Harnessing the Power of Proven Entrepreneurial Techniques to Drive Innovation in a Large Company

8/8/2019 Harnessing the Power of Proven Entrepreneurial Techniques to Drive Innovation in a Large Company

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Harnessing the Power of Proven Entrepreneurial Techniques to Drive Innovation in a Large

Company.

Part I: The Challenges Faced by Large Corporations [click forPart II, Part III]

By William K. Aulet (MIT Entrepreneurship Center), Ricardo dos Santos (Qualcomm,MIT Sloan MBA'97), Stig Poulsen (Danfoss Ventures) and William R. Wagner (Hewlett

Packard, MIT PhD'83 Course V).

Innovation is the key to sustainable competitive advantage, and its pursuit is the holy grail ofmost companies with global ambitions. Innovation comes naturally to most small,entrepreneurial companies because it is vital to their survival and growth. Innovation in largecompanies presents more significant challenges, since they tend to be more financially drivenand less tolerant of risk. In this paper, we look at this issue and how three companies, Danfoss1,Hewlett-Packard2, and Qualcomm3, have stimulated innovation in a relatively short time periodby harnessing the power of the business plan competition, a concept that was leveraged from the

world of entrepreneurship.

The Power of Entrepreneurship

The power and impact of entrepreneurship is becoming increasingly evident. In February 2008,a report released by MIT and the Kauffman Foundation4 on the impact of entrepreneurshiparising out of MIT alone revealed stunning results. Nearly 26,000 currently existing companieshave been founded by MIT alumni. These companies have created approximately 3.3 millionjobs and generated approximately $2 trillion dollars in annual revenue. To put this achievementin perspective, as a standalone economy these companies would comprise the worlds 11

th

largest economy, positioned behind Brazil and ahead of Russia. It is readily apparent that

entrepreneurship is a powerful engine that is driving economic growth.

The Needs of Corporations

Corporations are continually seeking organic growth by building new businesses andreinvigorating existing ones, looking to innovations in products, business models, processes, andcustomer experiences as the source of growth. Many of them are looking for new practices tospur innovation. Innovation and intrapreneurship (i.e., the entrepreneurial spirit to create newbusinesses within existing organizations) have become mantras often expressed by topmanagement.5 They look enviously at the often explosive growth created by entrepreneurs andwonder how they can harness this powerful force for their companys benefit, with the goal of

opening new markets, refreshing existing products and being more globally competitive.

Inhibitors to Innovation at Large Companies

While companies want to innovate and become more entrepreneurial, they face five majorobstacles in attempting to do so:


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1. Fear of CannibalizationAs documented by Clayton Christensen6, companies withexisting revenue streams are reluctant to risk cannibalizing them by creating newproducts whose market performance is uncertain. As a result, new ideas are not pursuedwith the same passion applied by entrepreneurs when starting a new venture.

2. Structural Obstacles to InventionAs highlighted in Howard Andersons work inarticles such as Why Big Companies Cant Invent.

7

, the traditional model of research inlarge companies is failing for structural reasons. Henry Chesbrough agrees and offersother solutions8, but the point remains that with large corporations, structural inhibitors toinnovation are commonplace.

3. Desire for Predictable and Consistent ResultsMature companies have investors withlarge amounts of deployed capital who value and expect predictable, consistent financialresults. As could be deduced by logic and evidenced in the experience at 3MCorporation, this expectation conflicts with the inherently unpredictable and disruptivenature of innovation.9

4. Lack of Training Traditionally, the employees of large, mature companies are trainedand expected to manage existing businesses rather than to create new businesses. They

gain proficiency in the practices of gaining market share, adding incremental new productfeatures, and leveraging and optimizing existing competitive advantages. Entrepreneurs,on the other hand, learn to create new markets, to create entirely new products, and tobuild competitive advantage from a clean canvas.

5. Personal Risk/Reward ProfileIn large companies, failure is often not well received.Career advancement most often results from the careful management of successes andavoiding association with conspicuous failures, for which the penalties can be severe. Asin scientific laboratories, entrepreneurial ventures use experimentation and failure as animportant part of the innovation process. There are large potential financial and personalrewards, and correspondingly high risks, associated with entrepreneurial ventures. Inlarge companies, the potential upside financial benefits are not commensurate with thedownside career risk that can accompany failure, a situation that inhibits the pursuit ofinnovation.

