Innovation StudioA New Method for Disruptive Innovation

Giff Constable, CEO of Neo Innovation May 28, 2015

Portfolio Team

Autonomy Structure

@giffco

Who am I?

• CEO of Neo (neo.com)

• 20 years in startup ecosystem as founder, builder or advisor

• Author used in entrepreneur programs at Harvard, MIT, Berkeley, NIH/NSF, etc

• Spent the last 3 years focused on enterprise innovation

@giffco

Analog > Digital

Image: https://www.flickr.com/photos/guysie/6095265888 @giffco

Image: https://www.flickr.com/photos/62693815@N03/6277209256

@giffco

Image: https://www.flickr.com/photos/downhilldom1984/6089311342

@giffco

Image: https://www.flickr.com/photos/aturkus/255736904

@giffco

Image: http://www.yhbm.com/ @giffco

Sustaining Disruptive

@giffco

Previous Attempts

Image: The Alto personal computer in 1973. (PARC/Xerox) @giffco

R&D labs

Incubators

Startup accelerators

Crowdsourcing

Shark tanks

IP Licensing

@giffco

Find lessons in the startup ecosystem

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Portfolio Team

Autonomy Structure

@giffco

VC Results (’04-’13)

42.0%&

22.8%&25.3%&

5.9%&

2.5%&1.1%& 0.4%&

0.0%&

5.0%&

10.0%&

15.0%&

20.0%&

25.0%&

30.0%&

35.0%&

40.0%&

45.0%&

Fail& <=1x& 135x& 5310x& 10320x& 20350x& 50x+&

Source: Seth Levine, Correlation Ventures data, “Fail” category estimated http://www.sethlevine.com/wp/2014/08/venture-outcomes-are-even-more-skewed-than-you-think

21,640 financings

@giffco

5 Shots on Goal

2"

1" 1"

0" 0" 0" 0"

Fail" <=1x" 1,5x" 5,10x" 10,20x" 20,50x" 50x+"

@giffcoSource: Seth Levine, Correlation Ventures data, “Fail” category estimated http://www.sethlevine.com/wp/2014/08/venture-outcomes-are-even-more-skewed-than-you-think

20 Shots on Goal

8"

5" 5"

1" 1"

0" 0"

Fail" <=1x" 1-5x" 5-10x" 10-20x" 20-50x" 50x+"

@giffcoSource: Seth Levine, Correlation Ventures data, “Fail” category estimated http://www.sethlevine.com/wp/2014/08/venture-outcomes-are-even-more-skewed-than-you-think

50 Shots on Goal

21#

11#

13#

3#

1# 1#0#

Fail# <=1x# 1-5x# 5-10x# 10-20x# 20-50x# 50x+#

@giffcoSource: Seth Levine, Correlation Ventures data, “Fail” category estimated http://www.sethlevine.com/wp/2014/08/venture-outcomes-are-even-more-skewed-than-you-think

innovation team

everything else in the

world

Image: https://www.flickr.com/photos/wwworks/8026343276

This used to be prohibitively

expensive

@giffco

Open source software

Cloud infrastructure

Cheaper prototyping

Cheaper initial distribution

Lean startup methods

@giffco

Done right, enterprise can be more capital

efficient than VC

Example: Aprizi and 7 business models

@giffco

Portfolio Team

Autonomy Structure

@giffco

What do they look like?

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• Risk Tolerance

• Resilience

• Chaos

• Generalist

• Creative

• Action

• Experience

@giffco

Business

Design Engineering

@giffco

Execution, not just ideation

@giffco

Can you get them?

(hint, it’s not about equity)

@giffco

Mission Mastery

Autonomy

tip: read Drive, by Dan Pink @giffco

Portfolio Team

Autonomy Structure

@giffco

Product ownership is essential

(this does not have to mean equity)

@giffco

Autonomy comes with accountability

@giffco

You need a team captain

Image: Star Trek, Paramount @giffco

What does a “startup CEO” do?

