Many large organizations are now looking at how they can generate new growth by launching new adjacent startups or business units. Skunkworks teams, corp incubators, and product development agencies are buzzing — trying to disrupt themselves before being disrupted.
However, all startups are not born equal nor have the same objectives.
At prehype, we built startups with big companies. While not very public, we are one of the most active ’startup-as-a-service’ firms across US and Europe having worked on startups for companies ranging from NewsCorp over LEGO and Royal Bank Of Scotland to Verizon and Danone. We are also building our own startups, you might know of BarkBox, ManagedByQ orAmberJack. What we are learning is that while we use many of the same methods, building with a big company as a partner makes the startup different. We call them Fat Startups. (teaser, more on this is in a blog post soon)
There are in general many embedded dynamics that make these ventures unlike what you might see amongst more traditional startups. Here are a four tips on areas to consider if you are building a startup associated with a big company:
Finally, get going! Venture creation is risky and filled with mostly unknowns. In a corporate environment, those are traits that nobody enjoys. However, if you are the one tasked with innovation you should take responsibility for getting started. Doing nothing is worse than doing something wrong.
A new type of investor is emerging — one who uses venture investments to push innovation internally. These new investors use investment as a tool for:
As it turns out, using investment can be a cost effective way to solve innovation and marketing problems. And, if done right, it can also be of great benefit to the startups receiving this investment. While strategic investing is not new, it seems that a new breed of investor is emerging. These teams are often not measured on financial return on investment — and the teams are staffed not with traditional investors but with entrepreneurial marketers and innovation managers. Emmanuel Seuge is the Senior VP of Content in North America for Coca-Cola, and one of the pioneers of Venture Partnerships. Emmanuel and his team, in collaboration with other departments within Coke, have used meaningful investments to create long-term relationships with startups that help them.
In our podcast, we discuss Coke’s relationship with various startups from their inception to their current state, as well as the mutually beneficial relationship startups and large companies have the capacity to create. Emmanuel also shares how an apparent meeting-gone-wrong transformed into a remarkable collaboration. You can listen to the podcast onSoundCloud and subscribe on iTunes. Below are a few selected highlights, as well as the full transcript of our conversation. (Disclaimer: prehype has worked with Coca-Cola on some of the deals mentioned in the podcast. We also run similar venture marketing programs for various companies in the PCG and Toy industry.)
Emmanuelle Seurge on the potential conflict between Marketing Venture and existing investment teams in a corporation:
“One of our chairmen in the 1920’s, Asa Candler, had this phrase that we use a lot at Coke today. It is: “staying permanently and constructively discontent.” This idea of staying permanently and constructively discontent is a responsibility we all have. It’s not about going around anyone, it’s about working very tightly with the finance team, with the M&A team, with the legal team and building those business models together. When we meet those startups for the first time, often the finance and M&A teams are with us in the meeting to ask the questions that we, as marketers, might not think of. Actually, the result of what we have done, is because of a great partnership with our M&A and finance team.”
On betting on founders vs startups:
“The reason we have started to embrace startups is actually because we believe that entrepreneurs — especially today because of the democratization of technology, because of the democratization of information — are able to bring so much speed, nimbleness, creativity and agility that it causes us to think about our business in a more innovative way.”
On being respectful of the founder’s time:
“As a team, we are paranoid of not living up to the expectations of the first meeting. We want to show excitement when we meet a startup. We know that when that entrepreneur goes back to his company, he’ll say he had a great meeting with Coke. Our biggest fear is not living up to that promise and that excitement. The only way to live up to it is to be choiceful, to dedicate the right amount of resources behind it and to learn how to be patient. Patience isn’t in the DNA of large organizations. We want results fast. It’s a small industry and if you burn yourself with one entrepreneur, you’ve burned yourself with a lot of them. You’ve got to be very careful.”
H: We’re at a conference and I’m sitting here with Emmanuel Seuge. Could you just give a little bit of an introduction explaining who you are and what you do?
E: My name is Emmanuel Seuge. I work at the Coca-Cola Company and I lead our content effort for North America. By, content, what we mean is the intersection of three dimensions. The creative work and all the work we do from an advertising perspective — social and digital. The entertainment work and all the partnerships we build with the entertainment industry — music, gaming and film. And then the third bucket, is all the content we build with our startup partners. We call that marketing ventures which is basically equity and marketing partners that we build with young entrepreneurs who work in an industry or in a business that relates to some of our business needs.
H: Obviously the thing that we worked on, and that I’m mostly fascinated with, is this idea — that I think in many ways you guys have pioneered — of using the marketing team and investments into companies to create long-term relationships with startups. Can you talk a little bit about how the marketing ventures idea emerged and maybe an example of something you guys have done that worked for you?
E: Yeah, I’ll give you an example. One of the very first startups we partnered with, actually you were involved in this, was in the sports-platform world. We were looking for Parade to engage on a more frequent basis — I’m almost tempted to say on a daily basis — with everyday athletes. And with Parade, on a global scale, we were very active around the World Cup and the Olympics, those tent-poles events, but we were lacking the tools to engage with that audience in-between those events.
So we were looking for a platform that would help us achieve that. We met a lot of startups in that field and then we met Endomondo. At the time, they probably had six or seven employees based out of Denmark. They were growing very fast and had several million users already. But, everyday, those users utilized that platform as a way to track their sports activity. So, we thought that if we could build a sustainable partnership to help them grow and bring some of our marketing leverage to them, it would allow us to connect with their audience.
Interestingly enough, in that first meeting we asked them: “What would be the one thing that you would love to do at Coca-Cola?” Their response was that for a sports platform, the ultimate place is the Olympics. They said they would love for Endomondo to be embedded in what Coca-Cola did for the Olympics.
We met them for the first time in December of 2011. At the Olympic Games in London, in the Olympic Village, where the athletes go after their competitions, we set up an Endomondo booth where all of the olympians could go and get their count and track their activity. It was a great example that showed us what we could bring to a startup. And, at the same time, they taught us to operate more nimbly, quicker and creatively.
H: How do you see yourself working with startups?
E: About three years ago we started to look at our business and how we interact and engage with consumers. We were trying to find additional innovative solutions on how to do that. We started to talk with entrepreneurs and startups and looked at how they had disrupted some industries and brought innovation inside certain companies. We began thinking about how we could engage with entrepreneurs in a different way to address some of our needs.
It started with a very simple brief around music and our growing need for music content. As you know, buying and acquiring music can be a complicated process. We met an organization called Music Dealers who streamlines that process by going to an independent music creator and providing music solutions for almost any kind of content that you could be looking for as a brand or as a broadcaster.
We partnered with them and, as we partnered with them, they were at a stage where they were trying to build a more strategic, meaningful and sustainable partnership with us. That’s when we joined their venture by taking equity and ultimately, a more meaningful and long-term partnership. That triggered our thinking around venture marketing. That is: building partnerships with startups in a way that is meaningful and important and relevant for them, but also meaningful and relevant for us. At the core of that is sharing similar objectives.
H: You work on a sponsorship team. When we talk about venture and investing, that’s normally something that is in the CFO’s office. How did you get around that structure?
E: As we look at our 128-year-old business, it is at the place it is today because there has been constant innovation, constant disruption and constant thinking about how we can better ourselves. That is true for everyone — the marketing team, the finance team, the legal team. All of us who are holders and inheritors of the brand who are trying to leave it in a better place for the next generation of brand holders. We have the responsibility to continue to innovate.
One of our chairman in the 1920’s, Asa Candler, had this phrase that we use a lot at Coke today. It is: “staying permanently and constructively discontent.” This idea of staying permanently and constructively discontent is a responsibility we all have. It’s not about going around anyone, it’s about working very tightly with the finance team, with the M&A team, with the legal team and building those business models together. When we meet those startups for the first time, often the finance and M&A teams are with us in the meeting to ask the questions that we, as marketers, might not think of. Actually, the result of what we have done, is because of a great partnership with our M&A and finance team.
H: One of the things that I think is very unique is this idea of using venture and investment as a tool for innovation, rather than seeing it is a tool for financial return. I think most corporate venture teams very much think of investing in a company, looking at a ROI and focusing on making their money back. But, obviously, if you’re an incredibly good venture capitalist in the startup space, you might return hundreds of millions of dollars, but that doesn’t necessarily matter with an organization like Coke. What you guys did is use classic investment tools to get a lot of other things out of partnership that aren’t necessarily financial returns. You got partnerships with the startups and you aligned your interests — how did you convince people internally that this was a good idea?
E: I think it was a couple of things. One is that we’re very focused as an organization as to what kind of business we’re in — we’re in the business of beverages, we’re in the business of refreshing people. We’re staying very focused with our priorities. Which means the partnerships that we build are here to feed our core business and allow us to engage with consumers in a better, more meaningful, quicker, or creative way, depending on the type of partnership that we build. The reason we have started to embrace startups is actually because we believe that entrepreneurs — especially today because of the democratization of technology, because of the democratization of information — are able to bring so much speed, nimbleness, creativity and agility that it causes us to think about our business in a more innovative way.
Why do we take equity? Well, because it positions those partnerships in a more sustainable, long term and meaningful way. It shows our commitment to the startup. There is even more responsibility for us to be successful and to meet the promise that we give to the startups than the other way around. It is easy for Coca-Cola, or a big brand, to appeal to a startup or to a young entrepreneur. We have the skills, brand, history and the people. So, that puts even more responsibility on our shoulders to make sure that we live up the the promise of that first meeting.
Now, going back to not getting distracted, we always remember the reason that we exist as an organization, what drives our bottom line, is selling beverages. Even some of the startups we have partnered with have grown tremendously since the time we initially invested in them. But, the financial upside that we could potentially make will be minimal compared to the business that we make every single day, every single hour, selling our beverages. So it is very important that we stay focused in that respect.
