Enabling Innovation Groups To Sell More Effectively to Operations Leaders
At ThroughPut, our mission is to bypass bottlenecks of every kind in the enterprise continuously. We do it throughout entire industries, enabling leaders to smooth-out their Supply Chains, lean-out their Logistics, optimize their Operations, and maximize their Manufacturing throughput, all with their existing teams and often disaggregated data sources.
In navigating our clients, partners, and end-users of all sorts, however, we also have to process and bypass the bottlenecks inherent in every organization, particularly the larger ones, which ultimately trend towards the mean and inertia over the very-long-term.
Whether it is access to data, maneuvering around competing innovation objectives, tracking down actual factory-floor operators, or involving oft-neglected procurement groups, there are internal bottlenecks everywhere.
This week, we would like to focus on a unique problem that many start-ups face in Silicon Valley and around the world in the so-called Centers of Innovation: navigating the enterprise with Innovation Groups, our champions within the enterprise.
The objective of this piece is to shed light on the struggles of Innovation Groups and why we believe enterprise bottlenecks exist between what Innovation Groups propose to Operations leaders as solutions, and what Operations leaders actually need to perform their jobs better currently. To eliminate those bottlenecks, we recommend the restructuring of what an Innovation Group should look like to reduce the adoption bottleneck with Operations. Having previous corporate innovation experience and currently being part of an industrial operations start-up, I hope to provide a blunt but unbiased view of both sides, starting with this week’s blog.
Here are the 5 top areas of improvement where Innovation Groups can start to improve today continuously, even without yet implementing ThroughPut’s own revolutionary ELI platform:
#1: Improving on Operational Domain Expertise
As the founding CEO of a Silicon Valley start-up that evolved first in the operational back-alleys of Houston and Memphis and the trenches of Oil & Gas, Logistics, Transportation, Manufacturing, and Supply Chain, my experience is very different from the usual Silicon Valley fairy tale.
From my side of the Operations table, perhaps the most frequent problem encountered within Innovation Groups is tied to their collective operational domain expertise, or in many cases, their lack thereof. Innovation Groups often lack members with deep operational domain expertise that have actually “been there, done that” and have the scars bruises, and war stories to prove it. In other words, industry professionals and domain experts who have not only heard of operational problems, but actually experienced the problems themselves, battled the fires, and put them out in real-time, usually with very little technology, if any, to aid them in their on-the-fly decision-making. Literally the definition of streaming, real-time, operations in a production environment but with little transparency or modern software enablement.
Don’t get me wrong: Innovation Groups are peppered with smart people with impressive college degrees from top schools and relevant internships from market leaders. Most of these energetic folks, however, have never managed a P&L sheet nor an actual real-world mission-critical Operation with people, machines, and dynamic problem sets that are constantly in flux. So the multi-billion dollar question is: if they have never actually experienced such problems firsthand, and never solved unexpected operational problems in real-time production environments, then exactly what solutions are Innovation Groups seeking to alleviate meaningful operational issues?
In many cases, Innovation Groups pattern-match the obvious market trends, to “keep-up” with their competitors similarly mirrored behavior. Hence we see non-operations-oriented “leaders in innovation” directing their own companies’ budgets and resources towards the next bleeding-edge trends splashing across the headlines. We all know the latest batch: Blockchain; Artificial Intelligence; Machine Learning; Drones: AR / VR; Level 5 fully Autonomous Vehicles; 100% all-Cloud all-the-time; Digital Transformations; and the next rainbow colored unicorns roaming the sunny fields of Silicon Valley.
Operations Technology (OT), however, control or direct some 70% of the overall IT budget. Furthermore, OT groups within Fortune 500s are getting smarter about technology and where to actually apply it to make meaningful impacts on their Operations, Supply Chains, and the KPIs that actually impact their up-times and bottom-lines.
In fact, many OT Groups no longer consult with their Innovation Groups at all (and in some cases, never did). In this manner, they are able to identify solutions that actually apply to the problems they face in production every day, not in The Jetsons ideals that are frequently thrown down from the ivory towers of innovation.
