Have you wondered if your company might be vulnerable to disruption? Without strategic objectives or a culture that nurtures innovative ideas, your organization is bound to miss huge opportunities.
Andrew is an expert in the world of strategic innovation and corporate venturing. He’s led programs for corporations across the globe, including in the United States, Europe, Russia, and Asia.
In this episode, Andrew shares his proven method for harnessing innovation so you can catapult your business into a new era of success.
Listen in to Andrew to learn:
- Why no corporation is immune from the change brought about by innovative startups
- How to harness the power of corporate venturing to unlock new value chains
- What simple steps any organization can take to gain a lasting competitive advantage
What was the spark that led you to write Purpose to Performace?
The seed that led to Purpose to Performance was planted back in the dot-com era during the late 1990s to early 2000s. At the time I was working for a large corporation and I was trying to get them to take a look at some of the emerging technologies like the web browsers Netscape and Mosaic.
I remember writing my MBA paper on how corporations were going to take their businesses online by storing information in the cloud and taking orders online. That was at the backend of the 1990s and I got the absolute worst mark for that paper.
“I could see how the Internet was going to change how we did business, but the organization I worked for just didn’t see it. These technologies were literally going to change their entire business model, but they didn’t understand that.”
So, in 2000 I started a new business to bring corporations together to teach them about these new technologies and show them how they were going to change business models. For the last 17 years, we’ve been in that space working with fantastic corporations and individuals who want to understand how to harness technology to move forward into the future.
A lot of organizations today are a bit like a rabbit stuck in the headlights of this oncoming truck. They recognize the power of emerging technologies but there are so many new technologies and startups and the rate of change is so fast that they just don’t know how to deal with it all.
For me, I could see what the future looked like, the challenge was in getting corporations to adopt these new technologies in a way that made the most sense for them.
So, my experience in bringing innovation to organizations over the last 17 years is what led me to write this book, which is really a collection of ideas, lessons, and examples as well as interviews that I’ve done with over 100 executives, startups, and technology players in the innovation space.
What sort of training do you offer organizations that are looking to bring in new technologies?
It’s not really training in the traditional sense, it’s really about how we go on the journey together. What I outline within the book is the process of taking a specific purpose and driving an organization’s performance to achieve that purpose.
The first bit focuses on the purpose: What is the purpose? What is the strategic objective? What is the threat that’s coming to you?
The next step is all about process. What processes are you using to achieve that purpose?
These can range from internal idea generation or investing in startups, to building incubators and acquiring businesses. At this stage, you’re asking yourself, “Am I using the right process for the right job?”
There are actually five Ps that we talk about when we move from purpose to performance, and the next one is people.
Do you have access to people who are curious and can see what the future looks like?
Then comes partners. Are you working with partners?
By definition, if you’re innovating, you’re going to be doing things that are outside your normal capabilities. Therefore, it’s important to ask, “Am I working with the right partners, the right startups, the right funds, or the right incubators?”
Finally, the fifth piece is performance. Are you seeing all of the strategic insights? Are you going to bring those into the business? Are you getting the financial returns you should be getting?
“In terms of actually getting an organization to understand what it takes to move from purpose to performance, well, it’s going to take more than the chief executive or the chairman standing up in an investment meeting and saying, ‘We’re going to be innovative.'”
What does that mean? Why are you going to be innovative? How are you going to be innovative? How are you going to engage your people?
And that’s really what’s at the core of this book.
What’s the #1 takeaway from Purpose to Performance?
What I’ve tried to outline within the book is a new way of thinking, and it’s centered around what I term “innovative new value chains.”
There are about 1,600 corporations that now claim to have done corporate venturing over the last six years, and about 900 have done these types of transactions in the last year alone.
Corporate venturing is when large corporates like GE, Unilever, or BP invest in early-stage businesses, specifically interesting new technology startups in Europe, in California, in Shanghai or wherever.
The corporation will make a minority stake investment which encourages and supports that startup while also giving the corporation an advantage in terms of access to insights or potentially disruptive technologies they wouldn’t otherwise have access to. The startup potentially gains access to a much larger customer base which can help it to scale much faster.
But the key message I want to share from the book is that it’s not just a matter of spraying some money around and doing minority stake investments. It’s about strategically thinking about how to create new technologies, new startups, and change your core business model to ensure you remain competitive.
“All corporations are facing a challenge today in that we’re seeing some fundamental changes in how we define traditional industries.”
An automotive business is no longer in the automotive industry, it’s in the mobility industry. What was once a health or sickness business is now a wellness business.
That’s why I termed this key idea “innovative new value chains,” because it’s not just an industry, it’s not just a business model, and it’s not just a different way of selling, or repackaging a product for a service. There is a fundamental change happening here.
Can you give us an example of what finding a new innovative value chain might look like?
One of the key examples that I give within the book features Bill Torrento who heads up Merck’s Global Innovation Fund.