• Whatever it takes to make it successful

• They own vision, hiring, funding

• They are often product manager #1 and sales person #1

• They keep the pace up, and make the hard calls

@giffco

What do they look like in an enterprise context?

• Product and strategic vision

• Founder-market fit

• Has been through the fire ideally as a founder (even if startup didn’t succeed)

• Forceful enough to overcome big challenges

• Charismatic enough to keep a team motivated and focused even through tough times

• Humble enough to build bridges to other parts of the business

@giffco

Good startups also have a board

@giffco

Ideally not this

Image: The Hudsucker Proxy, Warner Bros. Pictures @giffco

What does a “startup board” do?

• Represents the shareholders’ interests

• Hires/fires the CEO

• Approve major investments, financings, or the sale of the business

• Advise on strategy and assist the team

• NOT manage the business

the key point for enterprise@giffco

Autonomy is not isolation

@giffcoImage: https://www.flickr.com/photos/scragz/2715873958

Portfolio Team

Autonomy Structure

@giffco

Big companies have unique challenges

Image: Monsters Inc, Pixar

@giffco

This requires the right structure

@giffco

Image: Pixar

Parent Company

Studio

@giffco

Parent Company

Studio

@giffco

Parent Company

Studio

IDEA

IDEA

IDEA

@giffco

Parent Company

Studio

IDEA

IDEA

IDEA

Point 1: execution, not just ideation!

@giffco

Point 2: some of the team must stay with the idea!

Parent Company

Studio

Team 1CEO

DesignerDeveloper

(tbd)

Team 2CEO

DesignerDeveloper

(tbd)

Board

GMProduct Lead

SharedBranding

Content StrategyBD

SME

CEO Entrepreneurial Expert Domain Expert GM

Advisory Board @giffco

Parent Company

Studio

Team 1CEO

DesignerDeveloper

(tbd)

Team 2CEO

DesignerDeveloper

(tbd)

Board

GMProduct Lead

SharedBranding

Content StrategyBD

SME

Advisory Board

How far to sandbox?

@giffco

Sandboxing

• In most cases, reporting to CEO is imperative

• Can structure it inside the organization (but no matrix reporting)

• Can create a wholly-owned subsidiary (equity flexibility and external capital resources)

@giffco

Sandbox doesn’t mean secrecy

(use transparency to build bridges)

@giffco

Strategic Constraints

(company vision) (strategic thesis)

@giffco

Two Levels of Metrics

@giffco

Studio LevelExternal Headlines by 10 years Out Better Medicine Through Better Learning

Target: 50% of practitioners using our products see better patient outcomes because of the service ("you've made me better at my job").

We Create the Go-To Learning System for Medicine

Target: 25% of healthcare professionals in the USA are using our new products and services.

Speeding Adoption of Medical Advances

Target: We noticeably speed not just dissemination of information but adoption of important new breakthroughs.

Internal Headline Innovation Studio Pays Its Own Way

Target: Products from the studio all have the potential to be break-even by year 3.

@giffco

Dangerous Metrics

• Number of ideas

• Time / resources per idea

• Near-term Revenue

• Near-term Profit

@giffco

Idea Level Metrics

@giffco

What does success look like?

Image: Back to The Future, Universal Pictures

@giffco

5 Years Out

• Across the portfolio, have 1 or 2 ideas that show signs of making a material difference to market cap

• Another 2-4 ideas are financially strong

• Healthy bridges with the rest of the company

• Recurring capability to push the envelope and translate that into real business

• Inspiration on speed, transparency, and fresh thinking

@giffco

Failure Points to Solve

• Growth capital for the ideas that deserve it

• Hand-offs

• Quarterly EPS pressures

• Success theater

• and…

@giffco

Portfolio Team

Autonomy Structure

@giffco

Questions?

@giffco giff@neo.com

neo.com giffconstable.com