This is due in large part because IT professionals simply don’t have the domain expertise and often refuse to learn the language of Operations. And in a world where you’re supposedly adding value to the organization through applicable innovation, and where you are ultimately looking to sell to Operations, being fluent in operational language is an absolute prerequisite.
Therefore, for Innovation Groups to succeed in the perspective of the Operations groups supporting their budgets, corporations need to include decision makers with deep operational management expertise to augment Innovation Groups in solving real problems and keeping them on mission, rather than high on hype. Furthermore, non-operational Innovation Group members should spend considerable time visiting their own organizations’ actual Operations to fundamentally understanding what is needed at the real-time, day-to-day, shop-floor level. This point should be doubly underscored for technology scouts, digital officers, digital transformation leaders, and anyone proclaiming to have all the answers with none of the learnings, and no degree in the operational school of hard knocks.
#2. Adding Sales Expertise to Innovation Groups for the Internal Organization Sale
Innovation Groups do not have natural internal operations-savvy salespeople. In some cases, the corporate ventures-types have less confidence and clout selling to their colleagues than the actual startup founders navigating their innovation programs. A frequent complaint among such internal associates, scouts and partners interfacing with the actual external innovators can be summarized as “We can’t change things! Operations won’t listen! They won’t give us the data! I need more time!”
This may seem like a generalization, but on the startup side, you primarily deal with Innovation Groups initially, until you manage to navigate with them, or simply around them, to an actual Operations Leader, who discovers your value proposition, understands immediately where it fits, identifies the most immediate use cases, and takes the lead.
Moreover, while Innovation Groups appear overly influential around Silicon Valley, outside of the San Francisco Bay Area, the reality is quite different. I have continuously seen Innovation Groups get pushed aside and even roughed up by Operations, VPs, the C-suite and in some cases even active Board Members, when they bring in bleeding-edge new technology as potential applicable solutions to their organizational woes. Why? Isn’t technology by default supposed to make things better, faster, cheaper, leaner, and safer, in effect enabling more throughput, greater savings and freed-up working capital?
I did some research here and went through a random set of 100 Innovation Group leaders within my larger network and found a very interesting statistic: only two of them had any sales backgrounds. The other 98 are listed as some sort of digital leader, IT analyst, or engineer.
Now, I’m not saying that any of the latter positions do not have sales chops, nor that smart and dedicated people can’t stretch into new roles and responsibilities. But if you have never done sales, whether a product or service, to your external customers, then how exactly do you expect selling internally to work? Excitement and energy only get you so far before experience and competency kick-in where the rubber meets the road.
Innovation and IT are usually at the bottom of the food chain for Industrial Organizations, regardless of how valuable their R&D discovery may seem initially. Also, oftentimes, the teams advocating the R&D breakthroughs are the more technical types who are comfortable selling to technical people but are frustrated selling to the mass-scale organization units: i.e. - Operations. Innovation Groups tend to fall in this category, often taking new technologies to Operations as the future without clearly addressing the applicability and quantifying the “value of adopting now”.
The best salespeople are on the frontlines selling to actual customers. Just as you would not pull away the best operations people to do HR and Recruiting, as that would be an obvious misallocation of qualified resources on both sides. So, who is left to scout operational solutions and sell to operations managers busy with real-time problems? To a large extent, it’s the people who have the time and luxury in the organization to navigate the hierarchy, politics, and serve in Innovation roles.
So to help Innovation sell better to Operations, corporations should look to staff at least one technical salesperson in the Innovation Group to help frame and make the “internal sale”. Otherwise, I can list dozens of major global Fortune 500 Corporations with expensive Silicon Valley offices, where the Innovation and Corporate Venture Capital Groups have been knocking on Operations’ doors for years, pleading to adopt new technologies, but have achieved only limited success. Oftentimes, selling internally is harder than selling externally, and here is where professional expertise can help the more technical members of the group.