H: That’s refreshing in a lot of ways. We work with a number of organizations and some have different views than you. Some people say they would like to find a way to make their existing business better. I think that’s similar to what you do. How do we deliver our marketing message better? How do we engage with customers in new ways? I think there are some who are saying that they want to use cost reductions and use a startup to accomplish that. I think the third category we work with are people who are looking for their next growth engines, especially companies that are in industries with flattening growth lines.
When you are doing these deals, how do you measure success? Do you literally look at how many more sodas you are selling? How do you measure internally if you’ve accomplished something?
E: It varies by startups. All of those partnerships we build start with a common thing which is a clear business need or a business reality that we have as an organization. The example I gave you earlier, of finding the right music for our needs at the right price and at the right pace is a business need. That is a business need we have today, we had three years ago and that we knew we were going to continue to face, three, five, 10 years from now. Because we have more brands and those brands have more needs for music. Music remains a very important part of our marketing mix and we know 10 years from now we will continue to live with music.
H: Do you think that it was easier to make that partnership because it’s a “not such a sexy-type of business?” Music rights is a little bit of a nerdy thing.
E: I have to be very honest. A lot of it happened through the test and learn. We didn’t know we were going to start marketing ventures when we did that first partnership. We wanted to create more meaningful partnerships andMusic Dealers wanted to raise more equity and were looking for a partner. We believed in their business and wanted to take a risk with them. That triggered it and we learned from it.
So, back to your question about measurement. The measurement we do on the program is tied to the particular objective of that program. The partnership with Music Dealers was measured by how much music we sourced, the productivity driven by sourcing it through them instead of sourcing it through other forms and the number of projects we do. We have celebrated over 250 projects with them in two years around that world. It doesn’t all come from the United States; 50 percent of the projects are from places like Russia, South Africa, Asia, Latin America and Europe. That’s one way to measure it. Other startups we will look at how much we increased brand affinity or brand preference, with a certain target group. Each of them is very different, but it’s not too scientific. It is thought through, but when you work with entrepreneurs, you are forced to be agile and flexible. You have no choice. You partner with some of those startups and six months later the business that they are in looks very different than what they were in six months earlier. We have to adapt to that.
H: One thing I have been very impressed with when I’ve worked with you guys is this very respectful way you interact with entrepreneurs. I guess, as an entrepreneur and somebody who works in the space between big companies and startups, it can be a little weird to parade startups in front of corporations. The startups might have a skeptical attitude because they have been burned before. A lot of companies make very big programs offering money and then have startups parade in front of their people. You have chosen a different path. You work with people who have access to proper entrepreneurs and then spend real time with them. Obviously, I’m a fan of that kind of a approach. It’s an approach that doesn’t get a lot of credit. Why do you think it was important for you to do it in that kind of way?
E: As a team, we are paranoid of not living up to the expectations of the first meeting. We want to show excitement when we meet a startup. We know that when that entrepreneur goes back to his company, he’ll say he had a great meeting with Coke. Our biggest fear is not living up to that promise and that excitement. The only way to live up to it is to be choiceful, to dedicate the right amount of resources behind it and to learn how to be patient. Patience isn’t in the DNA of large organizations. We want results fast. It’s a small industry and if you burn yourself with one entrepreneur, you’ve burned yourself with a lot of them. You’ve got to be very careful.
H: I think a lot of companies are looking to partner more in this space. If you’re someone who sits in a brand and has either an innovation or marketing role and you want to get entrepreneurship much closer into your DNA, how do you go about that? You seemed to have used some of your sponsorship budget. What’s your trick to move things ahead?
E: I don’t think there is a trick. Today, it’s part of the ecosystem of doing business and bringing innovation into an organization and thinking innovatively. Working with entrepreneurs is not the same as working with other large organizations, working with Sonny Vo at Misfit, is not the same as working with the International Olympic Committee or FIFA. Those are different sized organizations; they don’t have the same history.
We need to be as good of a partner with FIFA and the IOC as we are with Sonny at Misfit, or Jeff at Spotify, or Eric at Music Dealers. Internally, that requires us to structure ourselves with a different skillset. You want people who are going to be great at working with large organizations and we want different people who are going to be great at working with entrepreneurs. At the core, what those two people need to share is that they need to work well inside Coke. They need to remind themselves that we’re working for Coke and ultimately we are here to engage with consumers and sell more beverages in the right way, at the right time, for the right occasion, for the right consumer.
H: This might sound like a bit of a weird question, but you’re based in Atlanta, which has some cool startups but isn’t necessarily the hub of the startup community. How do you practically engage? Do you travel a lot? Do you invite a lot of people over?
E: First of all, I would say that Atlanta is getting more and more dynamic. I would say also, there used to be the Valley and nothing else. Today, you have all these hubs around the world — New York or LA or Tel Aviv or Berlin or Paris or Sydney. When we were looking to find a partner in the wearable field who gives people the tools to be more active and monitor their activity and balance, we met a lot of organizations and startups. It was two days of back-to-back meetings with all of them. The last meeting of the two days was a meeting with Misfit. We had just seen an Indiegogo video they had done. We were all a bit tired and jetlagged. I wondered if we even needed to do the last meeting, but Basir told me we should go. We drove to southern San Francisco and the address that we had was a small suburban house. It didn’t really sound like the HQ of an up-and-coming startup.
Anyway, we rang the bell and the guy that opened the door had a dog barking next to him. The guy was wearing a complete basketball outfit — long shorts, a jersey, a cap. I told him that we were with Coca-Cola and were there to meet with Sonny. Sonny wasn’t there and he directed us to the basement of the house where there was an old-fashioned table with three chairs and three cans of empty competitive sodas on the table. It’s like it was staged. We were wondering if it was a setup. We waited for 20 minutes and then the guy who answered the door came back and said Sonny wasn’t coming in, that there was probably a misunderstanding about the meeting time. But, he put Sonny on the phone. We spoke with him for two minutes on the phone and he tried to understand why we were interested in talking. We ended up meeting at South by Southwest in Austin two weeks later. We spent three hours with him and that was it. Then we sealed the deal. If Basir hadn’t pushed me to go and if we didn’t pursue it, those things wouldn’t have happened.
H: It seems like you’ve also been very focused on the founder and the core team. I remember when we worked with Endomondo, you really liked the founder team and those were the people you were backing.
E: Totally. We have a philosophy that looks at three things. We call it the three P’s — the people, the product and the promise. What we mean by that is who are the founders? Are they people we’re going to want to spend time with and share values with? Is the product not only something we believe in, but does it work with our brands? And then, the promise, is where does this company want to go? What is their long-term plan? For example, we investigated digital music streaming companies to find a better way to connect with the younger generation since digital streaming is the number one way they consume music. We met all these companies and they were all fascinating and great.
But, the reason we picked Spotify is one, the people, Jeff, the chief business officer and Daniel. Not only did we believe in them, but they spoke about Coke and why they believed in a partnership with us. They believed in the partnership with us as much as we believed in the partnership with them. One of the main differentiations of Spotify at the time is that it was social at heart, it was all about sharing music. Using music to bring people together is what we like our product to do. It was the only one of the companies we met that said they wanted to expand internationally and transform music into a global, accessible and affordable currency around the world. That democratic approach and international growth were very important to us. So, while we look at those three criteria, it starts with the people.
H: You’ve done things in music rights, you’ve done streaming, you’ve done activity, you’ve done measurement. What are some of the spaces you are fascinated by these days?
H: You’ve been in gaming for a while, right?
E: Yeah, we just hired a head of gaming. We’re doing a lot of things. We started a partnership with eSports two years ago. We’re learning a lot and testing a lot.
H: What is it about gaming? It’s one of those things that everyone has seemed to be talking about for forever. You don’t really know how many people are gaming, but everyone says a lot of people are gaming. It’s never really been a thing that a lot of brands have integrated with.
E: It’s the fastest growing entertainment industry right now. It’s double the size of the film and music industry combined. There are more people watching the final game of League of Legend online than people watching the NBA finals. What is interesting and fascinating about gaming right now is that it’s not only about gaming or playing the game, but it’s about watching people play the game. Twitch was bought for just under a billion dollars by Amazon. Gaming is the second currency on YouTube after music. So, people are playing, people are watching and now people are attending. People are buying tickets. My immersion into this world was two years ago at the packed Staples Center with 30,000 or 40,000 other people who paid an average ticket price of $55 to watch other people play a game.
H: That’s incredible.
E: The multi-faceted dimension of gaming and how the gaming industry is reinventing itself is fascinating.
H: I used to run MTV games outside the U.S. and one of the things that was complicated was that you had a lot of cool kids at MTV and then you had a lot of pretty nerdy kids in the gaming space. The culture of those two was always an interesting thing to try to fit. Do you think sometimes it is hard as a marketer to understand the subculture of gaming? Is that one of the reasons you invest?
E: It’s very hard, but what we do is bring in gaming experts to our team. Matt Wolf, our head of gaming, has worked in the gaming industry for 25 years. He has brought inside our organization, the knowledge, the network and the understanding of what would be the right way for us to engage with gaming. Matt hired on his team, to work especially on eSports, a guy who is an eSports anchor in regional events in Georgia. On the weekends, he is the anchor of the League of Legends event in Georgia, and during the week, he works for us. He is bringing a ton of knowledge inside the building. So, when it comes to those specific passion points, we believe music is the same, we bring in expertise inside the building, rather than trying to do it ourselves.
H: That’s really fascinating. What do you think a startup who thinks they have something to offer you guys should do? You’ve been going out and finding them so far? Are there people who come to you?
