EMC Exec on ‘Incubation Readiness’ and Incentivizing Employees

March 22, 2016

How do you get an innovation program focused on strategic challenges that the businesses care about — without limiting it to incrementalism? That was among the topics we discussed recently with Calvin Smith of EMC Corp., the data storage and cloud giant, on one of our regular InnoLead Live calls.

Calvin Smith

Smith discussed how seemingly dull ideas can generate hundreds of millions of dollars in revenue; why EMC created its own innovation management software; how the program gets funded; the proposed merger between EMC and Dell; and what motivates employees to participate in an innovation initiative, among other topics. (In 2014, we covered the evolution of the innovation program at EMC, with video and an illustration.)

“We get four to five thousand ideas a year into this contest called ‘The Innovation Roadmap.’ We whittle those down to winning ideas and we put them through a fairly rigorous process called IRLs, Incubation Readiness Levels, which are mapped off NASA’s TRLs, or Technology Readiness Levels. Basically, [we] turn ideas into real products, services, solutions. We’ve [been responsible for creating] almost half a billion [in revenues] since we my team and I took over the reins, instituted the IRLs, and focused on the implementation and incubation as opposed to just the ideation.” (See illustration below for details on the IRLs.)

Focusing on Strategic Challenges

“We went out to the top executives in each [of our business units] and said, ‘What are your most pressing problems for the coming year?’ and then worked with them to formulate those into strategic challenges that we then posted. Winners were selected by each of those executive groups and the judges they appointed. By doing that we [gave] the power back to the people with the purse strings. We also put the power back with the people who would be ultimately responsible for the idea’s incubation within their lines of business. That was one of the most fundamental shifts that we had to make in order to get true value through this process.”

“One of the realizations we’ve had recently is that you can’t cast just one net and expect all types of innovation to fit within that net.”

Creating a Central Fund for Innovation

“Everything goes on the chopping block when a new executive comes in, including innovation programs, because sometimes they take investment. …When our current CTO came in about two and a half years ago now, one of the first things he did is he said, ‘Look, in years past, we have not asked for concrete financial donations or centralized pooling of funds from any of the BUs. We [just offered] a free service to spur innovation throughout the BUs.'”

“When he came onboard he said, ‘Let’s make sure they get skin in the game and create a centrally-managed pool that my team and I basically manage that says, If you want to participate you now have to pay.”

“For instance, for a group like sustainability that doesn’t necessarily have the massive budget to actually be able to incubate something within a business unit, we need to have a second pool of funds where we can help them to be used to push ideas forward — even if it’s not something that’s one of their major priorities. Most of the sponsors still stayed onboard. We actually had the same number of sponsors after charging’ for the services… We don’t pocket the money, obviously. It goes back to the ideas for their minimal viable products.”

Balancing Incremental and Radical Innovation

“I think in [our] first few years, we definitely saw a predisposition to choose the low-hanging fruit… The program has never been about going from product version 1.2.1 to version 1.2.2. It has never been about that. But I definitely think there was an inclination — once they saw we started to get metrics around how many ideas were actually incubated, what the full implementation rates were, and impacts that the ideas had to the business — I think there was a predisposition for some of the sponsors to want to choose stuff that they could point to as wins.”

“We started getting some more incrementals, and then we literally changed tack and recommended that they use it more for disruptive, adjacent, and radical or breakthrough innovations. Then it went a little bit too far the other way. It’s always a funny balancing act.”

Ideas that Move the Needle can be Dull

 “The [successful projects] I love to speak about the most are the sexiest, coolest ideas — [but those] don’t tend to be the ones that gross us the most money. Sometimes they say that the simplest ideas are sometimes the best. Sometimes those ideas are so dead simple for a company like EMC that they’re not terribly exciting to talk about.”

“[One of the projects] is essentially a way to get a leg up in the sales cycle. …We collect lots of logs, with customer permission, of course, and work pretty intensely with data center administrators from all of our customers. [Then, we apply] a basic algorithm [from] one of our innovators who used to be a data center administrator himself. What this [does is] very easily tell a customer what date their drives are going to be full on, and ask them if they want to do a one click to re-up [and add more storage capacity.] It’s a simple algorithm just based on historical usage patterns.”

“Another one, which is definitely not sexy, but grosses great revenue, was the data erasure product. Essentially, these massive drives, when they reach end of life it’s actually a relatively complex decision to decide what to do with them. You don’t want to just hit them with a hammer, because you don’t know if the data is really gone. If you’re a large insurance, healthcare, or a pharma company with sensitive patient or social security information, you’ve really got to figure out what exactly you’re going to do with that. We built a business around erasure, originally just for Symmetrix, and then moving out and spanning across the other products.”

“We have thought leadership [ideas], like augmented reality for data centers, which got, like, twelve patents, but look, to be completely frank and honest, we haven’t really done anything in market with it, even though it’s super cool. It may be ahead of its time.”

Software for Managing Innovation

“We did a big assessment of build-versus-buy, and we happen to have a lot of great engineers across the globe. It made sense to us to build, as opposed to buy, because we had some concrete requirements written down, and we knew exactly what we needed to achieve and how to achieve it. None of the software that was out on the market, at that time, perfectly met those requirements with the security needs that we had, in particular. We worked, hand-in-hand with legal, as well, to integrate our patent portfolio into the innovation activities, and basically make sure that we have visibility in both directions.”

“We built a set of tools called XCentral, which, X just stands for cross. The first [tool] was Innovation Central, which is a management tool for the Innovation Roadmap. Then, we built one called Patent Central. Then, we built one called Enhancement Central, and it stemmed out from there. They’re all categorized and mapped back to a centralized database, where we can look at the activities going on across the company…”

Venture Capital and M&A

“We have a great group called Corporate Ventures that focuses more on external M&A, and I’m brought in on occasion to vet things we’re looking at. …Historically, we did a lot more pure acquisitions, but over the last three or four years, we’ve gotten pretty decent at doing more round A and B [investments]. Very rarely seed [stage], but we do some seed.”

What Incentives Work for Employees?

“Everyone is intrinsically motivated by something different.” Cash awards can work, and so can recognition from senior executives — especially when it happens onstage in front of peers. When people see that innovating is part of their upward movement through the organization, and they see others being celebrated for developing new ideas, you’re on the right track.

Outsource Yourself

“I think part of the sign of success in innovation management in a large organization, is when you essentially outsource yourself. When the business units and everyone else can continue to innovate, without the need for centralized quarterbacking. It’s been a scary, but interesting realization. We’ve been slowly, but surely moving towards that with these tools. To just allow anyone to go in and post a challenge, or submit an idea, or do whatever they want to do within the system without the need for us to look over their shoulders.”