#3. Throw away the Innovation Adoption Process Maps. They are Bottlenecks. Here’s your Roadmap: Invite Operations People to your Technology Scoutings
Innovation Groups create their own adoption bottlenecks by creating process maps to approach operations. I have sat through so many of these reverse pitches about “maximizing adoption”, that I can pattern-match the pattern-matchers industry-by-industry now. In one case, I have even seen our own pilfered slides up there on stage. Why does it take a 15-page slide deck to approach Operations? In oilfield services, for example, our best engineers made at most one 15-page slide deck every three or so years, yet generated billions of dollars in incremental revenue for our customers with the latest and greatest downhole technologies. No Disruption, no Digital Transformation, no Chief Digital Officer required.
Here’s the secret:
Do you know how startup founders and operations-types approach Operations? They pick up the phone and say “Hi *insert name*, great meeting you last week. Guess what? I am in the neighborhood this week. Can I drop by the factory, hang-out near the batch mixers in a hard-hat, and see how I can help?”
The fastest roadmap in true innovation has always been “showing up”. I was on a text-basis with my own Operations Managers when I was in Oil & Gas at Corporate. During my time, our teams completed 3 pioneering projects in 24 months. How? Because we understood before “failing fast” simply “showing up” and “getting it done” came first.
Your operations people know your organizations’ problems. They live them daily. Talk to them. Walk in their boots. Empathize with them. Ditch the 15-page slide decks and get them in front of the actual technology groups for a fair and immediate evaluation of a relevant technology application, versus three years from now through an overly-optimized, theoretical startup adoption process borrowed from a consultant’s dusty play-book.
Here in Operations, we live in a real-time world. And we report up to a quarter-to-quarter world. The average CEO spends no more than 2 years at most companies’ top position in the U.S. yet may earn up to 300 times more compensation than the median workers wage. In the 21st century, most CEO’s don’t have the time, luxury or financial incentives to get to know their line-people. If there’s a revolving door at the top every 2-3 years, and significant executive compensation on the line, with few empathetic personal ties, you’ve just defined your window for delivering quantifiable innovation: less than two years. If you want to realize your Innovation Agenda, you’d better make an impression on the C-suite before then, and by extension, help support indirectly their executive bonus.
You need to get adoption that’s applicable fast. Get the end-users in the room, and hit your Innovation objectives earlier than promised. Because 2 years down the road, theirs a good chance you’re taking marching orders from a new CEO, and their agenda is very often to increase savings, increase revenue, cut costs, boost EPS, and hit their own KPI’s tied to equity and performance bonus’. And RIF’s are brutal to company moral, culture, and often crippling. So, an Innovation Group that hasn’t delivered true value and quantifiable results may well be one of the first on the chopping blocks. Silicon Valley history is rife with the cyclical shake-outs of unproductive Innovation and Corporate Venture Capital Groups when major economic downturns hit. Schumpeter’s Creative Destruction flows both ways.
#4. Step Aside. The problem-solution fit for the technology should not be with the Innovation Group. It should be with the Problem-Owner
This is perhaps the biggest bottleneck in enterprise technology adoption today. The right operational solution doesn’t reach the right problem owner in-time because the broker is bottlenecking the communication, or they’re playing favors to portfolio companies of some hot VC’s where they long to land a job someday, or simply get the invite to Tier 1 VC’s annual shindigs.
The start-up industrial technology provider is looking to be introduced to an operations problem-owner who has a direct problem and is feeling the pain. The operations problem-owner is relying on the Innovation scout and broker to find the right solution and make a timely, thoughtful introduction. Yet the Innovation broker is too often drawn to internally sell Blockchain, Drones, AI or an autonomous flying car to meet some far-off objective set by the technical division. So, when the incentives are not aligned, who wins?
In the years of approaching Fortune 500s, Small- and Mid-Cap businesses, Government & Military Entities, and even Dental Practices and Coffee Shops, I have learned to get Innovation involved last. Why? Because as an industrial operations startup, we are not afforded the time to wait on solving an Operations Manager’s most urgent problems, nor on the contrary, the luxury to explain to non-operations people, how it all works. After all, non-ops folks are the ones who most frequently don’t understand the underlying complexities and constantly shifting dynamics of Operations itself.