This resulting situation creates a dilemma within large companies. The innovation that isnecessary for growth is inhibited by the very nature of the enterprise. The question is how tomeet this challenge. Described here are three case studies in which major corporations haveexperimented with repurposing a proven technique from academic and other entrepreneurialenvironmentsthe business plan competitionto promote innovation and entrepreneurialspirit.

Business Plan Competitions Definition and a Brief History

Business plan competitions first started in the early 1980s with the University of Texas atAustin Business Schools Moot Corp competition

10, built to emulate the existing moot court

competition of its law school. In 1989, Moot Corp became a national competition, and othersbegan to emerge in business schools around the world. Today, the MIT $100K EntrepreneurshipCompetition

11is celebrating its 20

thyear. It has attracted thousands of participants and has

resulted in the creation of more than 120 companies. They have over $10B in aggregate marketcapitalization, have raised over $700 million in venture capital funding, and have created over


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2,500 jobs. The business plan competition concept has been embraced outside the halls ofacademia and has many close cousins run by various private and public organizations.12

Where the business plan competition has been adopted, the benefits are typically threefold:

1.

Create New Companies - The competitions can create new ventures as a result of themotivation created through financial or recognition incentives.2. Foster Enhanced Skill DevelopmentThe competitions serve as both motivators and

tools to enhance overall business acumen and entrepreneurial behaviors.3. Build Cross-Functional TeamsThe competition can be a platform whereby people

with different skills and the common goal of creating a new venture can meet andbecome partners. The resulting social and professional networks enhance the ability ofindividuals to realize their goals.

Continue readingPart II: Three Case Studies, orPart III: Lessons Learned and Conclusions.

This article has been written jointly by William Aulet (MIT Entrepreneurship Center), Ricardodos Santos (Qualcomm), Stig Poulsen (Danfoss Ventures) and William R. Wagner (HewlettPackard). It belongs to a series of 3 articles on the subject of Driving Innovation In LargeCorporations.

y William K. Auletisthe ManagingDirectorofthe MIT Entrepreneurship Center.y Ricardodos Santos (MIT Sloan MBA'97) isthe Sr. DirectorofBusiness Creation &

Development, Qualcomm Innovation Network / Qualcomm Ventures / CorporateR&D.

y StigPoulsenisthe Vice President, Danfoss A/S, & GeneralManagerofDanfossVentures A/S.

y Dr. WilliamR. Wagner(MIT PhD'83 Course V) isthe New Business Program Manager,HP ImagingandPrintingGroup.

References

1.

Danfoss is a Danish manufacturer of valves and fluid handling components for HVACand industrial applications with approximately $5B in annual revenue(www.danfoss.com).

2. Hewlett-Packard Co. is a global provider of IT products and services, with 2008 revenuesof $118B (www.hp.com).

3. Qualcomm is a developer of advanced wireless technologies, products and services with2008 revenues of approximately $11B (www.qualcomm.com).

4. http://www.kauffman.org/newsroom/mit-entrepreneurs.aspx


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5. The 12 Different Ways for Companies to Innovate. Mohanbir Sawhney, Robert C.Wolcott and Inigo Arroniz, MIT Sloan Management Review, Spring 2006 Vol. 47 No. 3

6. Innovators Dilemma: When New Technologies Cause Great Firms to Fail, HarvardBusiness School Press, 1997.

7. Reference MIT Technology Review, May 2004.8.

Open Innovation, Harvard Business School Press, 2006.9. See BusinessWeek, June 11, 2007, At 3M, A Struggle between Efficiency andCreativity

10.http://www.mootcorp.org/11.http://mit100k.org/12.The best known example may well be the X-Prize competition (www.xprize.org)

About the AuthorAulet - dos Santos - Poulsen - Wagner

W. Aulet is the Managing Director o f the MIT Entrepreneurship Center. R. dos Santos (MIT Sloan MBA'97) is the Sr. Director

ofBusiness Creation & Development, Qualcomm Ventures. S. Poulsen is the VP, Danfoss A/S, & GM of Danfoss Ventures A/S.