Merck is in the pharmaceutical business, and Bill is in charge of a fund that focuses on the digital health industry. Now, this is outside the scope of what health businesses normally do; typically a large multinational pharmaceutical corporation like Merck would stick to pharmaceuticals, but Bill has been looking at new digital health technologies from a strategy point of view.
Specifically, Bill’s been making minority stake investments in startups focused on cardiac health that consolidate data and services for their patients and clients in their own homes. Bill actually brought together three of those businesses to create a new entity for cardiac health.
To me, that’s an innovative new value chain; it connects different technologies found in three different startups in a way that offers value to customers using a new model.
Corporations in all different industries from the automotive business to oil and gas and the insurance and financial services industry are joining novel technologies together to drive innovation and create new value chains.
How is this different from how we traditionally view value chains?
Let me go back to the Merck example.
Previously, Merck would sell an active pharmaceutical ingredient in a tablet form which would be prescribed by a doctor to a patient. Well now, this patient has a cardiac health monitor on them, so Merck can access that information in order to help that patient change their behaviors.
Instead of prescribing pharmaceuticals, a doctor could instead prescribe exercise and with Merck’s data that doctor could track the effect that exercise has on the patient. If the patient would still benefit from pharmaceuticals, then that option is still there.
Merck could be remunerated by the health provider, by the insurer, or by the patient, depending on patient outcomes. So it’s a completely different value chain; where the value is and who pays for that value has changed from Merck’s traditional business model.
What would Andrew Gaule say to corporations that believe they’re too big to be affected by disruption?
It’s important to recognize that any corporation can have that Kodak moment where your industry is so fundamentally disrupted by a technology that you go from, in the Kodak example, the top of the market to bankrupt in about five years.
Now, that specific example is probably going to be a rare occurrence because there are still opportunities for many industries to grow in emerging markets.
The fundamental change I see coming isn’t necessarily one of disruption, it’s about using new technologies and startups to fundamentally change industries and create billion-dollar opportunities for new industries or new ways of doing things. Car sharing, electric vehicles, and other novel ideas like that are going to start impacting all industries.
“If you don’t innovate and change, you’re going to miss out on some multi-billion dollar opportunities that come along. Sure, you may continue to do well using your current business model and that’s fine, but you’re going to miss what the future holds.”
If you have a lot of capital and if you have the people and resources, shouldn’t you be spending a few hundred million dollars on a small team to give you that scouting capacity to see these emerging technologies and be thinking about the future?
Looking to the future is good for organizations. It’s one of the best places to allocate your resources, your investments, and your people. At the end of the day, investing in your business’s future helps your share price. I don’t care if you think you’re immune to disruption, you’re not immune to emerging technologies or to the future.
Tell me about your biggest success story to date?
I’ve been working with a large corporation in the oil and automotive sector. At the executive board level, they understand the future; they understand that things are changing. The innovation team has a good track record doing active investment going back about 10 years.
Over time, they’ve reached a level of maturity and understanding needed to connect the dots, so to speak, in order to outperform their competitors. They’ve taken in-car sensor technology, they’ve taken vehicle servicing, and they’ve taken vehicle leasing and insurance and they’ve joined these different technologies and startups together.
The result is that their core business has shifted from selling a physical product to selling services and increasing the repeat business they do with each individual customer.
I really enjoy working with organizations who recognize the importance of embracing the future.
“What I’ve found to be most exciting is when companies start seeing opportunities that didn’t exist under a previous way of thinking.”
It’s at that point that the dynamic and the communication changes within the business and they begin to go through the purpose-to-performance process. We illustrate that within the book with a number of examples in a wide variety of industries.
What’s one glaring opportunity that no one has successfully tackled yet?
There are a number of corporations that I’m working with at the moment with individuals who see the light and are asking, “Why are we not moving faster? Why aren’t we doing this or that yet?”
To me, the biggest opportunities are in China. There are new technologies, new business models, new infrastructure, and new vehicles. Things are moving quickly and growing at scale very quickly.
I’ll actually take clients to Shanghai and Beijing and other parts of China and say, “Look at these guys. This is what the future is. It’s already here and they’re doing it. Now, how can we bring that back and how can we bring that into other parts of society, other countries, other companies?”
How do you hope this book will impact others?
I would like people to spend a couple of hours to go through the book. It’s not a very heavy read, and it’s got enlightening examples.
I hope that people, after spending a couple of hours of looking through the book, begin to draw parallels between the examples in the book and their own businesses and to their industry at large. I hope people get that “aha moment” and say, “Oh wow, I can see this happening in my own industry.”
We also have a lot of other resources available for people to delve into, including our own podcast.
So, you can go back to your own organization and say, “Look, this is what I think, this is how we’re going to be disrupted, and this is how we could use technology to be the disruptors. Here’s an example from another industry where I see parallels.”
“To me, what would be most exciting is if we started to see new health solutions, new transport solutions, new consumer products, and new service offerings by joining technologies and startups more effectively together.”
Corporations have the resources and know-how to bring these things to scale and to get these things implemented a lot faster, so I really hope this book acts as a catalyst to make that happen.