Incrementalism is Not the Way to Disruptive Innovation

By Scott Kirsner |  February 1, 2016

We spoke recently with Phil Swisher, who in 2015 wrapped up close to five years as Global Head of Innovation at Brown Brothers Harriman, the oldest and largest private bank in the U.S., and also served as innovation advisor to the Governor of Massachusetts. Swisher, who has been an entrepreneur in the past, now runs Trevian Wealth Management, a national firm. He also teaches an executive education class on innovation at Harvard and is a mentor at the Techstars Boston accelerator program. (He’s pictured on the left, at an InnoLead gathering in 2014.)

Phil Swisher

Below are ten observations he made about innovating in an established organization, including: “It’s important to realize that there may be many people in the organization who are waiting you out.” And also, “I can’t think of any program that has started with incremental innovation and gone on to do really disruptive things.”

1. The fundamental question with innovation roles is self-interest — what are you personally optimizing for? Are you optimizing for your own long-term tenure at the company, or for maximum impact and outcomes? If the role is one stop on a longer career progression inside a company, you’re better served focusing on non-controversial opportunities where “successful outcomes” (success as defined inside the organization) are likely, and likely within the expected tenure of the role. It’s a corporate staff job, in substance. And savvy innovation leaders will use the role to deepen relationships with key senior executives who can influence future career progression, and not ruffle any important feathers.

But if you’re looking to maximize impact and outcomes, you’re relying on the senior executive sponsor (ideally the CEO) to provide the permission and space for the team to go after the really big opportunities, including ones which are threatening to the status quo at the company. The mindset here is similar to a start-up, and the goal is to take things as far as possible, knowing that the innovation role is likely the only one you will have at that company, and that it’s probably time-bounded by the tenure of your sponsor.

2. If you are trying to maximize impact and outcomes, some of the best places to look are the areas of the firm that are the most political and which are the most resistant to change. Those are the places where there is likely the least focus on meritocracy and on running a business well. There is often big opportunity in going after the entrenched sacred cows, and it also shows the rest of the organization that the leadership is truly serious about innovation. Making steaks out of sacred cow is a good thing, because it is really hard for companies to disrupt themselves. And if an internal innovation team can figure out big opportunities that are disruptive to the existing organization, it’s likely that smart people in competing firms can do the same thing. Isn’t it always better to try to disrupt yourself rather than letting others do it to you? I like to say, “If you’re not at the table, you’re probably on the menu.”

3. I can’t think of any program that has started with incremental innovation and gone on to do really disruptive things. I just don’t think it’s a progression. If the incremental stuff doesn’t work, people shrug their shoulders and ignore you. If it does work, people really like it and they want more of it since it benefits their P&L. So what do you do? Can you really say, “OK, next year, we want to build a space elevator or a self-driving car? And we’re not going to help do any more incremental things that we’ve shown are valuable to your bottom line?” If your incremental approach doesn’t work, it’s game over. If it does, people will want more of it. And then you have tangible wins, you get a bigger bonus, and now you’re going to risk that to do something really disruptive? I just have never seen it work that way.

I’m not an innovation snob – I’m a pragmatist at heart. Incremental and adjacent innovation can be really valuable, as are innovative approaches to reducing costs or increasing productivity at scale. For example, if your goal is to maximize the impact on a large global firm, figuring out how to make the IT department five percent more productive will likely have an impact orders of magnitude greater than most any new product idea, corporate venture fund, or start-up incubator. It’s not as glamorous or as easy to quantify, but it’s really valuable.

You could also choose to focus on being great at incremental things and execution — be the best at rapid prototyping and hypothesis testing, or making sense of large data sets, or enabling the executives who really want to drive meaningful change in their organization to do that faster and better. This type of program is the best answer for most companies. It’s not radically different, and that’s OK. Most of the time, top executives aren’t willing and able to invest time and political capital in doing the really radical things anyway, and may not need to in order for their tenure leading the company to be a successful one.

4. The real hard stuff, the fundamental challenge, is when you find a big opportunity and it’s also threatening internally. Does the CEO really advocate for the innovation team, over the objections of the core business? As I’ve said, it’s extremely difficult for any company to disrupt itself, unless external events make that the only viable path. Trying to reform the guts of the company will always make people uncomfortable.

