‘Creating the Organizational Structures that Liberate People to Innovate’

The popular narrative of entrepreneurship goes something like this: a young, hungry individual, perhaps a recent college graduate, gets an idea, moves to the West Coast, lives in their car, works out of a garage, barely sleeps, survives on instant ramen — all in the hopes of disrupting the market and striking it rich. Less romanticized, but no less important, is the type of entrepreneurial activity that emerges when a large company takes steps to empower innovators within its own ranks.

On this episode of Mastering Innovation on SiriusXM Channel 132, Business Radio Powered by The Wharton School, Kaihan Krippendorff (W’94, EAS’94), founder and CEO of Outthinker Strategy Network and author of Driving Innovation from Within: A Guide for Internal Entrepreneurs, discusses how employees within large firms can move their new ideas forward. Krippendorff’s research asks what barriers exist to innovation within large organizations and how employees can overcome them. In this interview, he discusses the value of innovating from within and describes the traits that characterize internal innovators compared to entrepreneurs.

An excerpt of the interview is transcribed below. Listen to more episodes here.

Transcript

Saikat Chaudhuri: We kind of assume, with this romanticized notion of entrepreneurship today, that we’ve got incredible survivor rates and that it’s entrepreneurs who do everything. And that’s all great. But, you know, you’ve got brands and resources and the ability to scale and all this other stuff in traditional firms, right?

Kaihan Krippendorff (W’94, EAS’94), Founder and CEO, Outthinker

Kaihan Krippendorff: That’s exactly right. It is when we compare the journey of an internal innovator to that of an entrepreneur and look at the differences that we often get frustrated. If you trace the path of the internal innovator, they have similar struggles and they have different struggles. But I think what’s kind of missing in the study of innovation is, what is the story of the internal innovator? If we can really understand that, then people who are seeking to drive innovation from within can say, “Hey, this is step four of the path. This is to be expected. This is part of the journey,” as opposed to, “There is something wrong.”

Chaudhuri: The stories about the internal side of innovation from the academic view have been, “Let’s create these ambidextrous organizations,” where they’ve got the traditional, more hierarchical organization that’s great for scaling, and then try to recreate the startup with some resources internally. Then they’ve got this ambidextrous organization, as Mike Tushman and others would call it. But your model is slightly different. It’s a bit more innate. It’s not just, “Okay, take a group of people and to separate them out.” It’s a bit more integrated with the rest of the organization.

Krippendorff: Absolutely. If I can be provocative, what I’m trying to say is that isolating innovation is really an easy way out. It is a way of avoiding the real work of enabling internal innovation. For example, research shows the aspects of individuals who are good at it. There are six things, some of which make them look like entrepreneurs: they’re innovative, they take autonomous action, and they understand the market and the customer. But there are three things which make them very different: they don’t seek risk, but they look to create risk asymmetry where they bet a little to get a lot; they are intrinsically motivated to innovate; and they actually have a very strong political acumen. They view the political challenge as part of the problem-solving process and actually enjoy that. So, if you isolate and you build up people who are capable of innovating in an environment that replicates an entrepreneurial environment, you’re not necessarily developing people who will then be effective at innovating in the mothership.

“Isolating innovation is really an easy way out. It is a way of avoiding the real work of enabling internal innovation.” — Kaihan Krippendorff

Chaudhuri: Makes sense.

Krippendorff: George Day, your former Co-director of the Mack Institute — he talks about how when you isolate innovation, you’re telling the people who aren’t part of the innovation group, “Hey, you’re not meant to innovate,” and that can be really damaging.

Chaudhuri: Yeah, that’s an important point. The other thing we’ve been talking a lot about is how you respond to threats and opportunities. What about recognizing them in the first place? How do you develop a sense for, “This is gonna be the next big thing”? New ideas are very frequent. We have a survivor bias and we celebrate the one out of 10,000 that actually make it, but there are so many that don’t, right? And that’s part of the experimentation. How do you stay on top of all the changes and spot the things which are going to make a difference?

Krippendorff: Yeah, so much to say about that. Jeff Bezos says, “If you have a 1 in 10 chance of 100 times payoff, you have to take that bet every time, but you have to be ready to lose 9 times out of 10.” How do we make a lot of small experiments and sequence our bets so that we’re betting a little to learn a lot? Rita McGrath, who just completed a book based on this question of how we identify inflection points, observes that the signs of inflection points actually appear early. They start slow and then they go fast. The way to be positioned for the inflection point when it turns is to already have a lot of bets in place.

I’d say two things. One is that you, therefore, want to have a lot of options at play, a lot of optionality in your strategy, so that you’ve already started doing something when it turns out that that’s going to work out. The second thing is that people who are more likely to see those early signals are the people at the front lines. And so, when you isolate innovation or put it into a silo, you risk missing the innovation that comes from someone in the call center hearing a customer complain about something multiple times and recognizing a new need, for example.

“When you isolate innovation, you’re telling the people who aren’t part of the innovation group, ‘Hey, you’re not meant to innovate.'” — Kaihan Krippendorff

Chaudhuri: That makes a lot of sense. One thing that also resonates with me, just on that front, is that a lot of people try to predict the future and forecast where things will go, but that’s really hard to do. It’s more about tracking developments, recognizing opportunities, trying things, and then having those real options in place as you described which is a more realistic process, especially in an established organization. Getting it right because you’re the first to the market with everything — that’s an unrealistic expectation.

Krippendorff: Yes, yes, that’s exactly right. I’m thinking that maybe my next book might be called “The Art of Not Planning” or “The Wisdom of Not Planning” because I think that that is an important misconception that we really have to break. When people appear to be ahead of the curve, it’s because they tried something. Albert Einstein says that play is the highest form of research. I think we need more play in our organizations if we want to remain relevant in the future.

About Our Guest

Dr. Kaihan Krippendorff was elected to the Thinkers50 RADAR list as one the 30 management thinkers to look out for in the coming and shortlists as one the 8 most influential innovation experts in the world. He is a top business strategy, growth and transformation keynote speaker that has helped inspire, motivate, and arm hundreds of thousands of people with the tools and mindset needed to win the future. Having begun his career as a strategy consultant with McKinsey & Company, Dr. Krippendorff is now the founder of the growth strategy firm Outthinker and The Outthinker Strategy Network, a global community of heads of strategy of large corporations including Pfizer, CVS, QVC, Macmillan, BNY Mellon, and Viacom. His work has generated over $2.5B in new annual revenue.

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