Mohanbir Sawhney is an advocate of handing corporate innovators a blank check.
Sounds like a dream, no?
But his blank checks come with audacious goals, tight timeframes, and the expectation that giant leaps can be made when a team is freed from traditional budget milestones.
“It’s freedom within a framework,” says Sawhney, a professor of marketing at Northwestern’s Kellogg School of Management.
According to Sawhney, giving teams a blank check and a 12- to 24-month timeframe can create a sense of urgency that unlocks creativity. The next step, he says, is to choose the right team.
“You can create the sense of ownership and entrepreneurship by really selecting people, giving them ambitious goals, giving them unconstrained resources, and getting the hell out of the way,” he said. “I define the role of the CEO as three things: Find the right people, put them in the right jobs, and get the hell out of the way.”
On top of teaching at Northwestern, Sawhney is the technology director for the university’s Center of Research, Technology, and Innovation. He has written seven management books, including The Sentient Enterprise, a book which explores how data can help large companies drive competitive advantage. Sawhney has also advised companies including Adobe, GE, Intuit, and General Mills.
We spoke with Sawhney in his office at Northwestern in July of 2018. During the conversation, Sawhney discussed the value of giving innovators a blank check, getting buy-in from the C-Suite, and measuring results.
The Barriers to Innovation
[L]arge corporations find it difficult to innovate on domains that don’t fit neatly into their established business unit structure — opportunities that are in white spaces that cut across the way that they’re organized. [But] … opportunities don’t give a damn how you’re organized… [Some white spaces] require collaboration and work across business units as well as outside the organization. Both lateral mechanisms for coordination and taking an idea forward are very poorly established. And the larger the company, the bigger and more complex this problem is.
I think the other [challenge] is that it’s very difficult to get past what I call the ‘tyranny of the submarket,’ and the legacy, and the fear of cannibalizing or disrupting your core business. Even though you see the disruption is coming, it’s really difficult to kill your cash cows in the search for something better. And I think related to that is the collective inability of large established companies to see disruption. … Their business is getting disrupted, but a combination of success in the legacy businesses and a mindset that looks at the past really doesn’t allow these [companies] to see disruption…
[Many] CEOs [also] recognize that a combination of new technologies, artificial intelligence, and globalization are … forces that are really disrupting the status of every industry. But they simply aren’t able to execute, they just get in their own way — whether it’s bureaucracy or the speed with which they are able to move… So I think that even when the strategy becomes clear to a leadership team, the execution simply isn’t happening…
Getting C-Suite Buy-In
An innovation team that is not empowered by the CEO and the C-Suite is doomed to fail. It is simply not a middle management initiative. So the first charter item on the agenda when you’re starting an innovation team is executive sponsorship and leadership. And leadership here is not only the CEO, it’s also the board.
I’ve also found that when you’re trying transformative innovation or disruptive innovation, you cannot do it within a business unit, so it has to be…a corporate incubator type organization. But in order for that incubator to go beyond ideas and to scale any of the initiatives, it has got to be driven back to the core business. That’s where executive sponsorship…is critical. Because otherwise you’ll just be doing cute experiments sitting out in…yet another silo, the innovation silo. Because it’s relatively easy to pilot new ideas, but what’s really challenging is to scale them by bringing them back into the core business and using [the] distribution channels, the brand … all of the assets of the mothership. Without that, you’re simply another startup.
Big Companies and the Startup Mindset
People believe that agility, and speed, and innovativeness are some how negatively correlated to size of the company. I disagree. There’s a stronger correlation [between] founder-led companies [versus] manager-led companies.
Founder-led companies can reach any level of scale and still be a startup. Amazon is Exhibit A. As Jeff Bezos likes to say it’s a “day one,” company so it will always have the day one spirit. … They’re a humongous company with a giant valuation, but they still operate as a startup. I’m on the board of a company in India [Reliance Jio Infocomm] that is in the telecommunication … services space. It’s a disruptive startup — the world’s largest startup — [and] it’s building a 4G network in India. It’s a founder-led company … and that company is 70,000 people, $35 billion in [capital expenditure], 225 million customers, and it turns on a dime. Literally within weeks they are able to secure their ability to move quickly, all because there’s one person in charge [so] everybody knows what the deal is …
[I co-wrote a book, Fewer, Bigger, Bolder, which] talked about the idea of creating entrepreneurs or entrepreneurial ownership culture inside a large, established company [not led by a founder,] and a phenomenon that we called blank checks.
