00:09so I'd like to welcome our presenters
00:12today so our first presenter today is
00:15dr. ray Leavitt so dr. Bray lemon is the
00:17academic director of the Sanford idea to
00:20market program he is the Kumagai
00:22professor of civil environmental
00:24engineering emeritus and the founder and
00:26director of the global project center
00:28GPC here at Stanford University so dr.
00:31Lovitz current research conducted
00:33through GPC as aimed at developing new
00:35financing governance and organizational
00:38approaches to enhance the long term
00:40financial environmental and social
00:42sustainability of these critically
00:44needed but institutionally challenging
00:46projects in recognition of his work he
00:49was appointed by Governor Schwarzenegger
00:51as a commissioner of the California
00:54public infrastructure advisory
00:55commission PIAA C in 2008 and served as
00:59commissioner of PIAA C from 2008 to 2013
01:03before joining Stanford in 1980 dr.
01:06Lebon served on the MIT civil
01:08engineering faculty he also served as a
01:10consultant to many Fortune 500 and
01:13global companies and the design of
01:14project matrix organization structures
01:16and work processes currently he teaches
01:19classes of organizational design and
01:21entrepreneurship for global project and
01:23matrix organizations dr. Lovett founded
01:27and served as academic director of the
01:29Stanford advanced project management
01:30professional certificate program
01:32awarding more than 6,000 certificates to
01:35mid-career professionals in a wide
01:36variety of industry sectors since its
01:39inception in 1999 he was elected a
01:42distinguished member of the American
01:44Society of Civil Engineers and served as
01:46chair of Stanford's Faculty Senate from
01:50sir second presenter today is Professor
01:52Pedro ma Korean Pedram is driven by
01:55reimagining how digital technologies
01:57will help address the challenges of
01:59global urbanization he is an adjunct
02:01professor at Stanford University and
02:02also a lecturer at the Haas School of
02:04Business at UC Berkeley where he teaches
02:06and advises entrepreneurs and global
02:081000 companies alike on the topics of
02:10entrepreneurship business model
02:12disruption and technology innovation
02:14strategy he was previously a principal
02:17at Mayfield one of Silicon Valley's most
02:19story to venture capital firms which he
02:21was part of the investment he
02:22with over 3.5 billion dollars in assets
02:26pedram is a founding partner of the
02:28ratio academy new line ventures and an
02:31entrepreneur and residents at General
02:33Electric and as various roles he focuses
02:35on accelerating the development of new
02:37venture efforts seeking out
02:39entrepreneurs who are equally passionate
02:41about the applications of machine
02:42intelligence connected systems via
02:45analytics and the Internet of Things he
02:48serves as a mentor or advisor to a
02:50number of startups innovation incubators
02:52including the Texas Medical Center
02:53Innovation Center and at M&A and
02:56innovation labs and serves on the
02:58advisory board of Phillips 66 he was a
03:02seat his PhD in engineering from
03:04Stanford University and has had a brief
03:05an exciting stint in the commodities
03:07trading group at Credit Suisse and with
03:10that said I would love to turn it over
03:11to Ray and Pedram and continue with our
03:14presentation today so welcome everybody
03:18thank you for joining this webinar it's
03:21a privilege to be able to share with you
03:23some of the ideas that we cover both in
03:26academic courses and in online courses
03:28through SCPD on the special innovation
03:32challenges for large businesses as I'm
03:35sure many of you are where Stanford is
03:38considered a hub of innovation and
03:41startups faculty students staff members
03:45and others are all launching businesses
03:47and some of the students are doing it
03:48before they even graduate and dropping
03:50out and so there's a lot been written
03:53and said about the challenges of
03:55launching innovative startups a lot of
03:58that is true whether you do it as a two
04:03or three person company working out of a
04:04garage somewhere or whether you do it
04:07inside a company but there are special
04:09challenges when launching innovations
04:11inside big businesses Pedram you might
04:14like to yeah absolutely so one of the
04:17things that rave hi ray and I have had
04:19the privilege of doing is it's actually
04:21teaching this notion of entrepreneurship
04:22and innovative thinking not only to
04:24startups and startup organizations but
04:26also very large companies in the fortune
04:281000 really across all six continents at
04:32this point and virtually across every
04:33single sector from construction into
04:36retail all the way through to medical
04:38devices and healthcare services and
04:40everything in between and most of the
04:43challenges are fundamentally the same
04:45and what we would like to do today is
04:46talk about some of those barriers right
04:48now that we see and some mechanisms that
04:50you can think about to actually start
04:52adjusting those and actually bring some
04:53innovations to market so many of you may
04:58have been aware of or may have actually
05:01read a book called the innovators
05:02dilemma by play Kristensen who actually
05:04just passed away this last week he was a
05:07Harvard professor and studied a number
05:09of industries and talked about why it
05:11was so difficult for big companies to be
05:13able to commercialize technology that
05:16they themselves had developed and so one
05:19of the challenges is that innovative
05:22technologies that start out
05:24underperforming traditional lines of
05:28business can actually raise their
05:30performance for price much faster than
05:33legacy products which tend to be
05:35incremental now he focuses on disk
05:37drives you can think about solid-state
05:40play also talked about steel mini mills
05:43and so disrupt disruptive innovation are
05:46often called submarine innovation it
05:47comes up from under your existing
05:50clients and under the performance
05:51requirements that they expect and your
05:54marketing people don't become aware of
05:56it because they're not talking to these
05:58kinds of customers until the performance
06:01of the disruptive innovation actually
06:03exceeds the performance of the legacy
06:05application and basically at that point
06:07you're toast and the second thing is
06:11that inside big companies existing
06:13business line managers will often oppose
06:16and and almost always kill these
06:19internal disruptive innovations if they
06:21challenge existing business lines and
06:23the whole point of disruption is to
06:26displace existing business lines and so
06:29you could ask the question of why codec
06:31which invented the digital camera never
06:33succeeded in making a business out of it
06:36you could ask why Xerox that invented
06:38personal computers sold it to Apple for
06:4010% of the original stock and then
06:42disposed of that stock almost
06:43immediately and and this is something
06:47we'll talk about more as we get into the
06:50webinar and how to deal with it so again
06:53that's the book by clay Christensen and
06:56this is the diagram of the same idea so
06:58you've got a sort of a performance
07:00trajectory of the existing legacy
07:02product and then you've got somebody
07:05lower down again this submarine
07:07innovation that's creeping up on you
07:09from underneath and you don't see it
07:11coming because the managers of the
07:13existing business mind so I'm not
07:14talking to the customers who originally
07:16or using the product that has lower
07:18performance that that is not even on
07:20their radar screen so this is very well
07:23understood I think by people in in
07:26business at this point the other issue
07:29this zone to win book by Jeffery more
07:32addresses and that is the fact that
07:34existing business lines will be
07:36challenged by these innovations that
07:38could even if they don't disrupt the
07:41existing business lines they take
07:42resources away from them marketing and
07:44sales resources engineering resources
07:46even top management's attention and the
07:49managers of your existing profitable
07:51business lines are usually senior execs
07:53with a lot of corporate clout and so
07:56Jeff Moore argues and we believe is that
07:58this is a very valid concern for big
08:02companies and so how do you protect