Dr. William R. Wagner (MIT PhD '83 Course V) is the New Business Program Manager, HP Imaging and Printing Group.


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Company.

Part II: Three Case Studies [click forPart I, Part III]



The following table summarizes the three corporate business plans we will review. Eachcompetition was independently created to uniquely reflect the goals and culture of theirrespective host companies.


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Danfoss: Man on the Moon

Danfoss has become a mature company operating in mature markets. Entrepreneurship andradical innovation, formerly hallmarks of the company, have been on the wane. In an attempt tochange this trend, the companys CEO sponsored a number of initiatives before the idea of aninternal business plan competition emerged. Man on the Moon, inspired by MITs $50Kcompetition5, was started in 2004 and has since become an annual event.

The original objectives of the competition were to stimulate cultural change that embracedentrepreneurial skills and behaviors. It was eventually discovered that great business ideas wereemerging from the competition, which now includes radical business innovation as a goal. Thecompetition has created additional deal flow for the corporate venturing unit and has helped toidentify employees with entrepreneurial talents for their most promising new ventures. Man onthe Moon and related activities are coordinated and sponsored by the Danfoss Venturesdepartment. Danfoss Ventures reports directly to a group of the Danfoss C-level executives andis led by the CEO.

The competition is open to all Danfoss employees. Competitors retain the responsibilities oftheir normal jobs while competing on a spare time basis. The competition seeks proposals ofthree types: (1) those that create an entirely new line of business; (2) those creating newbusinesses adjacent to current lines; and (3) improvements to existing business with either a 5-10X improvement in features and performance or cost reductions of >50%. Each year a specifictheme is chosen based on challenges the company is expected to face in the coming years. Forexample, the 2008 competition theme was Buildings of the future. The theme in 2004 was Oil


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at $100 per barrel. These themes are only suggestions, and any proposal consistent withcompany strategy is invited.

Employees compete in teams of 4-5 people created during an initial selection period. Functionaland personal diversity within the teams is strongly encouraged. Teams apply for participation by

submitting a summary of their business proposal and a description of each team members skillsand anticipated contributions. Based on a one-page summary, about 12 teams are chosen tocompete in the first round. During this phase, the focus is on strengthening the ability of theteams to articulate their value proposition through a strong one-minute elevator pitch. A one-daynetworking, training, and team building event kicks off this first phase. After a six-weekdevelopment period, a two-page executive summary and a ten-minute pitch are presented to ajury of Danfoss senior executives and external judges, who choose the five teams that advance tothe competitions second phase.

During this next six-week phase, the focus shifts to business concept development. The teamswork to build a strong business model, incorporating customer insights and commitment,

financial forecasts, and a solid understanding of the resources required for execution. Instructionin entrepreneurship and business acumen is provided as the competing teams finalize theirentries through a mix of live training classes and online courses, as well as coaching fromDanfoss Ventures.

The second round culminates in a ten-minute presentation to Danfoss Ventures InvestmentCommittee (the CEO, COO, CFO and divisional presidents), which selects two proposals basedon the criteria of market potential, market entry strategy, value proposition sustainability, and thequality of the presentation. A winner and runner up are chosen. Both teams are awarded theopportunity to attend the MITs one-week Entrepreneurship Development Program at MIT.

The participants receive development resources for needed travel, market analysis, demos,patents, and consultants. In the initial stages, the costs for these services average $10-12K perteam. In latter stages of development, this can increase to over $100K. Teams are allowed to useinternal and external resources. Possibly the most valuable resource arises from leveraging theglobal resources of the Danfoss Group and its 23K employees. The competition has minimalformal rules to allow for creativity and to encourage initiative.

One incentive to participate is increased visibility among company executives. The competitionis a valuable career development opportunity. At the conclusion of the competiton, participantscan choose to pursue a more entrepreneurial path within Danfoss. Approximately 10% ofparticipants shift their career focus in the company and embark on a new path within venturingor new business creation. For many other participants, the commercialization of their idea is themost important reward.