5. One model for working on projects that are not yet on the organization’s radar screen, that go against the company’s belief system, or that threaten existing businesses, is setting up a “captive startup.” You are actually trying to build product, as a start-up, for one customer, who is also your sole investor. You need real entrepreneurs, and you need to give them a lot of autonomy and the right financial incentives. This can be scary, since letting entrepreneurs loose inside an existing company can cause no small amount of anxiety.

Some of the people doing various flavors of a captive start-up include Dan O’Malley at Eastern Bank, and Joel Albarella and my old colleague Rohit Katti at New York Life. It can also be a really attractive role for an entrepreneur – getting to focus mainly on product, being able to rely in part on the core business to scale things once they are working, not needing to raise capital, having better and more certain cash comp, and in some cases (like in many parts of financial services) it can be easier to change an industry from the inside, rather than as a start-up. And the captive start-up model also better aligns to the temporary nature of most innovation roles.

And if the people working for your captive startup occasionally leave to do entrepreneurial things on the outside? That’s a good sign. It means you hired the right people.

6. You don’t want to spend a year or two figuring out what type of structure are you going to have as an innovation group, since there are now so many existing programs to learn from quickly. When I started at Brown Brothers Harriman in 2010 and told people I led innovation, some laughed and asked me if that was really on my business card (it was.) Now, most every company has some sort of program. I think the main structures are:

  • A captive startup trying to launch new businesses
  • An incremental product development resource for the core business
  • A corporate venture capital group
  • R&D for emerging and new technologies
  • Skill-building, training, and creating more innovation competency in the organization
  • Focusing mainly on marketing and PR and going to conferences to look more innovative to your customers.

Those are the main flavors. They’re not mutually exclusive, but you should probably start with one focus.

7. Standard top-down executive management can be really terrible for an innovation function. You have a small team of people, limited resources, and a huge disruptive mandate — and then you’re going to layer on all the corporate bureaucracy? People are providing metrics and financial projections and pipeline reviews, and they’re doing all of the traditional governance stuff the core businesses have to do. So you’ve taken 20 or 30 percent of the team’s time to do all that overhead, and then you have to explain variances over previous reports, and you almost always end up managing to those process metrics and not going after the really transformational opportunities.

When it comes to reporting and oversight, you have to set expectations from the start. You might say to senior leadership, “We can have qualitative discussions about what our top priorities are and why. And we won’t do ROI calculations or financial projections on early stage ideas because they’re all made up anyway. But once we have a promising idea, then we will project what it will cost to build and how big the benefit would be to the initial customers, which will provide the outer bound to pricing.” You want the innovation group to operate more like a captive startup than anything else.

8. It’s important to realize that there may be many people in the organization who are waiting you out. They think innovation is the current management fad, like kaizen or Six Sigma or quality circles. It can be really hard to challenge those entrenched interests, who are senior enough in the core business, have mastered the internal politics, and have no intention of leaving. If you are trying to make a fast impact (call it two to three years or so), otherwise you will seek a better entrepreneurial opportunity elsewhere, time is not on your side — and those people know it.

9. Taking large company executives to an accelerator program or inviting startups to a company-supported incubator space can be really beneficial. That model can be valuable, and quite inexpensive It can help drive change inside large companies that are insular. The big value is that it shatters the existing frame of reference and shows what is really possible from a speed, quality, and cost perspective. You can show your top management people doing things differently, at a faster pace — the five people in jeans and sneakers at a startup, who have done in a few months what it might take a team of 40 people two years to do in a large company. It’s kind of like the rabbit at the dog track — it shows people what’s possible from a talent and intensity and productivity and resource-efficiency perspective.

10. In the innovation roles where you’re try to build disruptive new products and businesses, your tenure is often very closely linked to the tenure of your executive sponsor. Building trust with them, and getting them to use their political capital is hard – they typically have a much broader role than just innovation. Your ability to get stuff done is so vastly diminished if you lose your executive sponsor — no one wants to inherit someone else’s ideas, and be the caretaker who isn’t likely to get much internal credit.

Innovation teams can have major impact even if you know there will be an end to it. Make it like the Olympics. It can be a shining moment that doesn’t last forever. But if all goes well, maybe you even end up on your company’s equivalent of the Wheaties box.