08:03yourself so there really again just to
08:07praise this first of all if you're a
08:13public company you've got shareholder
08:14expectations about what should be your
08:19growth rate of your stock value or what
08:22should be the dividends if you're a very
08:23mature company so you have a certain
08:25capacity for strategic innovation but
08:28the expectations of shareholders for
08:30continuing equity growth and continuing
08:33steady or increasing dividend payments
08:35will take away some of that capacity for
08:37you and then you've got these internal
08:41resource conflicts with existing
08:42business lines that are reluctant to
08:45give up engineering sales marketing and
08:47other resources and then you've got
08:49summary and innovations challenging you
08:51from below and so it's not surprising
08:53that big organizations are often not
08:56able to innovate very successfully so
09:01we're going to talk now
09:02about Geoffrey mores ideas about zone
09:04management and will perhaps embellish
09:07them a little bit with some of our own
09:08thoughts on ways you can make that an
09:10even more powerful framework so Jeff
09:14reamer talks about four zones that have
09:16different time horizons in the top right
09:19hand corner you've got horizon one your
09:20current fiscal year these are your
09:23existing profit lines that are
09:26contributing to earnings typically
09:28subject to annual reviews people are
09:31incentivized based on annual market
09:33share growth profit growth etc and they
09:37get the support of what he calls the
09:39productivity zone so zone money costs
09:41the performance zone this is your
09:43organization's ongoing performance the
09:45productivity zone on various staff
09:47groups that provides support to your
09:49horizon one performance product lines so
09:53the legal the logistics the sales the
09:57marketing the accounting it said all the
10:00existing staff groups in the
10:02organization are contributing often in a
10:05matrix kind of a strut on the left hand
10:07side you've got two disruptive
10:09innovation things that corporations try
10:11to do so they'll do it through internal
10:12corporate venture funds or they'll just
10:14do it by having individual groups
10:17protected from the organization's
10:19skunkworks Tiger teams different names
10:22for them put them in a new office give
10:24them all the perks that startups love to
10:26have you know video games etc etc lunch
10:31trucks coming with with different food
10:33on different days this is a much longer
10:37horizon kind of activity three to five
10:40years and what you're doing here is
10:43you're exploring opportunities for
10:46technical innovation and what tends to
10:50happen is if you don't fence this off
10:52and protected it tends to become a
10:54resource for your existing product lines
10:56to just tweak their existing features so
10:59at Microsoft the Rd organization had
11:01devolved into adding features to Word
11:03and PowerPoint and so on at the time
11:06Mike Steve came in and helped generate
11:07the outside in an innovation plan that
11:09launched the is your product line and
11:13then when you have one of these
11:16is going to be launched as a product you
11:18move the one that you've picked up into
11:21this transformation zone and then you
11:24have to pile resources onto it and what
11:27happens is this group is continuously
11:30supporting horizon-1
11:32and as you launch something into that
11:35transformation zone it takes away
11:38resources from the existing business
11:40lines and diverts them to the activity
11:42that's being scaled to become a new
11:44business line so penny would you like to
11:46comment on some of this at this point
11:48yeah so so fundamentally the way to
11:51think about this is is this is sort of
11:52an archetype for how to think about
11:54structuring your an organization such
11:56that it can actually begin to innovate
11:57it's not necessarily saying that this is
12:00how organizations currently do it but
12:02this is basically providing a framework
12:03to think about how it becomes more
12:05efficient to do that and the way that I
12:07often describe this framework and we've
12:09had the pleasure of working with
12:11Geoffrey closely on sort of thinking
12:13through this and inter observing how
12:15he's come up with this actual structure
12:18as well is to think about two sides of
12:21the business the left side on the right
12:23side of the business the right side of
12:24the business is fundamentally around
12:26what are you doing today to think about
12:28your core business your core product
12:31lines and this is the revenue generating
12:33side of the business this is basically
12:35what the shareholders are looking at is
12:36what your customers are interacting with
12:38this is basically for business as its
12:40defined the left side of the
12:43organization is effectively where all
12:45the disruptive innovation needs to
12:47happen and one of the the beauties of
12:49thinking about this framework is
12:51actually thinking about the sort of a
12:53semipermeable membrane if you will that
12:55separates these two halves of the
12:56organization where you can actually
12:58protect things that are that you're
13:00doing that are disruptive in nature from
13:02the business as usual because one of the
13:05fundamental nature's of all these things
13:06is that the financing and the funding
13:08and all the resources that are required
13:10to support the left side of the
13:11organization are effectively
13:13underwritten by the right side of the
13:15organization so what you'll end up
13:17having in a situation like this is if
13:19you don't have this protective structure
13:21and you don't have these you know
13:23quarantine zones if you will that
13:25actually are protecting some of these
13:26disruptive innovations you will end up
13:29that are actually driving the core
13:30business basically saying well since
13:32we're paying for it you should do
13:33exactly what we're telling you to do
13:35exactly where Bray was mentioning right
13:37now so if you actually have the core
13:39business defining what the innovations
13:41are that you need to be working on
13:43because of the fact that they're
13:44underwriting all of the efforts then you
13:46end up with basically having incremental
13:48innovations that support nothing more
13:50than the core unit so to think about
13:53this is really to think about how can
13:55you start to create frames within the
13:57organization that can actually create
13:59protective structures around which you
14:01can start to think about innovation and
14:03innovation oriented programs and a
14:05select few of those are going to be able
14:07to actually expand to actually become
14:09what he became what Geoffrey Moore
14:12describes to be things that are actually
14:14going to be transformative to the
14:15business and the definition of
14:17transformation here as we're talking
14:19about 10% of them or more of top-line
14:22revenues of the business so it doesn't
14:25become strands transformative until it
14:26has sufficient scale to be meaningful to
14:29the overarching organization and he goes
14:31into detail about thinking about how do
14:33you actually select those those few
14:34processes and those few projects that
14:37are actually going to go into the
14:39transformation zone but this is
14:40effectively just to think about a
14:42high-level architect and we'll talk
14:43about some of the methodologies and how
14:45to actually start putting some of these
14:47programs in place now so we'll go in
14:49more detail especially into the
14:50left-hand side of the organization how
14:52you protected from the right-hand side
14:54how you fund it in a different way how
14:57you direct the kinds of things it does
14:58in a different way to protect it again
15:00from becoming just tweaking your
15:03existing product lines because if you do
15:05these Submarine innovations will come in
15:07and hit you out of the blue from under
15:09the water just jaws style and so how do
15:13you do this we'll talk about this now in
15:15a little more detail
15:22so if you think about some of the kinds
15:25of metrics that are used you know the
15:28existing performance zone is looking at
15:30booking this revenue contribution
15:31margins market share what fraction of
15:34the customers account you're getting or
15:36the wallet share the productivity zone
15:39is really the Six Sigma you know stable
15:41reliable predictable support for the
