6 minute read.
In this article – one of 3 short articles about the Roadmap to Scaleup approach, my colleague in the Roadmap to Scaleup Peer Group Frank Mattes, Founder of LeanScaleup picks up the story and explains the key elements of the corporate scaling up solution. Previous articles on the corporate innovation situation in the Covid-19 crisis can be found HERE and how companies can use strategic roadmapping and business ecosystem mapping to generate high potential ideas HERE from new value pools.
How to select Pearls for scaling?
Ecosystem mapping identifies future value by examining the value pool of a business ecosystem. Strategic roadmapping shapes what you’re about to do in which innovation space and in defining ventures; it creates the narrative for investment, for buy-in, and to align, coordinate and synchronize the company.
But the big question is, how to select the “pearls”; in other words, which ones you should take to scale and back with initial investment?
Frank Mattes founded Innovation-3, a niche consulting agency focused exclusively on non-incremental innovation. It works together with large corporations, mainly in the industrial space but also in financial services to help them with new ventures by building the capabilities to take ventures to success. In some cases, it also helps companies to redesign the operating system for their non-incremental innovation activity.
The “scaling problem” and its associated opportunity, emerged four years ago through conversations about the reality of non-incremental space. Before that time, the sentiment was more about how large companies create ideas and how to find external startups and how to use corporate venture capital.
Companies were not short of ideas. They had read the books on design thinking and the Lean Startup and had taken the first steps to create business impact or as part of their transformational journeys in moving from a product company to a services company.
All companies could relate to this image which conveys the struggle to get to a meaningful minimum viable product (MVP) to make a significant business impact.
But this is not the end of the story.
You know the term, “the valley of death” that stops even leading companies from creating new businesses out of their innovation initiatives. If you look at studies done by the big consulting companies such as BCG, McKinsey and Bain they cite a failure rate of 85 to 90%.
That means that when you have identified a promising venture, your chances to create a business from that is about 10%, which is not good at all.
The interesting point is that the same figure also relates to when companies are trying to scale in digital technologies. Capgemini has found that when companies want to move to smart factories, using IoT central smart devices, their success rate is, surprise, surprise, also around 10%.
Beyond the statistics, this can also be felt as tensions; by the corporate folks, the red shirts in the core business corner and the blue shirts in the innovator’s corner.
There are many areas of tension between the core and the venture.
It expresses itself, for instance, as a difference in clock speed between the innovation venture and the corporate core. Innovators want to run at speed in two-week sprints. Whereas the corporate runs on annual planning and budgeting and monthly meetings by committee. The core operation is used to working with qualified partners, negotiating very hard with them, establishing clear deliverables at Six Sigma levels of quality. They’re set up to deliver on their quality promise to the customers and even to the end-users.
The blue shirt innovators are working with Unusual Suspects, particularly in the digital space.
Working with previous peer groups, several more areas of tension were identified. Such as branding where the corporate core has strict procedures on how to protect the core brand against the adventurous blue shirts, who want to carve a new brand presence as a source of conflict.
And in it’s the areas of tensions when combined, accumulate to explain the 90% failure rate.
Let’s go a bit further and look a the two systems. If you look at core and innovation activities from a high level you will see single-purpose systems designed for different but specific purposes.
And it becomes very hard for these two systems to work together.
Company Context Matters
If the big core organization is represented by the skyscraper, the operating system paradigm is one of predictability, efficiency, and productivity.
And in the garage, it’s bursting with energy and running on agility and ownership by the blue shirts.
Many corporate decisions are made in the offices of the skyscraper where day to day business and quarterly and annual figures dominate the long term perspectives.
We need to deal with this reality.
Secondly, if you look at the validation scaling up toolbox from many companies, you see that design thinking has left its mark. People are working to ensure that the new products and services are desirable from the customer perspective and can be feasibly made and to build a profitable and sustainable business.
But what has not been worked into the validation and scaling up toolsets, is the reality of the business situation of the company and it’s operating peculiarities.
In other words, the corporate context in which this all takes place can be thought of as the contextuality dimension.
In crossing the chasm a company needs to work out, for its context, how to structure the journey to take the MVP to create a minimal marketable product and an operating model. These are needed so the venture can eventually be absorbed by the core business.
What a company does know is how to take a 10 million business and make 50 or $100 million. That’s not the problem. The problem is going from the small to the large: from a first customer to the 10 millionth. That’s the problem.
The LeanScaleup Framework
The LeanScaleup framework has been developed working with over 20 significant sized and sophisticated corporates, market leaders from a diverse range of industries.
The Framework is quite universal and is applicable in energy, financial services, aerospace and construction.
It tells you how to go from a ~10% success rate to maybe a 30 to 40% success rate which would be a huge jump forward.
Three Main Capabilities
You need to master three key capabilities.
The first is rigour. The rigour in which you validate your venture in the corporate context and prepare the transition to scaling up.
Typically the people who run the venture are not the ones who created the innovation. Scaling requires different people such as serial entrepreneurs and experienced Business Builders, whereas in previous stages you had more inquisitive empathetic kinds of people that try to elicit the value pools.
The second key capability is the role that leadership within the companies needs to play building an ambidexterity mindset. Setting the right KPIs for the whole overarching system between the skyscraper and bursting garage and between operations and innovation.
And thirdly is a capability in how to cooperate between the venture and the core. In practical terms, how to make sure that the corporate assets, the client base, the existing supply chains and distribution networks can be leveraged for scaling up.
The portfolio perspective
If we loop back to the first article on the problem, companies need to carefully spect their portfolio of ventures so they can correctly deploy their precious resources. The LeanScaleup framework helps you to pick the few things that are worth to be scaled and ready to be scaled.
In this, you look at the left-hand portfolio where the time to market is mapped against the addressable market. These are the potential “raw” results from strategic roadmapping and ecosystem mapping.
But we can, in the right-hand portfolio, map options over the stages over the LeanScaleup phases as a means of decision making for the corporate investor.
Want to Shift the Dial? Consider joining the Peer Group later in 2021
I’ll be co-running the Peer Group later in 2021 under my association with IfM Engage and Lean Scale-up with Frank Mattes. If you are an innovation leader in a large company and would like to discuss participation, please contact me by email email@example.com or with a short message (Yes, I’m Interested.)