E: Yeah, there are. Sometimes they work, sometimes they don’t. I would say the key is a good understanding of our business problems. If a startup has an answer to some of the problems we are facing business-wise, then they have a higher chance of engaging in a positive conversation with us then if they’re in a business that is fascinating and growing, but is not connected to our core business. Earlier this morning we met a young entrepreneur with amazing energy who is working in a very interesting industry, but there is no way that we can connect it to the beverage industry or the business of consumer engagement. So, it’s not necessarily the right fit for us. That’s why it’s important to not get distracted and to stay focused and remind ourselves why we are doing those partnerships.
H: I’ve got a bit of a nerdy question that I always ask. I think a lot of us who are interested in entrepreneurship are also interested in life hacking and making stuff more efficient. Do you have an app or service you’ve discovered recently that is actually really cool and you’ve started to use?
E: There is this app that I started using two days ago that I’m really intrigued about. It’s called Plague. It shows you, through a very simple mechanism, how content you’re watching is spreading around you. Depending on whether you browse the content up or down once you watch it, it’s going to spread in one direction or the other. It shows real time the virality of a piece of content based on where you’re located. I’m not sure I completely understand it yet. We have a 24-year-old guy in our team who does analytics of real-time marketing and he told me about it, so I downloaded it. I’m really intrigued about it. Everyone talks about the virality of content, and all of a sudden I have it here. I can track it, I can see it.
H: I’ll try that.
H: Final question. I started to do this Prehype podcast and I guess I’m learning as I go along. Is there a subject you think that people are not talking about. Something you’re passionate about that isn’t being talked about in the entrepreneurship marketing scene, but it’s an area that someone should talk a little bit more about. Beth Comstock from GE was talking about philosophy, a guy who is very integrated in the Quantified Self movement was talking about what happens after we die — do you have an area that you think would be interesting for us to explore that no one is really talking about?
E: It’s cooler today for a smart kid to work at a startup than to work at a large organization. The model has flipped upside down. So, I’m fascinated and intrigued by what that means.
H: How do you attract people? How do you get that entrepreneurial spirit inside the organization?
E: We try to create an open culture where hierarchy isn’t really relevant and where everybody has a say at the table.
H: I think the coolest thing about being an entrepreneur is that you get to work with people you like on problems you think are worth solving. I think you still have that in some organizations and you can still offer that promise. Then, if you give entrepreneurs or young people tools to allow them to be a little bit independent, they can actually be pretty entrepreneurial within big organizations.
E: Totally, absolutely.
H: I think that’s a good end.
E: Thank you for having me.
H: Appreciate it.
One of the most respected big company CMOs in the startup industry is Beth Comstock. Beth is GE’s chief marketing officer and the leader of the company’s newly formed business innovation unit. She is tasked with making a corporation of 300,000 more entrepreneurial. Her passion and devotion to startups runs deep, which is probably one of the reasons why you might find at random bars hanging out with startup founders in NY’s Lower East Side. I had the chance to discuss startups and their increasingly important role within large corporations.
“I’m a market discoverer. I feel like you can’t read a report, you can’t have a consultant tell you, you have to be out there. When I was in college, I majored in biology and minored in anthropology. I think at heart I’m an anthropologist. I believe that’s what good marketing is. You’re not really trying to sell someone, you are understanding a need. How do you understand what entrepreneurs are thinking unless you go hang out with them?” – Beth
“Part of the reason you enter into a partnership is that you want to share risk and reward and you want outcomes faster. Sharing risk and reward means sometimes you win and sometimes you lose. You have to have that mindset. Not every venture you do is going to be successful. It is a portfolio.” – Beth
“I would say just start. That’s a mantra for me. We can analyze everything to death and do all the ROIs, but at some point, you have to just start. Start small, try a partnership. If you’re a startup, oftentimes you expect the gloryland immediately. But, you need to do the same thing. You need to take a bet on a company, you need to start small, pick one project, be patient and not put your whole business plan on one company. I think both sides – big companies and startups – have to just start.” – Beth
H: Okay, Beth, let’s do this. So, first, who are you?
B: I’m Beth Comstock. I work at GE. I lead our business innovation group and I’m also our chief marketing officer.
H: It’s somewhat unconventional that a lot of the venture stuff fits into the marketing team. How did that come about?
B: Well, it came about for a couple of reasons. I think if you really believe passionately in marketing, you believe marketing’s role is to help the company go where the markets are going and to be about what’s next. If you believe that, it takes you to hanging out with startups and figuring out how to partner with them and how to have a mutually beneficial relationship. What can they offer you? What can you offer them. Pretty soon, you start to think about investing, maybe you can help them commercially, maybe they can help us. So, it was really just a natural progression, saying where is the world going, how do you develop markets, and who are the partners that can get you there. Increasingly, startups are the ones who can get you there faster. So, if you follow that chain, it puts ventures in the marketing area.
H: A lot of companies seem to have a very tough time becoming more entrepreneurial. Why do you think that is?
B: Sometimes companies forget they were once a startup. You lose sight when you go to scale. There is a value in scale. Scale is about doing things well in a big way. Sometimes we forgot that is also important. You fail to focus. I think oftentimes companies try to do too many things. My colleagues hate when I say this, but in companies, frankly, we spend more money than we need to on these things. I think that’s what you learn from startups. In startups, you have a very limited amount of capital and resources, huge passion, aspiration and vision. I think we need to be more stringent in terms of how we fund ideas and get them to a healthier scale. We put money in before it’s ready, so it’s premature scaling. It’s a common issue. We just keep throwing money at it, when really what is needed are the right people and time. Often companies don’t want to give the time and patience that some of these ideas need.
H: I think that’s very true. Very often, when someone has a must-win area, they get 20 people in a room, have a brainstorming session and come up with 800 ideas. They invent these portals that take 18 months and 10 million dollars to develop, but by the time you are two-thirds through with developing them, the world has moved around, off to somewhere else and you’re stuck with this monster project.
B: They should have funded two and they funded five, because they don’t want to choose.
H: Or they should just fund one at the time.
B: No one wants to be accused of being an idiot because they let an idea go, but you have to pick.
H: When you work in a company like GE with 300,000 people and you really start to buy into this lean startup methodology, how do you get your head around the concept that you can’t always do the billion dollar thing that will change the world but you have to start with something small that could grow into something big?
B: That is a challenge in companies. Sometimes there are ideas that are just too small for us to take on. That’s sad if you’re the one that has that idea. That’s why you partner with startups, that’s why you fund ideas outside yourself. If you are a company at scale you have to have some sort of path to achieve scale, or it has to be part of a family of ideas, or it has to be opening a whole new market space that you believe in. But, also if you’re running a big company, and you’re an innovation junkie and a believer in innovation, you have to have a portfolio. And you have to know that there are going to be some ideas that you’re investing in that aren’t scaling now, that you believe are going to scale at some point. That’s why you have to give them room and you create space for them. That’s why we have incubation in our venture teams. You have to create a protected class of ideas. That’s something I believe passionately about. You have to fund them, you have to care for them, you have to say it’s okay when you don’t make your numbers for a quarter. You have different metrics, different toll gates and different expectations. But, there comes a time when you have to have accountability, because you have to have a customer at some point.
H: One of the things we do in the startup space, is that the accountability is having a limited amount of cash. If we spent $250K in our seat round and we haven’t created traction, then it’s game over. Traction can come in a variety of forms – users love it, or users pay for it, or a lot of new users join. In many ways, you often link time and budgets, but you could just link it to budget. You have $250K and if you haven’t reached certain milestones, then it’s game over.
B: We’ve tried to adopt that growth-funding method to incubating internally and that has helped a lot. But, you do have to create room for those things. I often say to my colleagues inside GE that they have a different risk profile. That’s why you came to work here, first of all. You don’t know what it’s like to go home and tell your partner I can’t help pay our mortgage or rent. Most people who work in big companies don’t have that personal anxiety of putting it on the line every single day. Starting up is hard.
H: As you know, I’m a big fan of they way you work with startups because I think it’s very generous. I don’t say that just because you’re sitting here, but at Prehype we interact with startups and the big companies. Often I find it’s very much on the corporation’s terms. They say come to our place, tell us what you do, and we might throw you some money. But, one of the things you seem to do is interact with the startup community. I went to this dive bar on the Lower East Side with 12 entrepreneurs, and suddenly you popped up. I was surprised to see you. Why do you spend the time doing that?
B: Two things. One is our company has been on a journey to partner more. Historically, in a company like mine, what happened is a partnership meant let’s do it our way. At best, you were 50/50 partners but you always had to fight for controlling interest. The world just doesn’t work that way anymore. I think companies like mine have become very humbled. We have had to admit that we don’t have all the answers, and we can’t do it all ourselves. When you go through that process, you become a better partner.
The second thing is, that’s just the way I’m wired. I’m a market discoverer. I feel like you can’t read a report, you can’t have a consultant tell you, you have to be out there. When I was in college, I majored in biology and minored in anthropology. I think at heart I’m an anthropologist. I believe that’s what good marketing is. You’re not really trying to sell someone, you are understanding a need. How do you understand what entrepreneurs are thinking unless you go hang out with them? So that’s really why you saw me hanging out on the Lower East Side. It has been my job to go where things are happening and understand them. Then I bring it back to the company and translate it in a way that makes sense.
H: GE is such a big organization and I’d imagine your to-do list is very long. Yet, you consistently show up at industry startup events, you organize dinners for entrepreneurs, you seem to spend so much time on it – do you feel you have to justify that internally?
B: Yeah, sometimes. I recently had someone at another company ask me how I managed to get my job to where I have no operating responsibilities. First of all, I have huge operating responsibilities and expectations. My neck is on the line for a lot. Fundamentally, it’s partly my job to say where the world is going and who is making it happen. Secondly, I think you make time for what is important to you. Discovering, connecting and hearing what is on the mind of Henrik at Prehype, for example, is important to me. I need to understand it; that’s just the way my brain is wired. I spend a lot of what would be my personal time out doing that.