15:43existing business lines the number for
15:47the incubation zone this is where you're
15:49really looking at identifying new
15:52technologies new business models new
15:55solutions that could could be
15:57drastically better than your existing
16:00product lines and you can think about
16:02them in two ways and Jeff Moe talks
16:04about this also some of them are
16:07defending your existing business lines
16:09against outside disruption so they might
16:12need you to take an existing product
16:14line and put it in the cloud because you
16:16know salesforce.com has cloud software
16:18and you don't and it might be adding
16:22features that other customers have that
16:24are turning out to be disruptive because
16:27they drastically improve the value to
16:29the customer of the particular solution
16:31so you're both playing defense and
16:33offense with the things that you
16:35launched in this incubation zone and
16:38we'll talk about this later on but this
16:40is just one way that if you go on
16:43offense and defense which is things you
16:44develop yourself you can also partner
16:47with others you can acquire outside
16:49companies and and of course all of those
16:52are things big corporations do so in the
16:54incubation zone what you're looking at
16:57is really a whole different way of
16:59thinking about what's important you need
17:01to have representation from your CEO and
17:04you need to have very strong support
17:06from the very highest levels of the
17:08organization again to protect you from
17:10this idea that the existing business
17:13lines will take your resources and
17:15squash you if they feel threatened by
17:17you and so you've got to have something
17:20like a venture capital model there where
17:23you have an investment committee which
17:25is comprised of possibly some outside
17:28people that understand the technology
17:30ecosystem better than your
17:33the organization could because they're
17:34closer to it people who are venture
17:36capitalists still people who are very
17:38well connected in various technologies
17:40but then you also need some strategic
17:42representation and if you want to just
17:44do random innovation in which case you
17:46just look like a conventional venture
17:48capitalist and in the transformation
17:51zone what you've got to do is bring in a
17:53manager who knows how to scale a
17:54business to take this idea that's come
17:57out of your incubation zone that looks
17:59like it has potential Jeff Moore argues
18:02you really have to do just one of these
18:03at a time because of the way she level
18:05whelmed the organization you certainly
18:08can't do four or five at a time even in
18:09a big company perhaps especially in a
18:12big company and we can look a little
18:14further now at how you do this
18:18incubation zone so I don't you pitch in
18:22here Pedram sure so one of the biggest
18:24things that I think a lot of people have
18:27a tough time grappling and and this is
18:29especially true in large organizations
18:31is they'll come up with with a new idea
18:34or they'll come up with some form of a
18:36new technology and the the automatic
18:39assumption is that the technology is
18:41effectively going to become consumable
18:43by the market almost immediately because
18:46it has some some very specific technical
18:48merit to it and one of the challenges
18:50were thinking about that is the fact
18:52that technology is not something that
18:54people actually consume people consume
18:56products and solutions and services and
18:58so part of the notion of actually
19:00thinking about how do you think about
19:01the structure of the incubation zone is
19:03to also think about how do you then take
19:06some of those nascent ideas that are
19:08either technologically oriented or
19:09they're you know native solutions that
19:12really aren't quite productized and
19:14actually give them the mechanisms and in
19:17the structure by which you can actually
19:18start to get some market feedback and
19:20this is part of the core of thinking
19:22like for example as what Ray was
19:23mentioning like a venture capitalist
19:25because as a venture capitalist our role
19:29is to sit there and not just look at a
19:31core technology and say this is a great
19:32technology our role is to actually look
19:35at the complete solution and understand
19:36how that technology addresses a problem
19:39who exactly it is that problem is being
19:42addressed so what are the market
19:43segments that's being going after what
19:45are the cost structures you know
19:47not only developing the product but also
19:49thinking about the cost structures of
19:50actually getting this into the market
19:52how much you're gonna get paid for it in
19:54the long run what strategic value is
19:56this going to add how much value is this
19:58going to create as a whole so there's a
20:00whole slew of questions that actually
20:03get overlaid on top of all of these
20:05nascent technological ideas and concepts
20:08that also then need to be flushed out
20:10and this I think by and large is is
20:12where a lot of companies struggle where
20:15they understand exactly how to bring a
20:17technology to a certain point of
20:19maturity but they can never really turn
20:22the wheel of figuring out how to take
20:23that technology and convert it into a
20:25product and this is effectively the same
20:27thing that we talk about when we start
20:29to say that a corporation should also be
20:31starting to think about I'm having the
20:34the internal skills and the internal
20:36functions to be able to actually take
20:38those products and take those ideas and
20:40actually put them on a pathway towards
20:42becoming product eyes and taking them
20:44into market as well and in particular
20:46your existing sales organization might
20:48not have any idea how to sell a new
20:50disruptive product and so you've got to
20:53come up with what ifs you'll go to
20:54market strategy who are the beachhead
20:56customers how do you expand to a larger
20:59group of customers what is the cost of
21:01sales if it's a very innovative product
21:03you have to educate the market you need
21:05a big marketing and PR budget as well as
21:07a sales budget and so learning how to
21:10think like that is probably what for
21:12Xerox to give away the personal
21:14computing business they had invented
21:16bitmap screens they didn't truly invent
21:18the into Ethernet not any politician who
21:20claims to have done that they so they
21:23had networked bitmapped many computers
21:26they weren't quite personal computers
21:28but they were on the way to becoming
21:29personal computers with mice that they
21:31brought in from SSRI and improved on
21:33they had the whole personal computer
21:35ecosystem in Xerox Palo Alto Research
21:37Center about 500 yards from where Pedram
21:40and I are sitting and they never
21:42commercialized that why because they
21:44were a copier company they leased
21:45copiers to big companies that was their
21:47business model they leased them and
21:50you paid by the page they actually had
21:52an interesting version of current
21:55subscription models but they only knew
21:57how to sell or how to least rather
22:00businesses like Stanford University we
22:02used at least Xerox copier and printer
22:04here and so they couldn't imagine how
22:07you would sell these personal computers
22:08and they said we're a copier company
22:10this is not what we do and they
22:12literally gave it away to Steve Jobs and
22:14Steve Wozniak for almost nothing what
22:16one one one great sort of example
22:19literally from a conversation I was
22:21having yesterday it's actually thinking
22:23about for example a sector like consumer
22:26packaged goods so companies like
22:27Unilever Johnson Johnson Procter and
22:30Gamble very very successful companies
22:33brilliant products across the entire
22:35spectrum of what consumers are are
22:37actually I'm consuming on a daily basis
22:40but if you actually think about their
22:41business model it's not direct to
22:44consumer they advertise direct to the
22:46consumer but the consumer never actually
22:48interacts with most of their products so
22:51one of the more interesting recent
22:52acquisitions that we've seen by for
22:54example by Unilever is the acquisition
22:56of a company like Dollar Shave Club
22:57whereby that provides them the direct
23:00access and the direct channel to a
23:03different business model so it's really
23:05interesting to think about even a
