It’s no surprise that effective innovation can be challenging for established organizations. The conventional wisdom—as articulated in classic tomes of business wisdom like The Innovator’s Dilemma—suggests that powerful organizational incentives lead large enterprises to prioritize incremental growth in mature business lines, instead of investing in disruptive technologies that may pay off years down the line but are barely a blip on today’s P&L.
Executives today are well aware of the risk of being left behind. Innovation cycles are shorter than ever, propelled in part by Silicon Valley and its army of startups and technologists with their crosshairs on every industry under the sun. For leaders of mature enterprises, the implications are sobering: the average lifespan of a company on the S&P 500 has decreased from 90 years in 1935 to 18 years today. Assuming a constant churn rate, 75% of the current members of the S&P 500 will be delisted by 2027.
It is more clear than ever that sustainable growth—even in the short-term—is a function of predicting where the ball will be and dispatching resources there. Of course, this is easier said than done. Investing in disruptive ideas can strain an organization’s pool of talent and capital with no guaranteed reward. Assuming that internal ventures exhibit the same skewed distribution of success as startups, the vast majority of new initiatives will fail to make a material impact.
De-Risk Innovation With Agile Teams
How can enterprises de-risk innovation? In our view, the most important factor in enterprise innovation is assembling the right team for the job. Creating new ventures is non-routine by definition, requiring leaders who balance deep customer and business insight with the entrepreneurial horsepower to learn fast, execute faster and pivot on a dime.
Many large organizations pursue internal innovation by harnessing the abilities of their best employees, but we believe an exclusive focus on in-house talent is a missed opportunity. In this article, we make the case that corporate innovation teams should be augmented by agile talent, creating an innovation strike force with the best traits of both worlds—enough speed and precision expertise to act quickly on disruptive opportunities, while retaining a deep connection to customer needs and minimizing the risk of obstructing core projects.
To frame our discussion of why agile team members matter, we introduce a key insight from Jeff Bezos—one of the world’s most innovative CEOs—that forms a proven philosophical basis for a winning innovation strategy. Then, we illustrate how incorporating agile talent can enable organizations to follow these best practices and achieve a winning outcome.
To Innovate Well, Make High-Velocity Decisions
In his 2016 letter to Amazon’s shareholders, Jeff Bezos makes the observation that mature enterprises make high-quality decisions but tend to make them slowly. Instead, he argues, “you somehow have to make high-quality, high-velocity decisions…if you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be costly for sure.”
For their part, startups are known for their ability to “pivot” at a moment’s notice—recognizing when a key assumption is disproved by early data and executing on that insight by adjusting everything from their product to their entire business model to reflect the new reality. On the other hand, enterprises are routinely faced with decisions that can affect thousands of people and millions of dollars in revenue. The result is employees who learn to apply structured processes to decision-making—a culture that protects the organization from downside, but also encourages risk aversion and incrementality. How can executives replicate startup-scale agility in a corporate environment while preserving quality?
One of the most powerful ways for established organizations to adjust to the rapid pace required for effective innovation is taking advantage of agile talent—high-caliber freelancers, consultants and independent workers who bring a fresh perspective, relevant expertise, bandwidth and freedom from the institutional norms that can and do hamper in-house talent. To explore why, we’ll walk through three tactics that Bezos believes are essential to high-velocity decisions:
1) Gather Just Enough Information
Paul Graham, a Silicon Valley elder statesman who has backed dozens of successful startups as founder of the incubator Y Combinator, has noted that if an innovative idea seems obvious at the time you’re making it, it may not be as innovative as you believe. On their face, the most disruptive ideas can seem bold and even ill-advised—and indeed, most of them will fail.
When they contemplate disruptive ideas, large organizations tend to over-correct in the face of uncertainty, spending far too long collecting enough information to reach a high conviction threshold. But blindly throwing darts at the board isn’t the right strategy either. The key, according to Bezos, is making decisions with “somewhere around 70% of the information you wish you had.”
Including agile talent on your innovation team is one of the most effective ways of fulfilling this mandate and short-circuiting the extended decision-making loop. As consultants and freelancers who constantly make rapid decisions in the course of their day-to-day, agile team members are less likely to be locked in a high-conviction mindset that ultimately slows down decision making.
Moreover, innovation teams can hand-pick agile team members with precise knowledge of the opportunity at hand. Most corporate innovation teams are comprised of talented, well-connected generalists who have a deep understanding of an enterprise’s customers and core business, but may not be subject-matter experts in the company’s new areas of interest. In addition to their entrepreneurial mindset, freelancers can apply deep expertise to help innovation teams reach the 70% threshold faster than relying on employee innovators.
The average lifespan of a company on the S&P 500 has decreased from 90 years in 1935 to 18 years today.
2) Make Reversible Decisions
In his classic book The Lean Startup, author Eric Ries advocates for a “build-measure-learn” strategy for startups, noting that innovation is a “feedback loop” that helps founders decide when to persevere and when to pivot. The fact is that most disruptive ideas will not pencil out—and the best way to limit the downside risk of picking the wrong horse is making reversible decisions. In Bezos’s words, if a decision is reversible, “so what if you’re wrong?”
Rather than investing scarce talent and capital in an unproven idea, organizations should strive to innovate within a structure that allows them to test assumptions and iterate as they go, shifting direction without feeling encumbered or pot committed. High-quality talent is the first and largest cost in pursuing an innovation strategy—not including the opportunity cost of pulling top employees off other projects.
One clear avenue to make a new venture more “reversible” is using agile talent to execute the first few iterations of the build-measure loop, testing assumptions and building MVPs without the cost and disruption of assigning an internal team to the task immediately. Enterprises can even assign separate agile team members to pursue competing approaches to the same problem, parallelizing the innovation process without diverting full-time resources.
3) Commit and Execute Fast
Once a disruptive idea has been validated, it seems reasonable to staff an internal innovation team on executing it. Internal stakeholders are closest to the customer, and in most instances will be best equipped to undertake the creative process of transforming novel insights into new products and services that will actually succeed.
On the other hand, by definition, innovating implies extending a competency within a business, or defining an entirely new competency in the form of a brand new offering. Existing employees may not always be equipped to execute on a new venture that is a 180 from existing product lines. With time to ramp up, they can get ready for the job, but reassigning existing employees or simply hiring a new team of employees can be excruciatingly slow in a competitive market.
High-quality agile talent can fill the gap between a validated idea and a real product, enabling organizations to ship to customers fast enough to beat the competition until a high-quality internal team can be assembled without compromise. As Bezos reminds us in his shareholder letter, “speed matters in business”—shipping a game-changing product first in a winner-take-all market can make the difference between an enterprise thriving or dying in the years to come.
Agile Talent Can Help Any Organization Innovate Like A Startup
Every executive understands the importance of staying ahead of trend and disrupting your business before others can do it for you. But executing on that principle and devoting resources to disruptive projects in the face of considerable uncertainty is not always as easy as it looks, especially for large enterprises that have grown accustomed to a more deliberate approach.
Ultimately, the difference between enterprises that innovate and those that stagnate is not the precision of their strategic insights, but their likelihood of taking action. By employing agile talent to reduce the activation energy of pursuing innovation and make decisions with greater reversibility and speed, mature organizations will be better positioned to stave off competitive threats from nimble entrants and innovate their way to long-term, sustainable growth.