Most Innovation Groups are stuck right out the gate, for example, even trying to process the 42 (and growing) major heuristics of our own ELI Bottleneck Management System, let alone understand the more than three centuries of Process Management and Operations Domain Expertise behind it, to properly explain to operations people how it all works, and where it is best applied for real, near-term results.
And the operations people? “Wow, this addresses a bunch of my pain points, and the results look straightforward, relevant and impressive. I’ve got 15 locations this can be applied to. Let’s kick off in June. What do you need from me and how quickly can you turn a proposal my way?”
So where is the bottleneck? Clearly technical due diligence with Innovation. While Rome burns, layoffs happen, R&D remains underfunded, and operations suffer irreversible damage, Innovation is still concerned about real-time integration into their SQL databases and what latest Visualization and Business Intelligence (BI) tool they can pitch to management for more budgets and toys to play with. Alignment it is not.
Therefore, it is in the best interest of Innovation Groups to handover the baton as expeditiously as possible from operations startups to operations people, and trust both sides to do what they excel at. I can almost guarantee that ThroughPut will never satisfy most Innovation Groups, because our product fit is with Operations, Lean Six Sigma Black Belts, Kaizen Experts, and Production Manager-types. Enabling ThroughPut and other like-minded operations-focused true-innovators with faster introductions to Operations, however, can help Innovation Groups conquer the blue ocean that they never had access to, and become winners.
Thus, Innovation Groups need to learn to step aside and make the introduction to the end problem owner faster. Our Japanese and Mexican clients are the first to adopt this mentality, and we hope other groups looking to be at the leading-edge will follow.
#5. Don’t give Innovation Groups budgets. Give them a cut of “Sales”
Here we come to a paradigm shift in the underlying incentivization, but we propose it as a much-needed one to align goals intelligently. Innovation Groups shouldn’t get a pat on the back, and a potential 20% base compensation bonus for closing a partnership that does nothing for the company’s underlying operational effectiveness and contribution to the company’s operating profit margin.
Innovation Groups require aligned incentives, such as receiving a cut of not just researching and scouting, but actually sourcing and introducing the breakthrough technologies that have the highest likelihood to transform their corporate operations, nearer-term performance, and long-term market competitiveness. Venture Capitalists, Sports Brokers, and Acting Agents all receive significant Carry for their contribution to align incentives better, so why not Innovation Groups? Why is it that simply closing a partnership with a certain number of companies leads to a bonus, when no actual KPIs and Operational Milestones were actually achieved? We’re all enthralled by bleeding edge innovation and sparkling new technologies – it’s human after all – but wide-eyed wonderment doesn’t equate to real operational improvements.
Let’s face it. Innovation Groups are given peanuts to go find the next big thing. What the peanuts do on the startup side is to force innovative small companies to absorb the cost, time and resources by perennially raising money and squeezing out the long hours and innovation that are so difficult to achieve at a large organization. The start-up vendor, however, is put in the untenable situation where we are not enabled to provide our best resources to the best users and buyers within an organization.
We get it, it’s a structural and cultural issue. It’s not like your organization is necessarily enabling the Innovation Groups either with the right aligned incentives with Operations. After all, most Innovation Groups are unfortunately stuck with the unenviable task of constantly showing Management, the Board, Shareholders, the Marketplace, and your Competitors that the company really is more hip, innovative and forward- thinking than the publically available financials and product roadmap might otherwise suggest. Plus, hey, it’s how a corporate insider can justify having an awesome office here on Sand Hill Road or Palo Alto, where the commercial rents for the postal-code status symbol are astronomical, and certainly not justifiable long-term if Innovation Groups don’t otherwise contribute to the organization’s Operating Profit Margin. But if your goal is to hob-nob with VC’s, pattern-match their investments, and otherwise copy the game plan of financial, not operational, experts, then it may indeed support other near-term incentives for jumping points into VC’s before the next major downturn wipes out the majority of non-performing Innovation Groups and Corporate Venture Capitalists once again. After all, Schumpeter’s Gale of Creative Destruction doesn’t just apply to the innovative start-ups at the whim of VC Super-cycles and ultra-low-rate interest rates pushing LP’s to continually reinvest in AlternativeInvestments to maintain for greater average portfolio return.