23:06consumer packaged goods company needing
23:09to think about how do you innovate on
23:11reaching those customers in
23:12fundamentally different ways because
23:15that's not an innate skill or an
23:17internal skill that the traditional CPG
23:20companies actually have how do you do
23:22digital marketing having new digital
23:24how do you do subscription sales of a
23:27you know of a disposable product and so
23:30all of these actually have to do we're
23:33thinking about the fact that sometimes
23:34these innovations are on the product
23:37sometimes there are actually around the
23:39business model and this is effectively
23:41all the things we want you know folks to
23:43start thinking about to say all of this
23:46needs to be modeled experimented with
23:48and really tried out within this
23:51incubation zone constructs and one of
23:53the really important things that Jeff
23:55brings out in the book and we would
23:56reinforce is you don't finance the
24:00incubation zone with annual budgets the
24:02way you do or you don't finance projects
24:03in the incubation zone you might give
24:05this own a budget that they would not
24:07pass that budget on to the projects on a
24:10time frequency what they would do
24:13look at how those products of being
24:14de-risk they would be risk the
24:16technology first of all and then they
24:18would dearest the market by showing that
24:20they can sell it to at least a few
24:21people in if this beachhead or in an
24:24early market segment before you would
24:26even think about transforming it and
24:28pouring all those resources into making
24:30it a large business and so you're not
24:32again you're not funding it on an annual
24:34budget you're funding it based on
24:36milestones with gradually increasing
24:37amounts of money which is exactly what
24:39people in the venture community do and
24:41then when it gets to a certain size 1 or
24:442 percent you've shown you can sell it
24:46to some people you can understand how
24:48you could sell it to more people then
24:50you pile on the resources and bring in
24:52the manager that's going to crack the
24:53whip and grow this into a big business
24:55and then the CEO has to talk with the
24:58performance own people and get them
25:00behind the new product and if they have
25:02to change their incentives because
25:04they're going to probably lose some of
25:06the support from the productivity zone
25:08which might affect their sales and so
25:11the whole business will will have to go
25:13through what some people call it Jacob
25:14you'll go down before you go up and
25:17everybody's got to be on board
25:19incentivize the CEO has to stay on top
25:22of this and give very very clear support
25:24to this new innovation or it will get
25:26squashed guaranteed there's there's one
25:28nuance and subtlety right that I just
25:30want to make sure that people understand
25:32as you're describing this is that what
25:34we're not saying is that the entire
25:36corporation needs to behave like a
25:38start-up and in fact that's a disaster a
25:41corporation is not structured as a
25:43start-up it's not designed to take those
25:45types of risks and the mentality that
25:48the overarching corporation should think
25:50like a start-up in my opinion from all
25:52the things that I've seen and all the
25:53various companies I've advised is
25:55actually a disaster or actually saying
25:57is that the new products the new ideas
25:59and the things that are going to be
26:01experimented with inside of the
26:03innovation zone those are the things
26:05that need to be treated like a start-up
26:07and so in reality a corporation should
26:10be thinking more like a venture
26:11capitalist in a particular sub segment
26:15not that the overarching corporation
26:17needs to be on this startup oriented
26:19mentality and basically putting not only
26:21the existing culture but the existing
26:23customer base and the existing product
26:26at risk because it's trying to innovate
26:28at its core and those are the types of
26:31things where we see there's there's
26:33often a lot of cultural issues with
26:35doing that and to be honest with you
26:37that sends a lot of confusing signals
26:39back to the market as well
26:40because now people are saying well
26:42what's wrong with your core product what
26:44why do I you every single you know day
26:46you're trying to innovate on its we
26:48don't really understand what you're
26:49trying to accomplish
26:50now you're actually confusing us by by
26:52issuing new releases so fast we can't
26:54keep up with him and so on especially if
26:56it's not what you do if your company
26:57like Amazon and you're and you're
26:58releasing things multiple times a day
27:01absolutely that's what people expect of
27:02you but if you're not that and you start
27:05to do this then people start to get
27:07confused right so you need to do this in
27:09a very structured way and that type of
27:11thinking needs to be limited to new
27:13innovative projects and programs and at
27:15the same time your incubation zone is
27:18not just a generic venture capital
27:21operation it's got to be linked
27:22strategically to what's happening in the
27:25performance zone and what's happening to
27:27your competition and the performance
27:28zone to the extent you can see it and
27:31this and this we'll talk about shortly
27:33as well as so how do you grow a business
27:40again it's a little different when you
27:43incubate a seed technology from when you
27:46decide you're actually going to grow a
27:48business and you move from you know four
27:51people in a garage to 10 15 20 people
27:54with substantially more capital and
27:56substantially more structure and role
27:59specialization the people that are
28:01selling are probably not the founders
28:02anymore you've got professional
28:03salespeople and so you're going to
28:05you're going to take this little startup
28:07business and you're going to turn it
28:08into a real business probably by
28:10bringing in an executive who knows how
28:12to grow business and that's often quite
28:14difficult for the founders to be given a
28:17Northwest promotion to chief technical
28:19officer but that's often what you need
28:22to do to make that happen
28:24so in the construct of the difference
28:28between the incubation zone and the
28:29transformation zone the way to think
28:31about this really is to say you're not
28:34just trying to incubate new ideas for
28:35the sake of incubating new ideas but
28:37you're not doing this just so that you
28:40Marketing of you know what is it you're
28:43taking care of your stakeholders and
28:44your shareholders saying we're
28:46innovative look at the number of
28:47experiments we're running simultaneously
28:49you're doing this under the guise that
28:51you are actually going to then create
28:53top-line value and and top-line benefits
28:56to the organization and a select few of
28:59the activities of the projects and of
29:02the initiatives within this incubation
29:04zone actually belong and what is defined
29:07to be the transformation zone and those
29:09are the ones where you start to actually
29:11pull resources at a substantial level to
29:14actually try to drive a few of these
29:16things into something that's
29:18fundamentally mirror and and I'm driving
29:20a significant amount of new value to the
29:23organization as a whole
29:24so to start thinking about you know what
29:27are the overarching structures that you
29:29can then use from a more practical
29:31perspective to tie out what we think
29:33about this sort of left side of the
29:35equation we've developed a new framework
29:37and this framework is really just
29:40thinking about how do you think about
29:42all the different innovations that are
29:44happening here ray mentioned Xerox PARC
29:47which is literally just down the street
29:48from us here as being one of the the
29:51forefathers if you will of the the
29:53innovation construct of actually
29:55developing products in a more advanced
29:58R&D archetype that structure really
30:01really worked back when you could
30:04actually put all of the experts in the
30:06world in one room and give them coffee
30:08and tell them to go innovate it doesn't
30:12work in today's environment by and large
30:14where innovation doesn't always come
30:16from the inside of the organization new
30:18ideas new capabilities new technologies
30:21are coming at you from all kinds of
30:23different directions so as a structure
30:26one of the things that we strongly
