talk about if you haven’t before

The product solved business efficiency – this was a different problem than any of our other products solved

It took a completely different conversation to sell it – to different people – with a different set of background experience

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No wonder we initially struggled to sell it

Myself and a marketing buddy basically sold it for the first year

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Then I realized

I started to think about some various products we had introduced that were “innovative”.

Every one of them had a personal “hero” who took on a business development sales role to jump start the product

If they stepped out too early, we stopped selling it.

Slowly over time, they would be able to train others

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My “crazy” new product had made an existing problem obvious

Innovative products, even if they don’t seem that different, could benefit from a business development role to prove them out in the

market, figure out how to sell, who to sell to, BEFORE rolling out to the traditional sales force (if ever it is rolled out)

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So did it work?

Can’t tell you yet. We are in the middle of it right now.

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Here is what I can tell you

We will run into another road block, guaranteed

And we will find a way around it

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That’s just innovation

It is never pretty, especially in an established company

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Established Companies Have Huge Momentum

And usually huge process all designed around cranking out more of the same

Changing course is very hard

No wonder so many miss the boat on new technology, despite massive budgets at their disposal

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Challenges at Established Companies

• Process

• Compartmentalizing roles

• Massive backlog

• Comparison to established products and revenue stream

• Short-term pressures

• Etc

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Is Innovation Impossible?

No way.

It just takes perseverance, awareness, and the willingness to do something different

And a lot of work.

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Another Trick For Big Innovations

A really good strategy is to set up a separate “Startup” division to go after some new opportunity

(if its big enough and game-changing enough)

Purposely break it out of the process and momentum that will stifle it

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OK, so let’s summarize

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Some Things That Worked For Us

Hackathon Events

Innovation Fund

Business Development

Breaking the Rules

Breaking Process

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Would this work at your company?

That’s not the point. Like Agile Development, there is no perfect process.

Every company is different. In fact, even within one company, it should change over time as the people, pressures, goals of that company

evolve.

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Would this work at your company?

But hopefully it gives you some ideas to try

And that is the point. Steal these ideas if you like them!

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Closing Thoughts

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Innovation Models Need To Keep Changing

No model works for every company

Each company is different based on situation, people, history, etc, etc

What works today might not work tomorrow

To keep innovation alive, you need to keep innovating your process

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Innovation is about smart people

Not about process

Innovation is not a machine. Smart people need freedom. And the company needs to trust them and allow it to happen.

Create a process that allows for less process!

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Use startups as your inspiration

• No existing products to worry about

• Allowed to focus on nothing but making the innovation a success

• Individuals wear many hats

• Basically no process – relies on smart people instead

• Aim for changing the world

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Cool References

Must Read: Netflix’s Culture Deck

http://www.slideshare.net/reed2001/culture-1798664

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Papers About This

How to Prioritize Your Innovation Budget

1/11/2015 Page 98

http://blogs.hbr.org/2014/09/how-to-prioritize-your-innovation-budget/

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Papers About This

How to Prioritize Your Innovation Budget

“Create new organizations and controls for innovation.”

“It’s too easy for revenue-producing parts of the business to poach resources from innovation projects and teams that are not (yet) contributing to the top line.

They need to be protected – made autonomous, with their own dedicated budgets, resources, and leadership – until they are.”

1/11/2015 Page 99

http://blogs.hbr.org/2014/09/how-to-prioritize-your-innovation-budget/

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Papers About This

Lean Goes Better with Coke – the Future of Corporate Innovation

“To develop this new portfolio, companies need to provide a stable innovation funding mechanism for new business creation, one that is simply thought of as a cost of doing business. ”

In building capability, the company should look for “starters,” not “scalers.”…. We also learned that creating the same kinds of conditions that enable co-founders to thrive on the “outside” is

very important to maintain on the “inside.” We had to design a whole new hiring process, compensation model, operating model, co-working spaces, etc. to find, attract and retain “starters.”

1/11/2015 Page 100

http://steveblank.com/2013/11/07/lean-goes-better-with-coke-the-future-of-corporate-innovation/

David Butler is the VP of Innovation and Entrepreneurship at The Coca-Cola Company

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http://hbr.org/2014/06/the-capitalists-dilemma

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Questions?

Let’s connect!

Andrew Frenz

andrewfrenz.com

@afrenz