Danfoss Ventures accepts the most promising of the competitions business proposals for furtherinvestigation towards the ultimate goal of launching them as new businesses. Team membershave the option of participation in this incubation phase. Each proposal is developed usingestablished corporate venturing processes, which ultimately lead to a decision to either incubateas stand-alone businesses, integrate into existing businesses, spin out, or reject. To date, two


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ventures have been funded in incubation, three have been funded and formally launched as newbusinesses inside existing businesses, and on average one proposal is spun out after every otheryear of the competition.

Manonthe Moon Participation

Hewlett-Packard: Flashpoint

HPs Flashpoint business plan competition began as a grass roots initiative from the inspirationof a member of the companys new business creation team. Inspired by the MIT $50Kcompetition, he set out to create a corporate business plan competition that could deliver thebusiness and organizational benefits of those commonly held in academic programs. Thecompetitions are run entirely by volunteers under the sponsorship of the Chief Technology

Officer and a senior executive responsible for technology and product development.

The competition has been held twice. It seeks to teach and promote entrepreneurial behaviorssuch as passion, resourcefulness, flexibility, and skillful promotion. It also aims to improveoverall business acumen and presentation skills, particularly among the scientific andengineering community. The first competition, Flashpoint 2006, offered an opportunity to benefitfrom that competition experience but made no advance commitment to the incubation of winningproposals. The second competition, Flashpoint 2.0, focused on a specific business area ofstrategic importance to HP. Teams were challenged to develop business proposals targeting thatarea of business. $200K in incubation funding was offered as the top prize. This proved to be afar more attractive competition structure, and participation doubled as teams found the lure of

seed funding a compelling attraction.

HP employees compete in Flashpoint in teams of 3-5 people. After registering, the teams createtwo-page executive summaries, a simple format that presents a low barrier to entry. Since it is aprimary goal of Flashpoint to teach business planning skills, it is important to attract potentialcompetitors who do not already possess those skills. The executive summaries are distributed toan internal network of business planners and managers for judging, using a template that gradeson a variety of criteria.6 Each summary is graded by multiple judges, whose scores are averaged


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to select 10-15 proposals which advance to the next stage of the competition, during which fullbusiness plans are developed.

A Flashpoint web portal was created, through which employees can access information about thecompetition as well as a variety of resources on innovation, entrepreneurship, business planning,

presentation skills, and company strategy. Competitors who progress to the second (semifinal)round are provided with a coach, typically a business manager with experience in business planwriting. Teams are provided with a business plan template describing each required section oftheir submission. Business plans must be no longer than ten pages including all text, graphics,and supporting materials. The plan must be accompanied by a brief PowerPoint pitch of no morethan seven slides. Three months are allotted for business plan writing. Brevity in the plan andpresentation are required as a way to encourage clarity and focus. Teams learn that they must beable to present a compelling picture in just a few minutes, and they are encouraged to develop astrong elevator statement as a means of distilling their messages.

Three finalist teams are selected by a panel of judges including company executives, venture

capitalists, and business school professors, who meet to review all of the business plans. Thejudging criteria employed in the semi-final round include the overall quality of the business plandocument, business attractiveness, addressability by HP, technical feasibility, and the perceivedability of the team to successfully incubate and launch the proposed business. To address this lastcriterion, teams are interviewed by at least one of the judges, who then presents her findings tothe rest of the panel. The three finalist teams are given one month to hone their plans andpresentations in advance of the final judging, which takes place at a formal banquet. Each teampresents a ten minute pitch, followed by a Q&A session with the judging panel of seniorexecutives who select the winning entry.

A variety of incentives is offered to participants. Volunteers receive certificates and trophies

acknowledging their service. The banquet event held at the end of the competition offerscompetitors and participants an opportunity to be recognized by senior executives in a livelysocial atmosphere. In addition to the incubation funding, members attend MITs one-weekEntrepreneurship Development Program at MIT.

Flashpoint has proven to be a widely popular event that attracts participants from every part ofHPs business and geographic locations. Through the competitions web portal and thecompeting teams own websites, blogs, and wiki pages, all behind HPs firewall, employeesfollow the progress of the competitors and access the professional development materialsprovided. During the final stages of the competition, the Flashpoint webpage is routinely in thetop ten internal websites in terms of daily visitors. Team blogs have proven to be an effectiveway of engaging direct participation by employees as they offer suggestions and volunteerassistance. Surveys show a high level of enthusiasm for the competition and a strong desire toparticipate in future rounds.