30:28recommend is to think about how do you
30:31then have the entire scope around the
30:34source of innovations and this is
30:36effectively what our x-axis or the
30:39bottom axis here is you have innovations
30:41that come from the inside of the
30:42organizations you have innovations that
30:44come from outside of the organization
30:45and hopefully you have structures in
30:48place that allow you to blend the two in
30:50between and actually have hybrid
30:53courses where you're working jointly
30:54with outside organizations so this gives
30:58you the ability to think about all the
30:59different types of sources of where
31:03these new ideas and innovations can come
31:04from now what we've seen a lot and I see
31:09this literally on a daily basis when I
31:11have conversations with with my my
31:14advisory companies is they don't really
31:17have a good definition of how to think
31:18about what is the stage or the phase of
31:21this innovation so what we mean by this
31:24is to say what is the purpose of this
31:25are you trying to peer around the bend
31:28to figure out where the future is going
31:30are you trying to just get a sense of
31:32where is the market getting to are you
31:35trying to discover effectively what the
31:37future potential is some of these ideas
31:39can be or what are the future potential
31:40disruptors can be that's in the
31:42discovery phase where you're casting an
31:44extremely wide net just to try to
31:47extract as much information as you can
31:48for the market then a few of those are
31:52going to go up into over Collington
31:54development phase and this is where you
31:56actually start to interact with the
31:57market so when we think about
31:59traditional on BD what most
32:01organizations are really good at is the
32:03big R right and the D associated with
32:06their core businesses what we're talking
32:08about in terms of the innovation
32:09development phase is how do you think
32:11about launching these new businesses and
32:13new product lines new service lines and
32:15new business models and how do you start
32:17to take some of those things and start
32:18to actually put them into revenues and
32:20then in the parlance of the
32:21transformation zone it really talks
32:24about are we delivering value at scale
32:27to the organization are we delivering
32:29strategic IP are we delivering strategic
32:31revenues growth margins there's a whole
32:34variety of way defensive mechanisms
32:36survival survival in many cases right
32:40it's it's that you know that antibiotic
32:42pill that you needed as an organization
32:44to keep you humming for another ten
32:46years and so this is really what we
32:48start to think about when we start to
32:49say top-line delivery and innovation can
32:52help deliver against each one of these
32:55different stages or phases of innovation
32:57from discovery to development to
33:00delivery of top-line value and if you
33:03put these two constructs together you
33:05end up with effectively a frame that
33:07by three matrix and what we've done is
33:10we've tried to map out to the best of
33:11our abilities what are some of the
33:13existing structures and initiatives that
33:15we've seen that fall into each of these
33:17categories the easiest thing to think
33:19about is obviously internal discovery
33:21and that's what we think about when we
33:23think about traditional R&D functions
33:25itself this is really a Jeff Morrison to
33:27an incubation zone it is this is this is
33:31effectively part and parcel of thinking
33:33about the entire left side as we're
33:35talking about that as well now what we
33:38were also seeing which i think is a
33:39really interesting new construct over
33:41the past ten years right and some
33:43companies have actually been doing it
33:44longer still is to think about how do
33:47you bring external ideas into your
33:50organization and these external ideas
33:52can come from for example sponsored
33:55hackathons or research around thinking
33:58about competitions and how do you
34:00actually put some of these questions out
34:01to the market and try to get some
34:03feedback around what it is that you're
34:04trying to solve for or many cases you
34:07may actually either launch your own
34:08accelerator or sponsor an accelerator
34:10where you're seeing a lot of different
34:12early-stage companies and entrepreneurs
34:14come with their own ideas and you can
34:16actually interact with them to kind of
34:17get a sense of how is the next
34:19generation of folks I'm thinking about
34:22what the future is doing now there's
34:23another very easy way to do this that a
34:25lot of corporations have embraced and
34:27that is to join industrial affiliate
34:30programs at universities and Stanford
34:32has a variety of these in semiconductors
34:35in renewable energy in construction
34:38digitization etc and so these are we not
34:42only do you meet with academic
34:45researchers you meet with startups that
34:47are spun out of the university you meet
34:49with competitors of yours who are doing
34:50things that you learn about and you can
34:52talk about in a way that insulates you
34:54from antitrust concerns because you're
34:56working in a university environment you
34:58know you're not meeting in a
34:59smoke-filled room with cigars and so
35:01that that university industry affiliate
35:05program you know with universities that
35:07are strong in areas you're interested in
35:08is a very good way I think to see around
35:10the corners along with the things that
35:12Pedram is mentioned and a platform based
35:15community to me one of the ways to do
35:17that is to become a limited partner in a
35:20venture fund that is
35:21focused on the sector you're interested
35:22in where again you'll see all of the
35:24startups that they're reviewing you'll
35:26see the ones that they choose to invest
35:27in you can learn about the ones they
35:29passed on and you can meet again with
35:31other strategic investors in these in
35:34these venture corporations so the the
35:36venture group that I work with as a
35:38number of strategic partners who I think
35:40in a really interesting look at
35:42technology outside and to just build on
35:45Petra's point for a moment the
35:47statistics on what spent on internal
35:49corporate R&D labs versus what spent
35:52outside show that there's way more money
35:54piling into venture capital than there
35:56is in the sum of all of the corporate
35:58R&D labs not only in the US but in
36:01Europe and in Asia and in other parts of
36:02the world so there's much more happening
36:05outside your organization that's
36:06potentially interesting than what you
36:08could ever do inside and and this really
36:10gets us into that the mechanisms to
36:13think about well first of all do you
36:15have within your organization a culture
36:17of well if it's not invented here then
36:19it must not be good and that sometimes
36:22sort of gives us the sense that well
36:25you're not necessarily trying to
36:27innovate you're just basically trying to
36:28then consume everything on your
36:31innovations and support your innovations
36:33but you're not doing it in the most
36:35efficient way right you're not doing it
36:36in the most honest and truthful way and
36:38and that's effectively what you know the
36:41rate raise examples of the you know the
36:43investment into the five separate funds
36:45or the collaborations within you know
36:47universities these are all mechanisms by
36:49which to actually expand the scope of
36:51where these new ideas are coming from
36:53now we're not gonna have time to talk
36:55about each of these boxes at extreme
36:58length but I just wanted to touch on
37:00just that middle layer where we talked
37:02about skunkworks the studios and the
37:04corporate venture functions all of these
37:06have to do with development and
37:08development is effectively the muscle
37:10that I think a lot of corporations are
37:12lacking right now when it comes to new
37:15ideas that are that are really not just
37:17the adjacent ones or things that they've
37:18been comfortable with in the duration of
37:20their life but it actually talks about
37:22things that are outside of the scope of
37:24their comfort zone and these are the
37:26things that need to get developed and
37:28this is exactly what some of the
37:30programs that we do for example the
37:31ideas market program really tries to
37:35as you're thinking about developing
37:37these ideas that you've discovered
