Creating the Right Conditions for Disruptive Innovation

By Scott Kirsner |  April 15, 2015

InnoLead convened a conference call earlier this month: nine senior leaders from large public and private companies, discussing how they’ve set up groups to focus on truly disruptive innovation — not line extensions or products sold in new-and-improved packages.

We promised the participants we’d leave their names and company names out of our write-up so that they’d focus on the challenges as well as what has been working for them. But the participants hailed from consumer packaged goods companies; financial services firms; brand-name technology giants; and international retail chains. Below are some of the highlights of the call.

Our next call, in early May, will focus on hiring strategies for innovation teams: how do you get people on-board who might ordinarily not come to work for your company? Drop us a message if you’d like to participate, but note that these calls are for a limited number of operating executives only.

Reporting Relationships Matter

“We report right in to the CEO. We’ve tried a lot of different models — reporting to general managers, presidents, people in core businesses — but at the end of the day, as you try to get away from [doing near-term work for] core businesses, it really has to be at the top of the company.”

“I was tired of giving presentations that went nowhere on new trends that were going to matter for our business. So I just started building stuff on my own. Our company had spent a lot of money on big name consultancies to tell them how to innovate, and they came back with a lot of boring, four-quadrant ways to look at innovation. We just started building prototypes. We don’t do product innovation. We’re creating new platforms for the future that don’t exist. I report to the #2 guy at the company.”

“There’s a generally accepted and aligned-upon point-of-view among our global leadership team that there are lots of innovation opportunities that will never fit in our traditional organizational structure, and shouldn’t be managed in a stage-gate way. So we’ve created a ‘parallel universe’ of transformational innovations” and innovations that aren’t extensions of the current product line.


“When we meet with business unit heads, we get fairly generic [responses] — we want to grow market share, increase profitability. [So to focus our work], we come up with either technology, demographic, or legal/regulatory themes that we think are going to have a profound impact. Will they affect the delivery of customer experience, [our core business,] or efficiency?”

“Transformation happens in your industry. You better be tracking those shifts. We try to identify those — looking at cultural and economic shifts — and how they might affect the market or create new opportunities.”

“We borrow a little from Intel — who are the consumers who could never go back once they experience your product? How do you keep driving that? You’re going to hit roadblocks, failures, delays. The ability to go back to that shining light helps keep the organization moving forward.”

“We meet with our CEO every three weeks. He owns our portfolio, [and helps us define] the space we want to explore, mine, and develop.”

Funding and Sponsorship

“At the very first project milestone, before we even start doing proof-of-concept tests, we assign a sponsor. They have a personal passion or belief in the idea, and they get more involved at the second milestone. We’ve got a commitment from our head of R&D and his finance VP that they’ll take over the more detailed funding when something hits [the third and final milestone in our innovation process.] That’s when the request for funding is going to jump up. The project goes into our strategic plan, which means it’s in someone’s objectives and bonus. [A roll-out is] going to happen.”

“Getting [the right level of] sponsorship and commitment has been hard for us. What I find is that those owning business leaders do not fundamentally understand what we’re trying to accomplish, even if it’s attractive to them.”

“I’ve got an advisory board, so these key [business unit] leaders are part of the discussion. They’re very busy and they’ve got their hands full. I try to set the stage for the long-term work [with them, while also looking for] ways to solve for their issues in the here-and-now. They’ve granted me a certain amount of seed money, and I work with them to ensure that it is staying on track.”

“We’re ring-fenced financially. It doesn’t mean we don’t get budget cuts, but we’re one of the last [groups to feel them when they do happen.]”

“About half [of the 100 people in our lab] work on new business incubation. In the prototype phase, we don’t have a business sponsor. But we do we have a business sponsor who has said that if the pilot is successful, they’ll transition it. And our company has venture capital guys willing to fund things as standalone companies [if ideas merit being spun out.]”

Challenges and Conflicts

“You can put together a list of all the objections and systems that can kill transformational innovations — ‘it doesn’t motivate our sales team,’ or ‘it doesn’t have the same gross margins that we’re used to.’ It’s death by a thousand cuts if you’re not careful.”

“You can have all the processes in place and you think you have the buy-in, but if the culture isn’t wedded to the need for new products and real innovation, nothing happens.”

“We’re trying to harness the best of lean startup methodology, but at a corporate scale. We want to give people the time to answer strategic questions and pursue new opportunities. My biggest challenge is how do I do that in an efficient or systematic way… But I don’t necessarily want [rank-and-file] employees to be working too much on transformational innovation.”

“I show a slide of Lenny from ‘Of Mice and Men’ holding a rabbit. Lenny is the company. These disruptive innovations need time to [develop]. If I give the rabbit to you too quickly, you’ll kill it with love. That’s what ends up happening with metrics. If you apply metrics to [a disruptive project] too quickly, you will kill it, or the idea will get watered down. It won’t have time to grow. I fight hard to not have sales metrics tied to innovation.”