FlashpointParticipation


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Qualcomm: Venture Fest

Qualcomm created its internal business plan competition, Qualcomm Venture Fest (QVF),in 2006 to add a formal selection mechanism to its online idea management system, theQualcomm Innovation Network (QIN). There are four main objectives behind QVF:

1. Develop entrepreneurial leaders (most important) who can articulate ideas into plans,build a coalition of support, and execute expediently and frugally

2. Promote the companys culture of shared responsibility for innovation3. Discover potential breakthrough opportunities for the company4. Experiment with management innovation practices (e.g. collective intelligence, self-

forming teams, and internal markets).

QVF is managed by a small team of experienced new business development professionalshoused in corporate R&D. The QVF management team reports on a dotted-line basis to thecompanys CEO, who champions the program.

QVF is a yearly competition open to all full-time employees. Each competition has either aninternal or external opportunity identification theme. For example, QVF09 had an internalFusion theme, seeking new combinations of existing products and capabilities while QVF10has an Out Sight theme, seeking external innovations that can be enhanced by Qualcomm.

To compete in QVF, an employee submits a short business plan summary into a section of thecompanys QIN web tool. The submission period is open for approximately six months. Thedown-selection process for the 10-15 finalists consists of two rounds of collective intelligencemechanisms lasting four to six weeks.7

When an employees business plan summary is selected to be a finalist, he or she must recruit adiverse team of 310 volunteers. The teams undergo a three month Boot Camp on a spare-timebasis. The Boot Camp includes a series of core and elective courses (~40 hours over three


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months) in corporate entrepreneurship and innovation. The core courses are taught by specialistconsultants and university professors. The elective courses are taught by internal subject matterexperts in fields such as financial analysis and intellectual property. The teams entering the QVFBoot Camp are provided with a micro-fund, which can be used for internal or external expensessuch as demo equipment, market research, and expert consulting. Teams also recruit a VP-level

mentor and expert advisors, similar to the process followed by a start-up company.

Teams prepare a full business plan for 20-minute presentations, including Q&A, to the judges,who include the CEO, President, CFO, COO and CTO. The judges select the top three prizesamong the finalist teams and announce the winners at an all-employee finale event.

The key incentive for participants in QVF is the opportunity to work on real business plans. Theprogram offers a uniquely contextual educational, networking, and mentorship opportunity in thekey principles of corporate entrepreneurship, including the art of discovering breakthroughconcepts, and moving them forward through internal and external networking and early-stagebootstrapping. QVF also offers competitors unique visibility in the company and official

recognition for their efforts. Finally, there is a genuine chance that the proposed venture willbecome a reality in some form, and that selected team members will continue to work on theirproject after the competitions conclusion. This has been the case with several QVF concepts.

The top three teams are granted a second round of modest seed funding to take them through amore in-depth proof-of-concept or diligence phase. The remaining teams do not have thisguarantee of seed funding but many have been successful in securing funding through existingdepartmental innovation budgets. Executive judges are kept abreast of developments and receiveperiodic updates so they can determine the ultimate home for the various teams, whether insidean existing business unit or in a temporary incubator like corporate R&D. Expectations are setthat not all teams will succeed in securing funding or reaching market launch.

Results of the QVF have been promising. Participation has increased 50% y/y. The number ofteam members in the finalist teams in nearly 100. The QVF Boot Camp is producing high qualitybusiness plans and well trained future corporate entrepreneurial leaders. About 75% of thebusiness plans receive funding for proof-of-concept activities. Ultimately, about 20% areimplemented as new businesses with continued involvement from their original champions.Some plans also become incorporated into existing projects or result in the filing of significant IPfor future use. The most prominent success to date is the Zeebo wireless gaming consoleadisruptive gaming solution targeting emerging markets recently launched in Brazil and Mexico.8

VentureFestParticipation


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Continue reading Part III: Lessons Learned and Conclusions, or go back to Part I: ChallengesFaced by Large Corporations.