37:39whether it's through a you know in
37:41affiliation with the university or
37:42research organization or an idea that's
37:44actually percolate enough from your
37:45research organization or organically
37:47through one of the various other
37:48functions you have inside your company
37:50you now need to actually have
37:51methodologies and mechanisms to take
37:54those to the next level and those are
37:56the best practices and the best
37:57principles that you can think of that
37:59you can then borrow from both the
38:01venture capital and the startup
38:02ecosystem to actually put a structure
38:05and a process and engage that sequence
38:08in place to make sure that you're
38:10efficiently developing some of these
38:12ideas such that one day they'll be able
38:15to deliver the value to the organization
38:17that you're looking for and this is
38:19effectively the new type of thinking
38:21around innovation from corporate
38:22perspective that we think is going to
38:24really revolutionize some companies and
38:26the companies that are getting behind
38:28this development cycle in this
38:30development phase I think are going to
38:31be the ones that are gonna have the most
38:33number of innovations that are truly
38:35going to reach market and that are not
38:37just gonna die on the vine yep you might
38:40like to say a little about what a
38:42venture studio is at a venture studio is
38:44effectively the way to think about that
38:46is if you think about a traditional
38:48spunk Works program for example a
38:50skunkworks program you know a name from
38:53Lockheed in terms of what they were
38:54doing it's an extension of a research
38:56development facility because of the fact
38:58that it's actually designed to deliver a
39:00value and products into the market but
39:02it comes from them so it comes exactly
39:04it comes from inside it's locked down
39:06and it's only really focusing maybe with
39:09one or more clients right and so for
39:11example the sr-71 blackbird is
39:14effectively the structure by which the
39:16skunk works with the structure by which
39:17that blackbird came to market for the US
39:20government they're still farmer exactly
39:22it's another one of these where you're
39:24building production capabilities but in
39:26a very limited profile around something
39:28that is still border line of research
39:30project and basically Apple developed
39:32the Macintosh in a separate building
39:34with a bunch of different people I had
39:35the chance to visit that and it was so
39:38different than any corporate environment
39:40I'd ever seen I couldn't believe it you
39:42know video games ping-pong tables bows
39:44and all for grand pianos in the age
39:46this building right I couldn't see
39:48anybody who is actively working and and
39:51the interesting thing with that is again
39:53those are innovations that you're trying
39:54to manage and bring up internally the
39:57venture studio extends that model by
39:59saying what are the expertise from a
40:02team perspective from an execution
40:04capability perspective from an IEP and
40:06Technology perspective from a capital
40:08resource perspective and potentially
40:10from a channel to market and
40:11distribution perspective that you may
40:13not have internally that you're looking
40:15to partner externally with so it extends
40:18that notion of the skunk first and
40:20saying we know how to do all these
40:21things inside by basically saying well
40:23now that we've identified that we do
40:25have some shortcomings that are limiting
40:27or prohibiting our speed to market we
40:29need to start coming up with
40:30methodologies by which we can actually
40:32have been much more hybrid orientation
40:34towards a support program and that
40:36effectively is a new type of structure
40:38that we're calling a venture studio and
40:40one of the best ways I've seen of doing
40:42that is for a big corporation to pay for
40:45what I'll call non-recurring engineering
40:47done by a start-up to add features that
40:49you need for your business and then you
40:52will get repaid in terms of license
40:54discounts of 2x the amount of money you
40:57put into non-recurring engineering and
40:58you will encourage and allow the startup
41:00to sell that to the world after some
41:02limited time maybe six months or a year
41:04when you effective your beta testing and
41:06forum and I've seen very successful
41:09examples of innovations done that way
41:11through non-recurring engineering
41:12payments to startups you often don't
41:15want to invest in a start-up or take an
41:17ownership position of any kind because
41:19that might limit their exit
41:20opportunities and it also might kill
41:22some of their customers but paying for
41:25non-recurring engineering for features
41:26they want is a great way to fill that
41:28phone in on a product or service line
41:30that you need absolutely so this is you
41:32can imagine as a rich area that we can
41:33talk about for hours but in the interest
41:35of time and to make sure that we
41:37actually get some of your questions
41:38answered we're going to turn it back
41:39over to Mona who's gonna actually guide
41:42us through a short Q&A period as well
41:44great well thank you so much for the
41:46presentation and discussion this is
41:48definitely very interesting we're also
41:49getting a lot of great feedback and
41:51questions from our participants okay so
41:54moving on to the first question you know
41:57attracted audiences from a variety of
42:00different backgrounds and this kind of
42:03stood out to me as something that's very
42:05so one participant asked how does the 3d
42:08innovation management matrix or a lot of
42:10the frameworks that you've talked about
42:12apply to nonprofit organizations or
42:15teams or you know organizations that are
42:17restrained by funding or kind of donor
42:21requirements you know what is a creative
42:23way out or how do you kind of innovate
42:25in this context when there are so many
42:27restrictions on you know where the
42:29money's coming from and what you can do
42:30with it like I'd love to take that one
42:32briefly I have two daughters who work in
42:34that nonprofit space and it's a very
42:37tough space to work in you have two jobs
42:38on this year an endowed foundation like
42:40the Gates Foundation you have to raise
42:42the money and then you have to do the
42:44work and it's literally two jobs if
42:46you're a small organization but
42:48essentially you're still competing
42:50you're not the valley your offering is
42:53not a sort of financial ROI it's an
42:55environmental return on donations or a
42:58social return on donations and you're
43:00competing with a lot of other nonprofits
43:02that are going after some of the same
43:04net high net worth individuals the same
43:06foundations same family offices and so
43:09you have to do just exactly the same
43:13thing I think that any entrepreneur does
43:14you've got to offer a return on
43:16investment except again it's not a pure
43:18financial return and so I think all of
43:20these ideas apply and you can see
43:22nonprofits get disrupted by other
43:24nonprofits that come up with more
43:25compelling arguments to the high net
43:27worth individuals and the foundations
43:29that support them and you've just got to
43:31keep innovating and you have to show
43:33that you deliver a very high value for
43:36the money they give you you're not
43:37consuming at all on your own salaries
43:39and your own overhead and and you have
43:42to deliver deliver that value in
43:44creative ways in technologies a big part
43:46of the way this is done these days so
43:49just a quick follow up on that so so
43:51interestingly enough women actually and
43:52advisor to to nonprofit organizations
43:54one of the healthcare space and one in
43:56the energy sector and what makes those
43:58EE interesting is that they're also
43:59regulated which makes it even more
44:01complicated to think about a non-profit
44:03also in a regulated if armed but to be
44:06honest with you one of the the most
44:08important things about think about some
44:09of these frameworks is that
44:10you need to treat these as businesses
44:13now you may not be ROI driven from the
44:15perspective of financial returns but you
44:18have to be ROI driven in terms of some
44:20form of metric as Ramos pointing out
44:22that you're trying to accomplish and
44:23achieve and you have to think about how
44:25do you take every single dollar that's
44:26coming in to more efficiently generate