I’m able to devote the time I need to doing the important things my company expects of me, but I have also been able to prove that this is also important. I’m able to connect with people who might not think of GE as a partner. If my company, my colleagues and my boss, Jeff Immelt, hadn’t seen the results from my work, they might wonder what I’m doing. But, I think they have seen enough results and interesting mashups, that they value it. At least I hope so. Well, I’m still there, so I hope so.
H: It seems like you get a lot of personal enjoyment out of being embedded in the startup scene. What do you think you take back to GE? I’m sure the partnership with Quirky came out of your involvement. It is very visible and considered a big success. Can you talk about the tangibles of these partnerships?
B: I personally get a lot of energy out of it. You are mostly learning a lot. The company I work for is big on development – they expect you to develop yourself and to develop the company. It’s the kind of place where you wake up every day and say: “What are we here for? We’re here to get better.” I believe that. That’s my ethos. If you believe that, you are constantly looking for people who can help you get better.
While we have dozens of others, Quirky has been a very visible partner. My colleagues and I in the marketing and development space are all about big experiments. There is no guarantee that any of these are going to work, but hopefully there is enough good that comes from them. What has Quirky helped GE do? When we first aligned with Quirky it was with our appliance and consumer business. They helped us learn speed to market in product development. Most recently, together we launched a connected light bulb. It took Quirky three months to help us do that. We were working on it for three years and didn’t get there. Already people can start to see tangible results. It was designed in a beautiful way; the community of Quirky helped make it better. As for other results, I can tell you that I got a product to market faster and we have a new customer relationship that is much stronger – all of those kinds of benefits are just huge for a company. Then there is the cultural piece of having Ben Kaufman, the founder and CEO of Quirky, come in and agitate a little bit. To say to people: “Why are you doing it that way? There is a different way to do it.” And I think we have been helpful to the Ben Kaufmans of the world.
H: Is that tough to manage sometimes? We see that when we build something very quickly with a big company, it slightly pisses off people within the organization. Is that just something you need to do – to create a little bit of tension sometimes to make people move a little bit quicker?
B: I think you hit on a really important point. The more I work, the more I’m convinced that tension is essential for creativity. Timing is also a big issue. A lot of what we set up is tension between the technical innovation and the market innovation. Sometimes technology creates opportunities that you never thought possible. Sometimes you can take existing technology and create new benefits just from combinations and business models. We try to create that tension a lot to encourage better innovation. I think tension is key.
And, yeah, sometimes we use our entrepreneur partners to create that tension. I’ll give you a good example. I’m not sure I helped Ben Kaufman much, but he helped us a lot. We brought him to a big leadership conference. He had just gotten back from one of our divisions where he toured the manufacturing floor. I asked him what his impressions were from the tour. He said, “I was really impressed that you guys are going to have new hinges in three years.” Well, he was being very blunt and the reaction from the room was interesting. It was a filter and a test. I goaded him to say it. There will people who hated that he said it, who were really annoyed and thought he was putting them down. And then there were people who said they needed to be around people who think like that. It became a filter. It was amazing the people who came forward and said they wanted to work with him. It was also a for us chance to say, “Hey Ben, it’s easy for you to think like that, but do you know what it’s like to do tooling at scale, do you know what it’s like to have this type of factory automation at this kind of output?” I think he was able to learn something, too. There is a real opportunity to take some of these disruptive models and challenge yourself by questioning if you really know everything.
H: But is there also benefit in failing with a partner? Let’s say a relationship with some partner doesn’t work out, you don’t get the numbers. For example, another company you work with that I really like is PolicyMic or mic.com. If you do a content marketing experiment with them and if it doesn’t work, then it doesn’t really matter because it’s just a partnership. Is that something you think about? That partnerships are a good playground for experimentation? Or is it just because you can get talent externally that you can’t get internally?
B: It’s all of those things. Part of the reason you enter into a partnership is that you want to share risk and reward and you want outcomes faster. Sharing risk and reward means sometimes you win and sometimes you lose. You have to have that mindset. Not every venture you do is going to be successful. It is a portfolio. You have to have other things that you are getting out of it. This was a bit of a sell at GE to say we aren’t just doing this for financial returns. There may be a project that financially isn’t a big success, but culturally, or speedwise, it achieved things that weren’t possible before. Strategically, it keeps us from making a mistake. You have to have a really interesting scorecard. It has taken us awhile to get everyone comfortable with the idea that the scorecard isn’t just financial returns. Yeah, you want some of that. You have to have earnings to keep doing inventions, right? It’s like that old Thomas Edison line, “I make money so I can keep inventing.” We are not a nonprofit. But, we are at the size of scale where you can take risks and look for other kinds of returns, that aren’t purely monetary.
H: Do you see yourself as an internal marketer? I would imagine a lot of people share your vision but feel they are restricted internally. They might have a CFO that’s very powerful, or a risk-compliance team, or tech team, or brand police that are often compensated to make sure tomorrow looks like today. How do you navigate those types of obstacles internally?
B: That’s a great question and leads to another benefit of doing these partnerships. It creates role models and examples. We recently completed a partnership focused on drones with the team at Airware. We are working together to figure out how to bring drones into the service arena. The ability to light people’s imagination by allowing them to have a partner and try new ideas without getting 500 approvals is crucial. I’ll tell you a couple things. In companies – big, medium and even small – innovation is often a journey into yourself. It’s easy to say you can’t do something because the CFO won’t let you or because you have restrictions. Yes, they exist. Yes, there are processes. But, sometimes people need to be given a little bit of permission and they need to give themselves permission. They need to say, “If this guy can do it, then I can do it.”
H: I was talking to somebody the other day about the idea that negative emotions and energy are actually very useful when you’re an entrepreneur. For example, you go out, you tell your partner that this time is going to be less hard, you tell your investors that you have everything figured out, you tell your staff that they should leave their good jobs and come and work for you because it’s going to be worth a lot. Then you have all of this anxiety build up. But, that is one of the things that keeps you sharp. What do you think are some of the negative elements of entrepreneurship that would actually be useful to have more of in big companies?
B: I actually think it’s too easy for an entrepreneur to get money these days and I actually don’t think that’s a good thing. There is venture capital everywhere. I like to see an entrepreneur who can actually make some money. I think the real test should be: Is your idea working? Can you actually generate revenue from it? Sometimes entrepreneurs underestimate the value of scale, access to markets and other things established companies have. They tend to look at an established company and think they are boring and slow. I don’t think we’re boring. Yes, sometimes we are slow, but we also know how to do things at scale and how to do them repeatedly. We have processes that may not be very exciting, but they help reach goals. If entrepreneurs are open to adopting some of these methods, I think it makes them go faster in the long run.
H: I think a lot of entrepreneurs have had some negative experiences working with big companies, either because the decision-making process is so slow or whatever else it may be. Do you think that is changing because big companies are becoming increasingly willing to work with startups and even a little bit more on their terms?
B: They have had to. For one, it has become a little bit trendy for big companies to work with startups. We went through a startup-envy phase. Everyone wanted to be a startup, but, then big companies have to pause and realize they have some good things.
H: Also, I don’t want my plane engine to be done by a startup. I want that to be done by GE.
B: Right, the business model around it might be okay, but there are certain things that big companies do really well. For partnerships to work, companies, like mine and others, have to dedicate partner resources. If you show up from Prehype with one of your companies, you want GE to make it fast. You want a partner who is going to help you navigate GE, not throw up roadblocks. Historically, companies got a bad rap because it had to be on their terms. Now, you have relationship managers who help the startup navigate the company and help the company navigate the startup. You are invested in making the startup succeed. You need a shared vision. I’m not sure every company is there yet, but more and more I think companies are realizing it’s important.
H: You guys have done a lot with startup methodologies internally. How do you attract entrepreneurs to work with you as partners but also to say with your organization?
B: Getting them to work as partners is easier because they can keep their own identity. They can grow their business and can hopefully choose the best of what GE has to offer. But, not everyone is going to be a successful entrepreneur. I think the success rate for founders is like .4%.
H: It’s very low. I heard somewhere that entrepreneur is just French for being stupid.
B: There is a high failure rate.
H: It’s not for everyone. Everyone watched “The Social Network” and saw it as the promised land because you are your own boss. There are a lot of downsides to being an entrepreneur. Obviously, I’ve chosen it.
B: It is really hard.
H: To spin on that point, I also work with a bunch of intrepreneurs who sit internally in an organization. They tend to have all the same properties of people I’ve met in the entrepreneurial space who are incredible. But, intrepreneurs just really understand how to navigate the political system and they get a lot done. Interestingly enough, I don’t think they get a lot of credit. Especially the people who bet on entrepreneurs. Some of the breaks I’ve gotten are when people, like yourself, have taken a gamble because they like the vision. Is that something you guys encourage? Or is there a way to encourage that?
B: It’s hard because you have processes. I’d say a couple things. In order to get entrepreneurs to come work for GE, you have to create the right mechanisms. We are hiring entrepreneurs and residents to help us incubate and telling them if they like it, to go run it. You have to set up different incentive compensations and different mechanisms not tethered to some of the metrics we talked about earlier. You also need to allow them access to all the goodness of the company. It means you have to do a lot of work to make them succeed and want to grow there.
Internal entrepreneurs don’t need a lot. They just need to be left alone and told it’s okay. They need to be given some air cover and some resources. Often, the best thing a leader can do is to identify those people and give them the courage and then have their back if they fail. That goes a long way. I think you’re right, companies need more people that recognize it is essential. Not everyone in the company can be that kind of risk taker, but you need a few of them.
H: I think GE is considered to be on the forefront of doing these partnerships and embracing entrepreneurial culture. What would be your advice to people who feel that is something their company should do more of but don’t know how to start?
