Tag Archives: layoffs

Thought Sparks – Episodic Innovation

Raise the curtain on Innovation Theater yet again!

Episodic Innovation

GUEST POST from Rita McGrath

We know that to create meaningful innovations that can move the needle for the companies that sponsor them, attention, resources and commitment needs to be sustained. But in too many organizations, innovation gets started, gets some traction and – just at the brink of discovering something useful – gets cut. Welcome to the world of innovation theater.

Layoffs are in the air

Predictably, firms that spent like drunken sailors during the low-interest-rate free-for-all that we’ve just been through are now reconsidering their spending as the economy looks a little soft, inflation has become a thing and investors are asking for — egads — a route to profitability!

We have seen this movie before, and it is one of the most devastating patterns that afflicts internal corporate venturing, or ICV. It’s worth bringing back some original research by Stanford’s Robert Burgelman and his colleagues to understand it.

The mystery of corporate innovation cycles

Years, ago, Robert Burgelman and co-author Liisa Vilikangas came to a perplexing conclusion. Despite all the talk about innovation, all the energy and money thrown at it and all the noise about accelerators, studios and labs, companies find it extraordinarily difficult to stick to an innovation program.

Indeed, as they observe in this article, “many major corporations experience a strange cyclicality in their ICV (Internal Corporate Venturing) activity. Periods of intense ICV activity are followed by periods when such programs are shut down, only to be followed by new ICV initiatives a few years later. Like seasons, internal corporate venturing programs begin and end in a seemingly endless cycle.”

They identify two influences on how an innovation process can come to grief. The first predictor is how healthy the existing core business is in terms of growth prospects. The second is how much a company has in terms of uncommitted resources – whether that’s cash or people. What you get when you juxtapose the two is a lovely 2×2:

Corporate venturing orphans: With plentiful resources, people get resources to start new ventures, only to find that the core business is quite happy to ignore them. So, things get going, develop for a while, then wither on the vine as the core business essentially refuses to welcome them into the corporate fold.

The entrepreneurs behind such ventures either give up in frustration, leave to find a firm with a more welcoming environment or even leave to found a startup that might well compete with the original firm. The interesting story of how Zoom became Zoom is a case in point.

All-out venturing drives: In this situation, there is money to invest, company leadership knows it has a problem, and venturing becomes the holy grail. This can be useful, as it tends to raise the profile of the venturing activity and it finally attracts attention, talent and a seat at the table.

The dilemma is that senior leadership teams in a hurry are apt to put too much time pressure and expectations for rapid growth on a still-uncertain activity. This can cause them to lose faith in its prospects and terminate it before it even has a chance. IBM and Maersk’s effort to create a blockchain platform, TradeLens, feels like that to me. That venture also ignored Bent Flyvbjerg’s excellent advice to avoid complexity to the extent possible.

Venturing seems irrelevant: Here, money and talent is already committed to other things, and the core businesses’ chances are looking pretty good. So why bother with an uncertain, unproven, hard to predict new business activity when you can just ride the existing gravy train, probably for as long as is relevant for the career of a given senior leader?

What happens in this situation is that investments in new capabilities are ignored, and eventually competition catches up or makes your existing operations irrelevant. For instance, Carlson Travel was riding pretty high for a while, and evidently under-invested in technology. Carlson Travel implicitly acknowledged as it struggled through a bankruptcy that it had under-invested in its core digital technologies and customer experiences and promised to spent $100 million on getting up to speed.

Desperately Seeking Corporate Venturing! Ok, so we’ve left investing in the future too late, money is now tight, and we need to deliver something to our customers and investors PRONTO! These situations rarely end well. A desperate senior executive team might well enter into ill-considered acquisitions or now, belatedly, fund the one or two ideas that have survived being neglected.

These are often terrible ideas. See: checkered history of mainline telecom or cable companies entering the content business. AT&T’s misadventures with its forays into the media business are a case in point. Verizon’s as well. Desperation seldom leads to cool-headed deal-making or venturing. A rare exception took place at Xerox Parc, where the invention of the laser printer saved the company after the government forced it to essentially give away its patents to other firms.

It doesn’t have to be this way!

In the next Thought Spark, I’ll describe what we think about all this at Valize, my sister company whose mission is to create predictable and reliable innovation and growth capabilities. In the meantime, please stop pouring money into innovation theater!

Or if you are really itching to start an innovation or transformation program, mail us at growth@valize to set up a time. We can get you off on the right foot. After all, there are no standing ovations for innovation theater.

Image Credits: Unsplash, Pexels, MIT Sloan Review, www.collectivecamp.us

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What the Current Round of Layoffs Tells Us

What the Current Round of Layoffs Tells Us

GUEST POST from Geoffrey A. Moore

When layoffs hit one or two companies, you might blame it on management, but when they hit market leader after market leader, you know something structural is afoot. The important thing then is to extract the signal from all the noise. Here is my cut at it.

First of all, it is the digital consumer sector that is under fire—not all of tech. But note that when you click on the Tech Section of any major publication, all you get is consumer tech news. B2C has eclipsed B2B in the public perception of what tech is all about. The downturn may not change this for consumers, but it sure will for investors. B2B tech actually has the opportunity to thrive in a downturn if it focuses on solving urgent problems that have short time to payback.

Second, the digital consumer model has such attractive economics when it is operating at scale that it led to a massive overvaluation of the sector per se. As with prior bubbles in tech, overvaluing is primarily due to extrapolating present growth as perpetual and ignoring global economic and geopolitical downside risks. Downturns simply call this out and demand a recalibration of valuation based on a more balanced mix of positive and negative factors.

Third, when enterprises have hyper-valued market caps, management does everything it can to sustain them, eventually to the point of counterproductive actions driven more by inertia than any sensible investment strategy. Given the peer pressures of investor relations, this is almost impossible to stop, so ultimately we end up where we are, in need of a correction that everyone saw coming, but no one acted upon. And to be fair, guessing when the correction will come is not a winning play. Better to accept the dynamics you have in front of you and then adapt as fast as you can once they change.

Net net, it is time to own the correction, put our houses in order, accept the deflation in stock price, refocus on our core mission, reset our performance metrics, and get back out on the field.

That’s what I think. What do you think?

Image Credit: Pixabay

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The Wonderful World of Downsizing

Stikkee Situations - Downsizing Cartoon

In Stikkee Situations we’ll try to take a humorous look at a lot of different serious business topics.

In this episode we poke fun at the wonderful world of downsizing.

Employees hate workforce reductions (aka downsizing), but some CEOs (even in profitable companies) seem to love these traumatic events as a tool to save their job and to drive short-term movements in the price of a company’s stock price, often coming on the heels of a company missing their earnings estimates.

But the positive short term stock price effects of an across the board workforce reduction come with heavy consequences, several of which greatly affect the innovation capacity of the organization, including:

  1. Destruction of trust within the organization
  2. Reduction in collaboration in the organization
  3. Loss of forward momentum on project work
  4. Loss of some of your best talent as they proactively find themselves jobs elsewhere
  5. Reduction in passion, creativity, and engagement among those who remain
  6. Elimination or reduction in the organization’s commitment to innovation

Now of course sometimes workforce reductions are necessary to avoid bankruptcy or for strategic realignment (removing human resources from business areas you are exiting), and they can be potentially healthy for the organization.

But, when downsizing is done purely to please wall street and in an untargeted way, in the long run I would assert that the organization suffers more than it benefits because any reduction in forward innovation momentum is an invitation to competitors and startups to speed past you.

So, keep innovating!

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