44:28that are alive that you're looking for
44:30and the second half of the answer which
44:33which is sort of very exciting I think
44:35both today and I is is the course that
44:37we teach in the spring quarter which
44:39Moda mentioned we actually lift any
44:43requirement that the entrepreneurial
44:45process that we teach has to be applied
44:48to a start-up that raises venture
44:50capital dollars and in fact every year
44:52we end up with our students pitching to
44:54us nonprofit organizations now that
44:57doesn't mean that these are just profit
44:59losing organizations these have to be
45:01sort of businesses that can sustain
45:03themselves on an ongoing basis in some
45:05way shape or form and really having
45:08those operating metrics and that
45:10operating philosophy and that culture of
45:12an organization that continues to drive
45:14the value forward so 100% of everything
45:18that we describe today fits squarely
45:20within the operating paradigm of how
45:23nonprofits should also be thinking about
45:25innovative and by the way some of those
45:27are extremely innovative with technology
45:30using drones to deliver medicines to
45:32remote hospitals etc etc so don't think
45:35that you know all nonprofits are just
45:38sort of hand-wringing environmentalists
45:40or or people worrying about child labor
45:42in some part of the world there's some
45:45really really really high-tech and very
45:48sophisticated nonprofits that are that
45:50operated in small scale or a large scale
45:53reading so our second question kind of
45:56comes down to you know participant image
45:58and so from my personal observation it
46:00seems like the biggest hindrance to
46:02innovation you know within the
46:04organization is really you just power
46:05fights due to office politics know folks
46:08fighting at the mid-level folks fighting
46:09at the high level and a lot of kind of
46:12stuff gets delayed in that process so
46:14two questions related to that so we're
46:16looking back at the innovation
46:18challenges would you say that it is kind
46:20of at its core a people problem and you
46:24and when it comes to you kind of people
46:27problems hindering innovation in the
46:29organization what type of
46:31recommendations do you have as to how to
46:33kind of overcome resolve what I would
46:36argue is when you put a mix of people
46:39into any kind of social setting whether
46:41it's a cocktail party or a business
46:43there are egos at play there are
46:46anxieties at play there are all kinds of
46:50things going on and a lot of that is
46:51random the stuff we're talking about is
46:54non-random politics that is the existing
46:56business line will always oppose
46:59something that threatens their
47:00performance metrics and their careers
47:02and their their their salaries and
47:04bonuses and so you know in terms of
47:07dealing with random politics and we
47:09don't really address that in this course
47:11although we may have our own thoughts on
47:12that we're talking about so the systemic
47:15politics that will exist in
47:16organizations and how you can both
47:18structure and operate around those more
47:21systemic kind of politics that you'll
47:23find everywhere and and it's 100% a
47:26people problem and the way to think
47:29about that is that logos right so your
47:32your company logo your company name
47:34isn't actually delivering anything
47:36necessarily it's the people inside that
47:37organization that are and so as a result
47:39it's also going to be the people that I
47:41grew to be innovating inside of that
47:43organization and so the entire matrix of
47:46an organization and how its structure is
47:48part and parcel of thinking about how
47:49it's actually going to be able to
47:51innovate and develop new products and
47:53services and and to raise point there
47:55are systemic issues as was pointed out
47:57that exists within these notions of that
47:59that are more in line with with things
48:02that are disruptive to the core business
48:03and one of the biggest and most
48:06important things is to the
48:07identification of very very very senior
48:10champions of the organization because
48:13without that support at the topmost
48:15level of the organization these things
48:17will never be able to actually deliver
48:19organizational value right it's always
48:21going to be based on serendipity so one
48:23of the things we always encourage is to
48:25have that top-level alignment with a
48:27senior leadership and then that gives
48:30you the air cover around which you can
48:32then have these more tactical approaches
48:34to thinking about the teams and
48:36everything else and then those
48:38secondary cultural issues of those sub
48:39teams that come to life but at least
48:41from an organizational perspective we
48:43have some ideas and some thoughts around
48:44how do you then create that high level
48:46alignment which is extremely important
48:49and I think there's a different
48:50conversation to be had with the leaders
48:52of organizations about creating a
48:55systemic culture about how we do things
48:58and how we behave in the organization
48:59and that's mostly not about what they
49:02say it's mostly about what they do they
49:03model the kind of behavior that they
49:06would expect others to have and if they
49:07don't they're viewed as inauthentic and
49:09they often don't inspire their employees
49:12and sometimes they end up being being
49:14pushed out almost like a virus is pushed
49:16out by by an antibody and so I think the
49:20addressing the questions of whether
49:24people treat others with respect how do
49:25you treat subordinates how do you treat
49:28racial minorities or ethnic minorities
49:30how do you treat women how do you treat
49:32LGBTQ people all those kinds of things
49:35are modeled by senior people in the
49:37organization and a lot of those kinds of
49:39politics are really more about
49:41organization culture than about the
49:43things we're talking about today and
49:45there are there are courses that that
49:48actually talk about this there are books
49:53about this but I think it's really about
49:55senior leaders creating a culture that
49:57then others will follow and you know if
49:59you're if you're behaving in a way that
50:01shows disrespect for any particular
50:04group or any particular stereotype
50:06you're creating an organization that's
50:08basically not going to function well
50:11because you'll stir up more and more of
50:14this politics that's the curse at the
50:15national level it occurs in a you know
50:18in a start-up that occurs in a big
50:19company so kind of along those lines
50:22right someone asks you know how do you
50:24convince leaders or folks who are in
50:26senior positions to you know support
50:29these newly created kind of
50:32entrepreneurship functions or you know
50:34kind of the technologies that are that
50:37they're exploring stuff instead of just
50:39seeing them upfront as enemies or
50:42intruders or you know someone who's kind
50:44of competitive but in a negative way so
50:46the most difficult thing to do is to
50:48persuade the senior executive of an
50:50organization that's Curren
50:51we perceive to be doing well to change
50:53anything so IBM was basically going out
50:57of business although some people in the
50:59organization didn't act as though that
51:01was happening when they brought in Lou
51:03Gerstner to basically rescue a national
51:05treasure which was IBM they were selling
51:08hardware that had been unique and and
51:11and had no competition but then they
51:14were forced to define the boundary
51:16between the hardware and the software
51:18then you've got plug compatible hardware
51:20from embell from Hitachi from other
51:21people and so Lewis garrison ax came in
51:24and tried to change organizations from
51:26within IBM from being a product company
51:29to being a global service company he is
51:31one of the few leaders that's ever done
51:33that with a big company it took him 10
51:35years and he was an exceptional leader
51:37and an exceptional creator of culture
51:39and if anyone's interested in thinking
51:42how to transform a big organization the
51:43book that he authored who says elephants
51:47can't dance is if some marvelous wiener
51:49it's actually a really fun read to but
51:51that's a talk about how you can change
51:53the culture of an organization if your
51:55organization is struggling which they
51:58began to realize at a certain point the