B: I would say just start. That’s a mantra for me. We can analyze everything to death and do all the ROIs, but at some point, you have to just start. Start small, try a partnership. If you’re a startup, oftentimes you expect the gloryland immediately. But, you need to do the same thing. You need to take a bet on a company, you need to start small, pick one project, be patient and not put your whole business plan on one company. I think both sides – big companies and startups – have to just start.
You need a good leader at the top of the company who believes it’s important. Who is willing to try and fail and to allocate resources. It doesn’t have to be a lot, but it shows it is an important idea. Symbolism really matters. You have to allow people to fail and make them heroes. You need to acknowledge that it didn’t work but you still learned and took something away from it. Sometimes you have to take those failures and turn them into wins.
Companies don’t always think this through. They expect to go to Silicon Valley, find a partner and get an incredible outcome. But, it’s really hard. What are you trying to do? If you are trying to just get return, then set up an equity fund. If you’re trying to move your culture, there is a different kind of path. If you’re trying to get strategic insights to the market, there is another way. You first have to decide why you want to partner with startups. Look, we have made a lot of progress, but we have also made so many mistakes. There are going to be so many failures in our portfolio.
H: That’s such a good point to determine what you are trying to achieve and then decide what tool is needed to achieve it. We see people who don’t know if they want to make their existing business better, or if they want to extend into new platforms, or if they want to create a new adjacent business, or if they want to have culture change. They need to just pick one and then find the tool that fits. What are some of the things that you haven’t managed to do yet that you would like to do?
B: I don’t think we’ve spread it as far and wide across the company as we should. I worry sometimes that these things become trendy and then people move on to the next thing. These things take time. Some of our hardest startup partnerships have gone through times when they are not doing well. You have to believe that you are going to get there. So, there are ups and downs. There is tension. We haven’t cultivated it as much in the system. I think about how you incentivise people. You have to start to say to people within your organization, “Do you believe so much in that idea that you would bet some of your salary on it?”
H: When Mike Volpi, who is now a partner at Index Ventures, was at Cisco he used to tell employees that he couldn’t finance it internally, but he told them to leave, set up their own company with the idea and then if it worked, Cisco would invest in the idea. It might not work, and then they would be out of a job. But, the reality is that a lot of these companies then spun out, made amazing stuff and then Cisco bought them back. Cisco made a lot of entrepreneurs very rich because they basically said, “Put your money where your mouth is and we’ll pay really good money if you succeed.”
B: We have gone so far as to assign Eric Ries and David Kidder as coaches for executives, engineers and sales and marketing people. The points we want to make is that it’s important, they have to make time for it, and we will have someone would hold their hand through the process.
H: That’s funny. We were talking to the McKenzie guys about the idea that a lot of senior executives shouldn’t be mentoring startups, but they should have a young, smart entrepreneur, mentor them.
B: It goes both ways. I think both learn from that pairing. You’re absolutely right.
H: If you’re a startup and want to work with a company, what’s the way in? It seems like people from the outside are protecting the access to someone like you.
B: I see this a lot. I will meet an entrepreneur who thinks they are set because they met the CEO or CMO of some company. I wouldn’t put all your eggs in one basket of any company. Oftentimes the CEO can give you an introduction, but if the people you are introduced to aren’t champions, then forget it. The first thing you need to do is find a champion. You have to do your homework. You have to understand what a pain point is in the company and how you can help solve it. It really is a sales job: “You have a problem, I can solve it. I have a need, you can solve it. Let’s get together.”
More and more companies, like ours, as well as CitiGroup, Walmart and Samsung, are setting up partnership teams. It’s a place for startups to begin. They have filters. First, you have to make sure you are aligned. What you are offering might not be of interest to the company. If I’m a startup, I would ask for clear, crisp communication. Ask if your pitch is good. Ask them to be honest, not just nice. Too often companies are just nice and lead startups on forever. You have to be very clear with a company about your time window. Tell them the deadlines and feedback you need.
There has to be a real honest discussion and not too much magical thinking. Your future is not going to be determined by just one company. I see that a lot, too. Startups often put all their efforts into one company. Instead, head your beats and go to a few different companies. Then, a final comment, in regard to the marketing and brand type of companies. I always say that while our brand team at GE, might not have the biggest budget, we are a really good development partner. So come to us, we want to be creative together. Out of that, you will have a blueprint that you can sell other places. Sometimes it may not be for big bucks, but it is for huge intellectual property that you can go scale. Be clear with what you can get out of the company.
H: I think that makes a lot of sense. A question I always like to ask at the end is: Have you discovered an app or service lately that will make your home screen or that you wish other people knew about?
B: I really like an app called Random that I’ve had for maybe six months. It does a random curation of content. It’s sort of an anti-movement. Also, I’m constantly in search of productivity apps. I’m a lifehacker from way back, so I’m always trying out new calendars and new to-do lists. I haven’t found anything yet, so if anyone has one, let me know.
H: I found one the other day called Captio. It sends an email to yourself. So, instead of opening an email client and having to write your own email address, it does that for you, saving you maybe eight seconds a day.
B: That’s a good one.
H: Final question: As we are beginning this Prehype podcast we are asking people what would be an interesting podcast they haven’t heard yet. What’s a subject matter that isn’t being discussed or somebody who is interesting that isn’t being heard and would make an interesting podcast? Do you have an area that doesn’t get enough air time?
B: Yes, one. I’ve actually started a dinner group and we get together every now and then and discuss philosophy. We look at how ancient wisdom applies to modern life. I think we are all looking for a better way. I’m finding there are a lot of digital entrepreneurs startups that are intrigued by ancient wisdom and philosophy. How do you life a better life? I think that’s a subject that never gets old.
H: And with that, thank you so much for taking the time to hang out.
B: Great questions, thank you.
H: Thank you so much, Beth.
I recently sat down with Thomas Wedell, author of “Innovation as Usual” and a partner at the advisory firm The Innovation Architects. We talked about tricks for becoming more creative, on how much risk to take, tips for selling ideas to your boss and the dangers of the Hawaii shirt syndrome. Thomas has experience working with managers from around the globe and has observed innovation at a vast variety of organizations. The focus of their in-depth conversation was how to innovate within the constraints of a rigid corporate structure.
Below are excerpted highlights (full transcript is below):
Listen to the interview here: https://soundcloud.com/prehype/prehype-podcast-how-to-make-new-ideas-happen-in-a-big-company or on itunes: https://itunes.apple.com/us/podcast/prehype/id983443923?mt=2
Thomas’ preferred definition for innovation:
“Innovation is about creating results by doing something new. And you have to focus on the results part. If it’s creative, great, but if you don’t make an impact in the real world, it doesn’t matter. And that’s where I think people can go wrong by focusing too much on the creative part, rather than the bottom line.”
Henrik’s qualities of an entrepreneur and their greatest adversary:
“If you want to be an innovator, if you want to be considered entrepreneurial, it is your job to move the ball forward. Often that means painting a very good picture of what the future might be, or by using charm or trickery, to get things done. It’s very easy to say things are difficult and might not work, and therefore people default to not doing anything. I think the biggest risk for innovators and innovation in general is not that you do something wrong, but that you do nothing at all.”
Thomas’ advice for getting traction within a large organization for an innovative idea:
“One of the first steps is to get a sponsor on board. With a sponsor, I mean something very specific. A lot of people think innovation is about selling your idea; that’s wrong. It’s about selling yourself. So, the first question you have to ask is: who in this organization, a little bit higher up than me, can help me in some way? Who trusts me, who knows that I’m not going to create a mess or do something bad for their career if I take a few risks here and there? That’s the person who can be your sponsor and who you can approach with your idea and get advice. From the very first step, you start thinking about the political landscape.”
Henrik’s observation of a common fault present within innovation teams:
“We meet a lot of innovation teams that just started and a lot of them don’t seem to be in much of a hurry. They might have three years, so first they want to do a lot of research and discovery and play around, too. I don’t know why that is. Lately, I’ve been thinking that we’ve been talking too much about it being okay to fail. That basically gives everyone a carte blanche, that as long as they’ve learned something, it’s fine. I think that’s a little bit of BS. This is not a game, this is about inventing the future for a business and therefore, you have to really mean it.”
Thomas’ discussion of the often-underestimated value of less-disruptive innovation:
“I think we’re sometimes so blinded by the light of really big ambitious projects, those that we read about on the front page of Wired, that we miss out on the fact that there is a lot less risk and a lot more value to gain from stepping a little bit down with the ambition.”
Henrik’s emphasis on not giving up hope that small projects can succeed in big ways:
“Often, it’s very difficult to predict which one of these projects will turn out to be very big. Sometimes just building a small thing is better than building nothing at all, because, often these small things can turn into something big, if you’re lucky.”
H: Today I’m joined by Thomas Wedell, a friend of Prehype’s but also a pretty extraordinary gentleman and scholar.
T: Mostly scholar, really.
H: Today we are going to talk about how to convince your boss to let you work more as an entrepreneur. What are some of the tricks you can deploy to really get to do some of the stuff that you think you need to do, but there might be an environment or there might be structures that prevent you from doing those things you want or need to do. Joining me is Thomas, I’ll let him introduce himself.
T: I’m an author with Harvard Business Press. I came out with a book called “Innovation as Usual” two years ago. I worked a lot with corporate innovation, trying to figure out, not so much at the CEO level, but further down, how do you actually make this work. And what attracted me, and what is happening at Prehype, is the focus on implementation.
H: You spent the last 10 years or so touring around the globe, working with different companies, studying the art form of innovation, its structures and its tools.
T: Basically, whenever I ran into people who had either really failed or really succeeded, I went in and looked at what they had done. The question that really interested me was: where are our mental models about innovation wrong? We have this idea that innovation should be a free-flowing, Hawaii shirt exercise, but in reality, you have to focus on the corporate environment, you have to consider that your biggest obstacles are not necessarily the customer, or getting the product right, but if you work in a big company, how do you manage that space? And that’s something that I found not a lot of people had focused on.