This article has been written jointly by William Aulet (MIT Entrepreneurship Center), Ricardodos Santos (Qualcomm), Stig Poulsen (Danfoss Ventures) and William R. Wagner (HewlettPackard). It belongs to a series of 3 articles on the subject of Driving Innovation In Large

Corporations.





References

1. http://www.danfoss.com/2. http://www.hp.com/


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3. http://www.qualcomm.com/4. Entrepreneurship Development Program, MIT-Sloan

(http://entrepreneurship.mit.edu/edp.php)5. Now the $100K Business Plan Competition.6. Criteria incude the clear identification of a target customer set, a quantified value

proposition, preliminary financial assumptions, and clarity of presentation.7. Mechanisms include peer and expert ratings and a decision market game.8. Zeebo (http://zeeboinc.com/)

About the AuthorAulet - dos Santos - Poulsen - Wagner

W. Aulet is the Managing Director o f the MIT Entrepreneurship Center. R. dos Santos (MIT Sloan MBA'97) is the Sr. Director

ofBusiness Creation & Development, Qualcomm Ventures. S. Poulsen is the VP, Danfoss A/S, & GM of Danfoss Ventures A/S.

Dr. William R. Wagner (MIT PhD '83 Course V) is the New Business Program Manager, HP Imaging and Printing Group.


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Company.

Part III: Lessons LearnedAnd Conclusions [click forPart I; Part II]



In each of the case we reviewed in Part II, for a relatively low cost the Corporate Business PlanCompetition (CBPC) has a high impact on improving the innovation culture, the skills of theorganization and even producing tangible results from new lines of business. Will this happen inevery case? The answer is clearly no, and so we look at the characteristics that first make anorganization a good candidate for such a competition:

1. Is innovation fundamental to your companys business strategy?2.

Does the CEO believe this and aggressively push for innovation?3. Is your company willing to take a long term view of innovation programs?

4. Will a CBPC complement existing innovation programs in your company today?5. Is your organization willing to make a significant investment in a CBPC program?

(>$500K out of pocket plus a material time commitment of senior executives)6. Will your company take seriously ideas that come out of such a competition?7. Is there an identified champion who is passionate about running such a CBPC program?

If your company fits this profile, then the lessons learned from our case studies would indicatethe following are key design points for a successful CBPC:

1.

Clear andAligned Objectives: The objectives of the CBPC need to be clear and directlyrelated to the overall strategy of the company. As such, they should be consistent withthe objectives that have been met by successful traditional independent business plancompetitions, as well as being an effective catalyst to change corporate culture. Asmentioned earlier, traditional business plan competitions offer three main benefits:creation of new companies, fostering of skill development and building of cross-functional teams. Importantly, it will take even longer to create new companies in acorporate setting: perhaps a few years because of the additional challenges in thatenvironment.

2. Strong Support at the Top: In our case studies and other analysis, this is the most criticalaspect for success of a CBPC. It is easy to criticize a corporate business plancompetition, and it will likely be a target for incremental managers who do not want theirhomeostasis threatened or resources reallocated from lower risk projects. The onlysolution is to have active and committed support from the very top. Since there will befailures before successes, CEO advocacy is critical.

3. Sufficient Resources: It is imperative that sufficient resources are committed to theprogram. The first and most visible will be the incentive for the winners. Is itmeaningful to them? Does it show commitment from the company? If not, everyonemay be polite but they will notice it, no matter what the decibel level of the cheerleading.


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In addition, there must be sufficient resources to run the operations of the program foritems like the web portal, programs and market research, which requires microfunding.In our cases, we found a budget of at least $500K was necessary to have a positiveimpact. Finally, is there an agreement or understanding on how other non-monetarycompany resources will be allowed to be used for the competition? Will the employees

be encouraged and given time to do this, even if it takes place after hours? Will othercompany resources be made available? Will executives willingly and gladly spendmeaningful time judging, mentoring or helping the teams? This is necessary to back upthe objectives and strong top-level support for the program.