Blank checks are the idea that you create a high-potential team within a large company and you give them a stretch goal that seems impossible, a very, very ambitious innovation goal. Against that what you do is you give them a blank check, basically whatever resources you need — but an impossibly short timeframe with clearly defined outcomes.
That can unlock huge amounts of creative potential, as well as urgency, because you’re effectively creating these mini-startups inside established companies by running these VC-like strategic investments.
Picking the Right Metrics
[Metrics] depend on whether it’s a new business being created, or if it’s [an existing] business that is being grown.
What I advise people to do is to think about three kinds of metrics: input, throughput, and output. Think of this as an innovation pipe.
The first is metrics that relate to input. How many ideas? How many prototypes? What is the volume [of concepts]? …
The second thing is throughput, which [relates to] velocity. How fast are we moving things from the idea stage to the prototype stage to the [minimum viable product] to the commercialization [stage]? There, I have to make sure that the innovation that comes in the pipe is being shepherded at an appropriate speed. Am I able to also successfully kill [failures] and scale the [successes]?
And then you have outcome metrics, which [are] sales, revenues, profits, and classically we talk about percentage of sales from new product… As your innovation pipeline [reaches a] stable state, you should seeing all these.
[When] you are creating an innovative business from scratch — particularly something that has a reasonably long gestation period where you’re not going to see results right in the short run, [especially if] you’re building something fairly disruptive — initially, you’ll only have the input metrics.
Creating a Startup Engagement Strategy
Partnering with startups is obviously a very complimentary marriage, because when you combine the agility, and the creativity…and the sense of urgency…of a start up with the scale…the brand, the resources of a large companies theoretically you have a marriage made in heaven. But like most marriages, it’s not so simple.
The engagement of startups can take many forms, right? One is [when] the team [is] looking for acquisition opportunities, startups that they can buy… So that’s sort of the corporate venturing or the corporate business development [approach].
Another angle is that you want to bring startups into the organization to actually partner on product development and R&D… That’s where you actually want to incubate and bring entrepreneurs in.
And in some cases [you merely want to know] trends and where technology is headed. You may not be interested in an acquisition but you may just want to get an understanding of where technology is going… So this is sort of a spectrum of engagement—from the educational engagement to the incubation of the startup to acquisitions. So you have to define the portfolio…[before you move forward].
Acquisitions: When Innovation Comes From the Outside
[W]hen you do decide to go the acquisition route…you have to have a very clear vision of what you’re buying and how you are going to preserve the value of what you have bought.
… It’s this sort of balancing act of preserving the creative spirit, and the entrepreneurial spirit, and the capability that you acquired, but at the same time being able to leverage [the full benefits of the mothership]. That’s not easy to do, which is why a lot of these startup acquisitions fail, because the technology simply dies or the people leave.
So one thing I learned from the team at Cisco … is they told me that [they] are very clear: either we buy customers or we buy code. So when WhatsApp was acquired by Facebook they’re buying customers… But on the other hand, when Cisco buys an early technology startup, they buy code, they’re buying technology. They don’t care about customers; [the startup] may not even have customers. … [I]f you’re buying code, if you’re buying technology, then it’s easier, because you’re just integrating it into the platform and the relationships [and culture] are less important.
If your culture and business practices are very diametrically opposed and different, then you need to preserve independence of that organization for a longer period. For instance, if you are Amazon acquiring Zappos, Zappos had a very distinct culture. They’re very customer-focused, and high service, [and] they didn’t care as much about [the] cost of it. Rolling Zappos into the larger Amazon very quickly — it would have lost a lot of its very unique culture that had been created there. But if there’s a reasonable alignment then you can move faster.
For more from Mohanbir Sawhney, check out season 2 of our podcast, “Episode 3: Playing in the (Startup) Sandbox.”