H: The word innovation is one that is being used for a thousand different things — do you have a definition of innovation?
T: Yes, I love to use a very simple one. Innovation is about creating results by doing something new. And you have to focus on the results part. If it’s creative, great, but if you don’t make an impact in the real world, it doesn’t matter. And that’s where I think people can go wrong by focusing too much on the creative part, rather than the bottom line.
H: So it becomes art if it’s too creative?
T: Because the corporate paradigm of creativity came from the art world, like Alex Osborn back in the 1960s, we got this whole idea of creativity being very artsy and I think that’s a problem if we work in a normal company. I call it the “Hawaii shirt syndrome.” If you’re going to put a Hawaii shirt on in one of your meetings, is that going to further your career, or are you going to look like an idiot? And I think that’s the tension. We’ve inherited a lot of bad ideas about creativity from the art and advertising world.
H: But, let’s go back to innovation and doing something new. A framework that we talk about often is Vijay Govindarajan’s Three Boxes of Innovation.
1. How do you make your existing business better?
2. How do you extend it or create something new on the back of that?
3. How do you create complete and new adjacent businesses?
It seems to me like there are different tools for these different boxes. If you just want to make your existing business better, you need to deploy tools to basically empower your staff to think and do something in a new way. If you want to create something new, a new incubation business line, than you need some different tools. People mix all these different ones. If we start from the left, how do you improve your existing business better, and we try to introduce this concept that you’ve been writing about called stillstorming. First, can you describe what that is and then how it works in the context of being an employee of a big organization with something you want to improve.
T: We coined the word stillstorming to position it differently from brainstorming. The whole brainstorming approach is based on this very visible, very creative process that is seeking buy-in for ideas. If you’re working in Box 1, you’re in the corporate environment, not at some startup in Silicon Valley. And basically, you have to accept that your corporate culture is what it is. You cannot change a corporate culture, so those are the working conditions. And I became really interested in people that succeeded in that space.
I wrote about a guy called Jordan Wechsler sitting inside Pfizer. Pfizer is a really big, super bureaucratic company. The way he dealt with these challenges is by not being very visible, by staying under the radar. He gathered resources on the sly, tested out staff, and used his existing network to get buy-in. I came out with an article about your MTV initiative where you did something similar. You started a thing inside MTV called Top Selection, that was very under the radar. What did you do? Why did that succeed?
H: Well, I think at the time I was young and slightly stupid. It wasn’t thought through that much. The issue I had was that I had an idea to launch a new show, and the gatekeepers, who were the technology team, didn’t really want to use the type of technology that I thought would work really well. I built it on my own dime and brought it to my boss who thought it was kind of cool. But, we met all these people who didn’t want us to do it. So it ended up with me going live at two or three in the morning without getting permission and hijacking the channel that way. It sounds very rock and roll, but now you would probably get fired and escorted from the building. But, at the time, that type of thing was kind of okay. And, so we launched it and it worked very well. I think it was only by taking the risk and doing it under the radar, that it worked.
T: Can you talk more about risk? I know this is one of your philosophies at Prehype. How do you view the prospect of risk? Should the company take it on? Risk is a big thing with innovation and it’s a bad thing.
H: If you want to be an innovator, if you want to be considered entrepreneurial, it is your job to move the ball forward. Often that means painting a very good picture of what the future might be, or by using charm or trickery, to get things done. It’s very easy to say things are difficult and might not work, and therefore people default to not doing anything. I think the biggest risk for innovators and innovation in general is not that you do something wrong, but that you do nothing at all. When it comes to risk, I think organizations need to take balanced risk. For example, make it cheap to fail, so the organization doesn’t lose a lot of money if it doesn’t work. And then try it a lot of times, rather than making it very safe and expensive.
T: In my time, I’ve seen some companies that were so risk-averse that they delayed the collision with reality until the last possible moment at which point it was a huge collision.
H: I think that’s very common. I think people sit in a board room and think they’re very smart as they come up with ideas. They might try to validate it by doing user testing but the user testing is hiring an agency that is basically paid to agree with you. So, you test it, but you don’t really test it. I think what we advocate at Prehype, not just the corporations, but also with our own projects, is that we just launch stuff and see how users really react. It’s a very humbling exercise. Quite often you’ll do something that doesn’t work at all and you thought it was a very good idea.
T: I saw a fun example, well not so fun for the company. Carlsberg, the Danish beer company, decided to use a different bottle design that was a little taller, meaning the crates had to be a little taller too. They launched this nation-wide in Denmark and then realized that the shelves in bars are a specific height and the taller crates didn’t fit. So a lot of bartenders just put the crates in the back, and their unit sales literally dropped 20 to 25 percent overnight. That happened because they didn’t reality test it faster. What I’m curious about is: why doesn’t that happen? We, as an innovation industry, the experts, have been telling companies this message a lot — you have to fail, you have to test things early. Why do you think that doesn’t happen?
H: That’s a good question. I think many people are inherently lazy and like to think and talk. When you actually have to do this, it’s a lot of grind work. It’s not very fun. Most people have the idea of X, but don’t realize that idea X, actually involves endless amounts of laborious work.
T: I tried to do a startup once, but that suffered an ignominious fate. The interesting thing to me personally was that before doing the startup, I took a class on entrepreneurship. That worked against me because I thought I had it all figured out in my mind. It wasn’t until I got in the trenches and figured out that it wasn’t a logical thing, it’s something you have to go through.
H: So let’s go back to the original question. You belong to a big organization, you have an idea, something you want to do. What are the concrete steps of stillstorming, or is there such a thing?
T: One of the first steps is to get a sponsor on board. With a sponsor, I mean something very specific. A lot of people think innovation is about selling your idea; that’s wrong. It’s about selling yourself. So, the first question you have to ask is: who in this organization, a little bit higher up than me, can help me in some way? Who trusts me, who knows that I’m not going to create a mess or do something bad for their career if I take a few risks here and there? That’s the person who can be your sponsor and who you can approach with your idea and get advice. From the very first step, you start thinking about the political landscape.
H: There’s this joke in the venture community that if you ask for advice, you get money. And if you ask for money, you get advice. Maybe that’s the same thing in the corporate landscape. If you go to someone with an idea, they probably give you free range to do it. If you say, I don’t need money to do this, they’ll probably say you shouldn’t be doing it.
T: Most people like giving advice, most people don’t like to be asked for help. Help is something different, but if they like your idea, they’re going to help you with it anyway. The second thing, then, is: how do we find ways of testing this that are so cheap that we can keep it off the radar? There is such a thing as a corporate radar, and once you’re on that, people will be asking for results and five-year plans. Typically, the less power you have, the better off you are keeping it under the radar as much as possible until you have a little bit of proof of concept. Like, what you did with MTV, you broadcasted it, there were good reactions and then you could go in and say, “Look, it worked.” One thing I love that you work with is this idea of clear cost of closure. Do you want to quickly explain how you work with that?
H: It is a little bit boring. But, I guess one of our main points is the best way to reduce the risk of innovation is to make it cheaper. A lot of corporate innovation teams hire a lot of full-time headcounts to work on a project. And almost, by design, then if you realize it doesn’t work, it’s very difficult to close down, because a bunch of people are trying to come up with new ideas to keep their jobs. We create structures that isolate projects with project teams. If they don’t hit their various milestones, we default close them down, rather than default make them continue.
T: I thought it was interesting because that was one very tangible way of dealing with that question: what is the risk here if this doesn’t work out? I work with Samsung’s European Innovation team and they discovered a few things about how to best sell in various places. For example, they discovered that people in Korea are afraid of losing their jobs at Samsung. It’s a big, big deal there. But, basically, one thing they found out is that they should never present their idea in isolation. They learned to always pitch a high-risk project along with it, that wouldn’t be accepted but would increase the gatekeeper’s appetite, for the less-crazy project, which is the one they wanted to get done anyway.
H: Have you ever seen that backfire, when it really just didn’t work?
T: That happens, definitely. One company, whose name I cannot mention, launched a big innovation initiative and got sign-off from everybody on it, up to the top level. They thought they had covered their backs, but then it failed, and most of them got fired.
H: I’ve noticed that especially if you’re running a business line already and you try to innovate within that, I very seldom see people get penalized for it. If you do stuff and it doesn’t damage the company too much, I think most people are just excited that you tried something new. It’s interesting though, because if you take an innovation job, you very much put yourself where if there is nothing tangible that comes out quickly, then people wonder what you’re doing. Ironically, we’ve talked about Boxes 1, 2 and 3. Box 1 is how do you make your existing business better, I think you can actually do quite a lot within that framework. The more that you do Box 3, create a new adjacent business, then it’s very visible when you don’t succeed.
T: It is a high-risk position to step into an innovation team exactly for that reason. One interesting thing I saw was done by a guy called Luke Mansfield who ran Samsung’s innovation team. From the beginning, he went and negotiated a deal with his bosses in Korea and said he needed three years. In his case, he got it. But, what also happened, is that a year and a half in, they started asking anyway.
H: We meet a lot of innovation teams that just started and a lot of them don’t seem to be in much of a hurry. They might have three years, so first they want to do a lot of research and discovery and play around, too. I don’t know why that is. Lately, I’ve been thinking that we’ve been talking too much about it being okay to fail. That basically gives everyone a carte blanche, that as long as they’ve learned something, it’s fine. I think that’s a little bit of BS. This is not a game, this is about inventing the future for a business and therefore, you have to really mean it. I think a lot of innovation teams just start out really slow. They always seem to be scrutinized much earlier than they think they will. To your point, most of them know they have three years, but even six months in, their senior management is looking for the billion dollar outcome. As an innovation manager, you have to manage to that. You need to have different projects running in your portfolio — some long-term plays but some have to be a little more shiny. You have to manage your own role within the ecosystem of your company.
