In my inbox today was a "SmartBrief on Leadership" email that included a eye-catching story: "Why CEOs secretly hate innovation". Here is the link to that interesting story and discussion thread (which I chimed in on ... also included below).
---
In this ~$100M "small" business unit, I championed an innovative initiative that fundamentally harnessed existing assets and core competencies of a product in its decline stage, and with a modest add-on investment, enabled the product and business unit to capitalize on the emerging boom of the eCommerce industry. With a 5 year plan that projected a $.75B opportunity, the network-centric leadership was unable to sustain support for a billing-centric solution ... even after a reincarnation effort was made earlier this decade out of a unique incubator-organization that funneled 20 top innovative initiatives into a CEO authorizes shop (since none of the BUs could afford having out-year break-even line items on their balance sheets). While mine was 1 of 2 (of those 20) to make it to market (again) and scale ... the unimaginable happened: the corporate icon company was acquired. Earlier this week eBay announced it realized over $2B in mobile commerce sales - exceeding their forecasts (and reasonably mapping to my 5 year outlook at the beginning of this decade). In hindsight, my corporate leadership was chasing a ghost in the industry (leadership of that ghost is now behind bars) ... but investors too were chasing that ghost, influencing leadership decision making at my former corporate giant.
Companion to the contemporary investors' influence in changing the US business culture is globalization of recent decades. The plateau of the US playing field has been eroding away by a combination of a retreat from tariff protections, to technologies that allow for accessing lower cost human resources in developing nations, to the challenges of competing with firms from nations with an ability to access financial assistance from their sponsor states. Rhetorically, do investors have the patience for US firms to alter their ecosystems to tap the advantages of the new global playing field that is leveling? How do a majority of US business leadership make financial commitments to speculative out-year opportunities in this investor climate?
Another consideration - commercial viability of innovation will typically be key. One of the best examples I have come across recently to illustrate is Corning Inc's "Gorilla Glass" - developed almost 50 years ago ... but only recently getting meaningful marketplace traction with its virtually unbreakable, unscratchable glass that is perfectly suited for mobile devices, flat screen TVs and much more. A remarkable anomaly, Corning was able to survive in recent decades with its core business and now is fortunate to be in the position to capitalize on an innovative development that served no commercially viable purpose until recently.
To me, it fundamentally comes back to the investor-culture which influences how companies and leadership, and ultimately innovators are compensated. It's a human nature-thing.
---
What has changed over recent decades to cause the USA to loose the top spot in driving innovation? Randy Voss made a key observation with his point about the compensation plan (as did Matt Snyder with his remark about retail gift cards to reward corporate innovators).
What influences a compensation plan? Leadership. What influences leadership? I say ultimately investors. What do investors of recent decades demand ... more than investors of the mid-1900s? Optimal short term profits (then stampede to the next optimal short term profit opportunity). My assessment is that the aggregate rationale of the investment community - at all levels (from investment houses to individuals) - has evolved away from having a meaningful component of longer haul investing ... thus creating a business climate and leadership culture that focus more than ever on in-year/in-quarter profit optimization decisions.
Most of my career was in big corporate. For most of my 20+ years there, the company tried to evolve from a regulated entity which had a government sanctioned guaranteed rate of return, to being competitive. Reorganize/ downsize was the annual drill with cost-cutting being the flagship. That said, I found a small business unit that had a unique arrangement of being a virtual entrepreneurial shop with a team of a dozen+ having in-(bu)house control of our own network, our own billing system, our own sales force, as well as virtually all other key functions except legal (we did have a dedicated attny in big-corporate).
In this ~$100M "small" business unit, I championed an innovative initiative that fundamentally harnessed existing assets and core competencies of a product in its decline stage, and with a modest add-on investment, enabled the product and business unit to capitalize on the emerging boom of the eCommerce industry. With a 5 year plan that projected a $.75B opportunity, the network-centric leadership was unable to sustain support for a billing-centric solution ... even after a reincarnation effort was made earlier this decade out of a unique incubator-organization that funneled 20 top innovative initiatives into a CEO authorizes shop (since none of the BUs could afford having out-year break-even line items on their balance sheets). While mine was 1 of 2 (of those 20) to make it to market (again) and scale ... the unimaginable happened: the corporate icon company was acquired. Earlier this week eBay announced it realized over $2B in mobile commerce sales - exceeding their forecasts (and reasonably mapping to my 5 year outlook at the beginning of this decade). In hindsight, my corporate leadership was chasing a ghost in the industry (leadership of that ghost is now behind bars) ... but investors too were chasing that ghost, influencing leadership decision making at my former corporate giant.
Companion to the contemporary investors' influence in changing the US business culture is globalization of recent decades. The plateau of the US playing field has been eroding away by a combination of a retreat from tariff protections, to technologies that allow for accessing lower cost human resources in developing nations, to the challenges of competing with firms from nations with an ability to access financial assistance from their sponsor states. Rhetorically, do investors have the patience for US firms to alter their ecosystems to tap the advantages of the new global playing field that is leveling? How do a majority of US business leadership make financial commitments to speculative out-year opportunities in this investor climate?
To me, it fundamentally comes back to the investor-culture which influences how companies and leadership, and ultimately innovators are compensated. It's a human nature-thing.