4. Good Plan: A solid plan must be developed that involves careful scheduling to fit withand not disrupt the schedule of the companys core businesses. In addition, the planshould include a web site for communicating the program broadly, consistently and atlow cost. An outreach component of the plan must also be developed to generate theawareness and excitement needed to create deal flow for the program. Of course, theoverall plan needs to involve the key stakeholders at the appropriate time and level andhave their participation locked in on their schedules. The plan should be updated

annually. We have also found it valuable to produce a theme for each year, but it shouldbe a guideline and not a restriction.5. Avoid Too Much Detail in Plan: Entrepreneurship is a creative problem-solving skill,

and if the competition becomes a fill in the blanks exercise without forcing theparticipants to be creative, the proper skills will not be developed. Initiative andcommitment to creatively break through walls should be encouraged. Danfoss hasexplicitly designed this lack of too much detail as one of the explicit guidelines in theircompetition.

6. Strong Team to Execute: In each instance, the CBPC takes strange, unpredictable andsometimes scary turns and twists. It is therefore essential to have a visible, respected,passionate and committed team to lead the execution. The team will have to makeadjustments to navigate through choppy waters, especially in the early years, but in theend it will be great leadership training.

7. Support Tools for Participants: In reviewing the factors for success, having goodmentors/coaches was very important, which seemed obvious. It was less obvious thathaving a high quality web site with information, tools and communications capabilitywas extremely important as welland potentially even more important. In the case ofour three companies, this helped to tie together disparate geographic groups and fostercross-disciplinary teams. It was also important since much of the work had to be doneafter hours.

8. Exit Strategy: There needs to be a clear strategy and concrete plan for what happenswhen the competition is over, and the exit strategy must be embraced by the executives,the organizers and the participants. Without it, the CBPC will become an event ratherthan part of an integrated innovation plan. Consequently, its value will be dramaticallyreduced and its longer-term impact will be disappointing.

9. Willingness to Involve Outside Parties: In our competitions, if expertise was lackinginternally and even times when it was present, the willingness to engage outsiders to helpin evaluating new ideas was critical. Beyond generating new thinking and discussion --which is the essence of innovationthis commitment sends a clear message that the

company is open to ideas and scrutiny of their efforts by outsiders. Another corporate


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business plan competition is now planning to take this a step further, opening its CBPC tooutside participants. This will be based on the model of the MIT $100K competition,where outsiders can participate as long as there is one central player from the sponsoringorganization. With a strong foundation from the other items on this checklist, thisdevelopment can inject new thinking into the company. CBPC designers should consider

incorporating this new feature.10.Celebrate Wackiness and Even Failure in the Participants: True innovation involves aprocess of mutation that at first might seem crazy, but it expands the boundaries andultimately might (or might not) turn into a valuable innovation. Out-of-the-box thinkingshould be celebrated, and entrants who fail should be given credit and encouraged todetermine what was learned in the process. Failure to encourage such learning may cutoff a valuable line of thinking that could produce breakthrough innovation. Historyshows us that the much maligned Apple Newton product failure was a seed thatultimately contributed to the DNA of the game-changing iPod and iPhone products.

When looking at these three examples and others the authors have reviewed, it is clear that

CBPC, as traditional business plan competitions have proven outside the corporate structure, canbe a powerful program to promote innovation. It is not, however, a silver bullet in all situations.At best it is a valuable tool in a more comprehensive tool box that corporations should use to

achieve their innovation goals. If you choose to use this tool, consider carefully the ten points ofguidance we have recommended in this paper and your benefits could be remarkably like theyhave been for the good venture capitalists who get 5X or more return on their money. However,it is important to note that a venture capitalist approaches this process from a long-termperspective. The innovation process is like a plum tree that at first drops many green, hard,inedible plums to the ground. Unless you are willing to wait, you may miss the tasty, ripe plumsthat the tree will eventually produce. Implementers of CBPCs must likewise have patience to seethe full rewards of their efforts and investment.

Go back to Part I: Challenges Faced by Large Corporations orPart II: Three Case Studies.

This article has been written jointly by William Aulet (MIT Entrepreneurship Center), Ricardodos Santos (Qualcomm), Stig Poulsen (Danfoss Ventures) and William R. Wagner (HewlettPackard). It belongs to a series of 3 articles on the subject of Driving Innovation In LargeCorporations.





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Harnessing the Power of Proven Entrepreneurial Techniques to Drive Innovation in a Large Company