T: It’s very difficult, especially to be a highly disruptive team aimed at that because they tend to take more time. But, if you don’t have something that’s a little less disruptive and gets results or at least visibility, then you can get axed. There is an interesting example from Samsung. They were approaching their three-year limit and they hadn’t generated the results. And then there is this project where they decided to take a big risk. They had come up with a better way of syncing data between competitor’s phones and Samsung’s phones. Only, Korea said they didn’t want to launch it because they had a team working on it. But the team in London had a solution that worked, so they launched anyway. Luke Mansfield, who made that decision, launched it and then didn’t pick up his phone for two weeks until they had gotten enough traction with it. It’s a very clear example of someone taking a personal risk, but also because they were under pressure of a deadline.
H: I think you have to create kill-switches for yourself. I think you have such a bias for falling in love with your own ideas. You have to create structures to make yourself do the right thing because your mind will trick yourself. I think that’s important. Even for the stuff I do on my own and the homegrown business we do for Prehype, we very much have kill-switches and structures that keeps ourselves honest, for ourselves.
T: This goes back to the 100-day point. What I like about that is that it influences your selection of projects so you don’t end up picking very ambitious projects, that we know from research have a very high failure rate.
H: At Prehype we do a lot of different things that I wouldn’t say are counterintuitive, but, for example, we have unit economics and business models built into our businesses. That probably caps us off from making a $10 billion Instagram business because we like to have more clarity about what is on both sides of the equations, what are the unit economics that will allow us to scale this business even if we have 30 or 50 thousand accounts.
T: A lot of the research bears this out. One of the points I like to make is that we underestimate the impact of less-than-super-disruptive innovation. This is a bit tragic, but I compare this to data from 9/11. After 9/11 occurred, a lot of people chose to drive, instead of fly, because they were afraid of the visible risk. There is a German economist who figured out in the year following 9/11, an additional 1,500 people were killed in traffic, because it is actually more risky to drive cars. In the same way, I think we’re sometimes so blinded by the light of really big ambitious projects, those that we read about on the front page of Wired, that we miss out on the fact that there is a lot less risk and a lot more value to gain from stepping a little bit down with the ambition.
H: I think that’s super interesting, because if I look at the projects that I’ve been involved with that have been successful, a lot of them were somewhat unambitious when we started them. We didn’t know that BarkBox was a huge industry that hadn’t been disrupted, we just thought it was a cool little idea.
T: I remember when you started it, I wondered what the knock-down effect on the economy of happy rottweilers was and the reality is that it’s pretty big, as it turned out.
H: That comes back to advice and tricks for people who sit in roles where they would like to do new projects. Often, it’s very difficult to predict which one of these projects will turn out to be very big. Sometimes just building a small thing is better than building nothing at all, because, often these small things can turn into something big, if you’re lucky. I have a few standard questions that I always ask. If you were to give tangible advice, from your position as an innovation expert, what is an easy trait to apply to everyday life or to everyday work life?
T: I’d probably say two things. One is to focus much more on building trust networks. It’s not so much about ideas, but the ability to work with different people across an organization. That’s what I’ve seen that unites all of the people I’ve worked with. Secondly, always aim for impact. There are many teams that fall into the trap of focusing on the wrong metrics, like generating 500 ideas. You have to force yourself to be measured on real-world stuff like did we create money for the company or extra income or increase customer satisfaction, or whatever you’re going for. And I said two things, but I’m going to say three. I’m not always good at applying this in my own life, but this whole idea of working with structures and becoming an innovation architect, which is different than being an innovator. The idea of going in and working with the architecture and personal structures that are in your own life and using those to get better at what you want to get done. If you want to get better at meeting new people, create a Monday lunch routine where you sit at a different table at the company. You create structures for yourself to get things done.
H: Last question. We are obviously pretty new at making these podcasts and we’re pretty happy that a few people seem to be enjoying the first one and I hope enjoy the second one. I hope people share it and send ideas of what we should talk about. If you had a subject matter you think we should talk about in this podcast, what would it be? Last week, Steven Dean was talking about how we never talk about what is going to happen after we die. It’s a pretty interesting subject matter. What’s an area that you think is really interesting and under discussed?
T: Before you said under discussed, I was about to say the behavior design field, but I feel like a lot of people are actually discussing that. How do you getter better at engineering people’s behavior — your own, customers, coworkers and so on? I feel that there has been a shift from focusing on values and mindsets and getting more tangible. If I had to pick something more unusual, I’d say narratives. Narratives are something I’ve always taken an interest in and it plays such a huge role in how we sell things and how we tell our own stories. I work as a keynote speaker, so from that perspective, how do you get better at actually conveying ideas in a way that really works? A lot of people are afraid of public speaking. There are a lot of courses out there that focus on the presentation, like how to move your hands, but that’s not it. The point you have to focus on, is how you develop your content. And, once you have really strong content, it’s actually okay if you’re not the world’s greatest orator. Content is just more authentic.
And there is a third thing, problem diagnosis. Across every business I’ve worked with, there are people who are very good at solving problems, but really bad at taking the time to diagnose what the problem they are trying to solve is. The consequence is that very often you see these huge, ambitious projects that are just fundamentally barking up the wrong tree. That particular skill, of upgrading the world’s ability to solve problems, is what I’m working on at the moment.
H: Have you written about that already or is that for a new book?
T: I’ve written a little bit about it in my first book “Innovation as Usual.” It’s buried somewhere in chapter three or four. But, a book is not a great vehicle for changing behavior, because it requires you to read 220 pages. So, I’m trying to build a toolkit around teaching people to develop this one specific skill. That could also be an interesting topic to discuss at some point.
H: Thomas, you are a gentleman and a scholar. Always interesting to talk to you.
T: Likewise, Henrik.
Turning cost centers into profit opportunities
Typically, when companies offer new products or services, they do so either as a defensive play, to protect existing business, or as an opportunity for growth. However, one area of opportunity is to take a product development view on creating new revenue out of an area of your business that traditionally is just a cost center. The idea of turning cost centers into revenue opportunities is something we have been exploring at Bark & Co. Several of our teams, ranging from content marketing for promotional events to customer service, are now running as independent business units with their own P&L. This allows us to scale the teams faster, compensate the staff better, and build better tools for our core business. Our promotional events team at BarkBox.com has been turned into BarkLive, a set of paid-for dating events for dogs and their parents. Another example is what in other firms would be called a traditional content marketing team. At Bark & Co., our content marketing team has morphed into BarkPost.com. This is now a very fast growing media property, which not only provides value to our core business, BarkShop.com, but also sells sponsorships to external established advertisers, ranging from Sony to Roomba to Tito’s vodka.
Larger companies should explore this type of innovation too, turning their domain specific tools and processes into new products that can be sold to the industry at large or offered to their existing customers. This method is, if nothing else, a very effective way to reduce costs. The approach is not necessarily new; several tech companies have been doing this kind of innovation and have stumbled into opportunities that turned out to be much bigger than their original core businesses. There are several famous examples of this. The photo sharing service Flickr was originally a simple productized version of a tool that was used in a computer game, while PayPal was developed as a tool to showcase Palm Pilot Payment. In both cases, the marketing site ended up being a much bigger business than the original product.
The latest example (outside Prehype and Bark & Co.) that I have seen is what Jeff Bezos is doing with the Washington Post. According to the Financial Times, the Post plans to sell its back-end content-management system (CMS) to local and regional newspapers.
Why is this so interesting?
Because it shows that you can turn what is usually a cost (buying/building software) into a revenue opportunity. New revenue can be extracted not just by monetizing content (the traditional core offering for the WP), but also by productizing the process or tools used to generate content.
Making these core tools a profit opportunity will allow Bezos to allocate more resources (talent and capital) towards those tools, which will make them better and result in the development of better content for the Washington Post.
So the question is, what other cost center’s could larger companies turn into profit makers (events, research, financial reporting tools)? At Prehype, where we co-create new ventures with large companies, we will certainly be looking more at this area in 2015 and will try to find opportunities not just in an organization’s core offering but throughout the whole value chain.
More on this can be found http://twitter.com/werdelin
I am doing a new research project in collaboration with Thomas Wedell-Wedellsborg author of ‘Innovation as Usual‘ , looking into different approaches to making innovation happen. The question we’d like to answer is:
If you are responsible for driving innovation in your business, what kind of practical approaches or models are currently available? What are the strengths and weaknesses of each approach? What are they most appropriate for?
A lot has been written about innovation strategy and the like. What interests us here is a more hands-on question, focused on creating a neutral, data-driven overview of the main existing solutions that are currently available. We sometimes use the metaphor of an ‘innovation smorgasboard’: if you are looking to make innovation happen, there is this whole buffet in front of you, full of different options for getting the job done, from incubators to traditional R&D to corporate venturing. Each approach has strengths and weaknesses – and some may be more effective than others.
With the project, we want to create an overview of the main options that can help people make better decisions about how to make innovation and growth happen.
We are in the early stages of the project, so we’d love to get your input. All (significant) contributors will be credited in the final report. Some questions we are currently looking into are listed below – all kinds of feedback welcome:
For the purposes of the study (and in line with Thomas’s book on the topic), we define innovation as “Creating results by doing something new”. So innovation is not only or necessarily about new technology or big-bang disruption; it may as well be getting better at identifying new needs and solving those with existing technology. In this sense, innovation is really about answering the question, “what new offerings will our business live off in the future?”
If you want a note when the report comes out, please fill out the form below or send us an email on firstname.lastname@example.org.
The underlying logic of the model above is based on the recognition that successful innovation has different components, from need identification to building the organization that can deliver the product/service, and that the available solutions address different parts of this. The logic is shown below (click for full size).