52:00Board of Directors began to realize that
52:02IBM was struggling and they brought in
52:04somebody who was not an engineer to run
52:05the company IBM had been run by
52:07engineers Watson and successors since
52:10the founding they brought in a guy who
52:11came out of American Express and RJR
52:14nabisco you know consumer products
52:16tobacco cookies American Express credit
52:19cards and a lot of the engineers in the
52:22company were a guest and he'd
52:23successfully turned that company around
52:26but if the company is failing they will
52:29be very open to this and again there's
52:31got to be a leader who is creative and
52:34inspired enough to be able to understand
52:36so if you're in an organization that's
52:38currently doing well and you're trying
52:40to propose something disruptive if
52:42you're going to have a very tough row to
52:43hoe the thing you might be able to do is
52:46to point out to senior executives where
52:48those submarine challenges are coming
52:50from or where outside technologies are
52:52coming that will disrupt them people at
52:54IBM were warned about mobile phones they
52:56were warned about the internet stance
53:00Steve Ballmer said no one will ever buy
53:04etc and so you know IBM Microsoft rather
53:07was doing very well and they were not
53:09open to these ideas they've got too late
53:11into the internet although they're
53:12recovering now to some degree under new
53:14leadership and they got very late into
53:17mobile phones and through that
53:18completely by buying Nokia and forcing
53:20it to use Windows Mobile so yeah so
53:24still we have a lot of interesting
53:26questions coming in I think we have time
53:28to maybe address just one or two more so
53:31one question is how can you know this
53:33person Vincent mentioned some specific
53:35names I'm gonna try to flare them out
53:36here how can dine essaouira companies as
53:39in like very kind of tech companies with
53:41you know lots of businesses very long
53:43legacy kind of huge assets maintain your
53:46innovative competitive competitiveness
53:48when they carry debt you know such as
53:51pension obligations such as a lot of
53:53kind of just heavy baggage you know
53:55within the organization in general and
53:57these problems are not experienced or
53:59present in some of the newcomers you
54:01know like smaller startups or someone a
54:03new comers an industry like how can you
54:05maintain competitiveness and such under
54:07such a content and you'd like to do it
54:09in a way less extreme and putting your
54:10company into bankruptcy and writing
54:12before your pension and other
54:13obligations as the big auto companies
54:15did it is others have done better maybe
54:19you have some folks yeah so absolutely
54:21so so one of the things to think about
54:22is every initiative every activity that
54:26we've described these needs to get
54:28underwritten by some portion of the
54:30business and and one isn't a such an
54:33important point that this that's being
54:34raised in this question which is how do
54:36you actually finance some of these
54:37different activities and initiatives one
54:39of the one of the biggest things that we
54:41start to think about is how do you start
54:42to actually think about the innovation
54:44in and around the capital structure of
54:46an organization and there's there's a
54:48whole variety of different you know
54:51issues and topics that that raises in
54:53and of itself there's a few extremely
54:56high level responses that I can give
54:58right now it's sort of in the interest
54:59of time one of the ways to think about
55:01that is that you don't necessarily need
55:03to underwrite all of your innovation
55:04activities and if you think about the
55:06matrix structure that we described you
55:08can actually start to push more of your
55:09innovation to be external where it's
55:11being underwritten by either research
55:13organization such as such as
55:15universities it's being underwritten by
55:17time in sweat equity from startups is
55:19being underwritten by external venture
55:21capitalists there's a whole variety of
55:23other mechanisms that actually finance
55:25these types of innovation activities
55:26that you can basically support without
55:29having to underwrite all of them so the
55:32more you think about having more blended
55:34and more external innovation activities
55:35the less of a burden that poses on your
55:37internal organization capital structure
55:39the second thing which is extremely
55:41important is and one of the things that
55:44I hope to sort of see in the near future
55:46is an expansion of the notion of M&A and
55:51actually a description of MA and D and
55:54if we can start calling this more bad
55:56than M&A I think it becomes interesting
55:58what do I mean by this
55:59the DEA's divestitures a lot of these
56:02times these dinosaur organizations as
56:04you're describing actually have really
56:05valuable assets they can either be
56:07monetized by other people in a slightly
56:09better way or just basically somebody
56:11else may want to actually take those off
56:13your hands and this is a brilliant way
56:15for you to start to take advantage of
56:17the fact that if you are adding new
56:19things to your organization new
56:20innovations new product lines
56:22you better have a methodology by which
56:24you're actually shedding some of those
56:25some of that potential dead weight or
56:28things that you know you no longer view
56:30to be valuable to your core you know
56:32strategy going forward but that somebody
56:34else may actually want to actually
56:35acquire off of you and these structures
56:38are a fantastic way of bringing capital
56:39back into the organization to help
56:41finance and under a some of the new
56:43things that you want to support the
56:44biggest mistake that most organizations
56:46make is that they basically are in this
56:48hoarding mentality right well we can't
56:50get rid of this we've had this for 20
56:52years what we also want to add this we
56:53also want to add that well at some point
56:57you're gonna actually have this bloated
56:58inflated structure and you're gonna just
57:01continue to see things that are that are
57:02long in the tooth that are dragging you
57:04down and they're not actually providing
57:06you that free new cash flow to be able
57:08to under I probably some of these new
57:10initiatives so at the highest level
57:12early of the organization above and
57:14beyond just the culture that Ray was
57:16talking about previously you also have
57:18to get that alignment at the highest
57:20level of the organization to start
57:21thinking about what is the capital
57:22structure and the financing mechanisms
57:24that you want to put in place to help
57:26underwrite some of these things it's an
57:28important point and and I hope that
57:31more strategic focus is actually going
57:33to be placed on this versus knee-jerk
57:35reaction is to say well we can't afford
57:37any of this stuff and just a couple very
57:40final comments on that first of all
57:42what's not working in your current
57:44marketplace might work in some other
57:46marketplace in another country for
57:48example where the markets that you're
57:51operating in in in the US or in Europe
57:53might not be as well developed so it
57:56might work in India it might work in
57:57some parts of Africa and so on and there
57:59might be somebody there who wants to
58:01take it off your hands there's a lot of
58:02money in the hands of people that
58:03control resources in those countries and
58:05then the other thing is this is just
58:08basically a different version of
58:09portfolio management portfolio
58:11management is not about what you do
58:13everybody has more good ideas than they
58:15can execute it's about what you don't do
58:16and if you don't decide to not do some
58:19things you will fail any other things
58:20you do well again thank you so much I
58:24know we're past time today but you know
58:26this was such an informative
58:27presentation and you know on behalf of
58:29our audiences I just wanted to thank you
58:31all for your time and sharing this
58:33knowledge with us so if you found
58:35today's presentation helpful we
58:36encourage you to share the recording
58:38with your friends your colleagues or
58:40whoever might find it to be you know of
58:42good use so again thank you all for
58:44spending this hour with us today and
58:46have a great rest of your day
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