If organizations, however, were to up the stakes by offering absurd, Fortune 500, CEO-worthy incentives to find the next disruptive breakthrough technology that actually positively impacted Operations and KPI’s, the Innovation Group would become the #1 dream job for all your employees. They would drop the MBA dream, the Amazon offer letters, the tempting Google perks, the cool Facebook hoodies, the secretive Apple allure, and the Airbnb microbrews on tap, stay in the organization and aim for the job that gives them CEO-level impact, operational-alignment, lucrative quantifiable bonuses, and an amazing opportunity to transform the company and culture for the better.
If you were a Soccer (or Futbol) Club, you would have paid millions of dollars in retrospect for scouting Lionel Messi. Wouldn’t you do the same for a cancer cure, or a near 100% efficient engine (yes, I know the Carnot Cycle), or 23% less manufacturing waste, if you were Pfizer, Volkswagen, or ArcelorMittal, for example?
Therefore, corporations need to incentivize Innovation Groups with a better commission structure. I’ll be honest, I’ve observed far too many Innovation Groups-types who sport their Blue Bottle Coffee, Patagonia Vest, and iPhone AirPods, nailing the wanna-be VC culture down pat. But that’s basically where it starts and ends for how bold and disruptive they actually want to be in Silicon Valley. I don’t blame them for pattern-matching with their peers. Most of those VC’s back far more losers than the few winners they follow other VC’s into, and long-term don’t produce any meaningful returns to investors, let along ground-breaking, operationally impactful solutions to real-world problems. If there is no “maximum throughput” career map to encourage outlier behavior, you would have to be a true intrapreneur with strong values to really go out of your way.
Selling behind a big brand is far easier than selling a new technology for a new company. Whether you like it or not, people buy from Apple, not from you, Apple Store Genius. Therefore, the type of organizational employees who can sell new stuff to old conservative companies are the types of team-members you want in the Innovation Groups. Their trailblazing qualities deserve to be incentivized because they break the ice for many millions in new incremental annual revenue, billions in valuation, and the refreshing smell of operating profit margins from actual innovation.
In conclusion, what is being advocated here is not the abolition of Innovation Groups four-score and seven years ago, but the restructuring of them into something that has a far better chance of making a real-world impact on the company, and the innovation-enablement careers they might pursue internally vs. simply a stepping-stone to sexier VC position down the line.
In short, most of today’s Innovation Teams are setup to fail from the start, and even from the startup side, it’s clear that the incentives simply aren’t there, unless you are working with the occasional really effective champion who just believes in doing the right thing for the right reasons.
For Innovation Groups to be more influential and respected, there are missing roles that must complete the Innovation Group’s organizational puzzle. Innovation Groups should round their teams off with expert technical sales, and operations domain professionals. The Innovation Groups should spend more time doing, and less time planning, on how they are going to approach and adopt new technologies (actually bypassing bottlenecks, and not flying delivery drones overhead).
To incentivize Innovation Groups to make the connection and get out of the way (or accelerate adoption with the internal problem owner), a commission-structure would help all parties involved. Most importantly, it will keep your innovation teams from jumping to another competitor or a venture capital firm in the first place. Retention of your best, after all, is always a problem, especially in these times low-unemployment and a multitude of other career ladder-up options.
On my next post, I plan to flip the narrative and talk about how Operations can enable Innovation Groups to solve their problems faster. It’s only fair to cover both sides of the story. It’s a two-way street, after all. In the meantime, please connect with me directly, or reach out to info@throughput.ai if you have any questions, comments, or additions to this piece!