Despite the the massive growth in online shopping, ecommerce is still incredibly basic and utilitarian as a user experience. You show up, buy, we ship.
At BarkBox, we focus on a customer-centric approach that incorporates a bit more emotion and experience design. We do this by constantly finding new ways to meet potential customers, delivering a better experience when they visit our sites, and building a strong and personal relationship once we begin to service them (and their dogs). We focus on trust and by extension, authenticity, in every pixel of our presence, and every dog butt pic we share on Instagram.
Constant testing, trials, and experiments have led us to the six pillars outlined here, and following them has been key to achieving real scale.
1. Give a shit
Thinking that customers are idiots and you’re the smart one is toxic, and that attitude seems to be prevalent in corporations and startups alike. Customer support shouldn’t be viewed as reactionary, like something you only do when you have to. We did a few things differently early on at Barkbox, some by accident, some by design:
A) By necessity, the founders handled support from day one. We talked to customers every single day by phone, email, Twitter. We put our phone number on the homepage. As we began to grow, we put a very senior person, who some might say is overqualified, on running support. We then added other important responsibilities to the support team, like our pro-social work, some aspects of analytics and reporting, and marketing. Elevating support as a focal point of the company.
B) We reframed support as “Customer Love,” and constantly rely on the team to provide insight into customer’s motivations, interests, and complaints. The feedback loop between support, management, and product development is super tight. That allows us to turn customer complaints into insights, and pass those into tangible features.
C) Even when a customer did something wrong, we go to great lengths to make them happy. The most vocal critics become the loudest supporters once you listen to them and understand why they feel you were unfair or frustrating. Engaging in real dialogue like this helps you gain permission to ask customers all kinds of questions, and introduce them to new products and features. Some of our best features and ideas comes from open customer conversations. As a result we now ship special boxes to ‘heavy chewers’.
We evaluate many aspects of our progress based on changes in call volume relative to certain issues, number of tickets, customer win-backs, and other key support metrics.
2. Find million dollar stickers – by obsessing about your user flow
Sometimes huge pools of revenue are hiding in plain sight. The conversion funnel (from homepage visit to check-out) is the artery of an ecommerce business, and small tweaks there can pay outsized dividends. Below is an example of what we call a “million dollar sticker.” This little “best value” sticker has been tested dozens and dozens of times and after introducing it, the composition of our customer’s subscription values increased by 40%. This little sticker earned millions in revenue.
Think deeply about what users are motivated by and interested in as they move through your landing, registration, and checkout pages. Especially now that ecommerce shopping takes place more frequently on mobile screens, you have less real estate and need to make small tweaks a core exercise to profitability.
3. Email is one of the most underappreciated tools
If email is not a core driver of growth in your revenue, then you’re definitely doing something wrong. Ecommerce companies aren’t thinking as innovatively and creatively about email marketing as they should be. Maybe because we all feel like email is spammy now, and our own inboxes are full. But in reality, the inbox is more than ever the homebase for communication and the jumping off point for sales conversions. Mobile people check their inbox 100 – 300 times per day. Carving out a brand presence there is a big opportunity to increase the length and monetary value of customer relationships.
Think of email like a pulse check over time as your customer travels from day 1 signup to day 90 being a loyal customer and evangelist. Emails are like signposts on the side of a road. The customer is in control, but you can influence their route quite a lot by posting the right signs at the right times.
Email needs to be personalized, well-timed, and tightly correlated with what a customer wants to hear from you at that moment in their relationship with you. Some key tips to driving repeat purchases, engagement, and loyalty with email:
A) Be aggressive in capturing emails. Not too aggressive…. but collecting emails should be a focused effort for your marketing team.
B) Be really personal. Get out of the “batch and blast” mentality. Be entertaining, and not just salesy. Even when promoting a special offer, make it fun, and not just urgent.
C) Plan emails as an if-this-then-that chain over a 30, 60 and 90 day period. Design the content to guide customers along the ideal onboarding and activation path.
4) Let users do the talking
For as much noise as people make about “tapping into social,” most integrations and share triggers seem to be poorly or haphazardly integrated. The customer is the best resource and inspiration here. They are naturally social, so you don’t have to reinvent the wheel, just listen to them closely and understand not only what they share, but also why they are sharing. What’s their motivation? Why would they tell their friends about a purchase? Why would they tweet about your company’s existence?
People value content that is any combination of entertaining, helpful, or educational. Be one or all of those. Sharing is mostly motivated by our need to feel smart, cool, or unique. Help users feel that. Help them humble brag.
Your social strategy should be to amplify and encourage the natural sharing tendencies of your customers. The days of the borderline rude pop-up window “Congratulations, you bought some shoes! Post on Facebook // Share on Twitter” are mostly over. – And yes, you can you just trick everyone into sharing? But then again, it’s really not ethical. Read more about that at “The Product Developers Dilemma: Morality vs Virality”
5) Be the place to hang, even if customers aren’t buying
Apple’s flagship stores changed the future of offline retail in my view. Computer stores are no longer a place where you just buy gear; they are venues for taking classes, meeting geniuses for support, or snagging free wifi and hanging out.
Our experience is that the Apple approach is highly relevant for e-commerce platforms. At BarkBox, we aim to do for dog parents what Apple does for computer buyers. We give them a place to hang out – even if they aren’t buying anything yet. We created a popular content property called BarkPost, and are super active on Instagram. Our Facebook properties are fresh with dog-related content. Facebook in particular has been a great partner and a good platform for publishing our content in a way that people enjoy while allowing us to quietly promote our services too.
But we seldom talk about our products on our hangout properties. Our content outlets are for sharing our passion for dogs with like-minded people – not scooping a quick “like” or forcing sales offers down people’s throats.
6) Be a smart salesperson once you’ve established intent
In your content and social presences, you should not be be pimping your products and services heavy-handedly. But once you have purchase intent, turn on the direct sales. Try offering additional impulse offers at checkout, discounts to incentivize larger order sizes, free shipping incentives, and complementary product category recommendations. The more your customer feels like they are discovering a value-add as opposed to being sold an additional product, the better.
Be smart about marketing around abandoned carts or cart items that didn’t make it through purchase. Every dollar counts in ecommerce, and just like million dollar stickers, small improvements in your sales flow go a long way. So look at your flow as a journey – and find polite ways to upsell when you think you can. (read my post about ‘Flow vs Feature’) But don’t overwhelm customers with too many options early on. Most customers think they want options, but really they want the right options.
When reading Reid Hoffman’s essay “Disrupting the Diploma” it became clear for me that badges are growing up. Once something you claimed for fun on Foursquare, badges are now being used in new, different and awesome ways — for pretty much everything. It seems the time has come for badges to be taken seriously and become serious business. Here are three reasons why:
Badges are becoming real.
The core thrust of Reid Hoffman’s recent essay “Disrupting the Diploma” is that diplomas and other devices for communicating accomplishment, skill, dedication and expertise are outdated. They’re ready to be ushered into the 21st century. Pieces of paper, Reid argues, just can’t keep up with the dynamism of an authentic digital badge (or collection of badges) and the way a badge can be shared online and brought everywhere on mobile phones.
Reid is perceptive to point out that a badge can only be real and valuable if its distribution is limited. Over the past two years, for example, thousands (and tens of thousands) of people have been claiming badges on basno every day. They do that because they trust (and can verify) that the badge was issued by the right issuer in the right way to the right people. By understanding a badge’s source and how it’s been distributed, people can place value in the story it tells.
For those of us in the badge business, it’s therefore a big deal seeing the word “badge” used in a serious essay written by one of Silicon Valley’s finest. Gone are the days of badges as little images you collect for checking in on Foursquare. Today, the badge world is humming with talk of great potential. This is a huge shift in public perception that is just starting and crucial to our collective future. Badges are real, versatile and will increasingly provide real life value for their owners.
2. Badges are not just for education.
The attributes that make people special (that are #badgeworthy) stretch way beyond their coursework and job training. (There’s a reason that a good interview quickly skips to the “Interests & Activities” portion of a resume!). The impact of a great digital badge platform will likewise stretch far beyond education and professional development.
Badges will touch athletics, health and wellness. The medal and trophy will go the way of the diploma.
Badges will be part of sports, music, movies, television and entertainment. Souvenirs, ticket stubs, memorabilia and other mementos will all be badge-ified. Exactly as they have been in the ‘real’ world for a long time. What is new (and required for digital badges to work) is that we build a way to verify the authenticity of badges. Give them series numbers — and track who issued them.
Badges is already for supporting causes, non-profits and charities. Badges as appreciation from brands and businesses. Badges for traveling to great places and climbing mountains and going shark diving. Badges for interests and affiliations. Badges for style. Badges for reasons no one’s even thought of! Check out a few examples here from ‘a badge you get when you are a serious Lego Builder, over the digital version of your New York Marathon Medal to proving that you are an accredited investor.
3. Badges will be big business.
Badges are incredible communication devices, capable in a second of conveying immense context. (And as our friend Gary V says: “context is king.”) That’s why what Reid dubbed “certification as a platform,” my co-founders and I call basno.com. A platform build on the fascination on how to create authenticity for virtual goods that is now the leading platform for badges.
For Reid’s vision of a world where the diploma is a collection of badges to be realized, it will require the issuance of many badges by many sources. That in turn requires an open platform for the creation and collection of digital badges: A place with both robust badge creation, distribution and authentication tools, and also a layer of services and apps that recognize those badges and help connect people with access and value based on the badges they own.
This is similar to when the creation of domain names started a whole new industry of domain hosts. It’s similar to what YouTube did for online video, SlideShare for presentations, etc.
@werdelin | http://henrik.me
Below is a list of articles that I think are super relevant for everyone who deals with corporate innovation or incubation.
If you have articles that should be added then tweet me.