The Funnel - Corporate Innovation Magazine | Spring 2019 | Volume #5

Do you use an innovation GPS? page 14

Partnership for Innovation page 22

New Skills, New Culture, New Business page 30

CONTENTS Business Title

06

Driving Innovation by Thinking More Creatively Together

10 Formalizing the Informal: Creating Change through Informal Networks

14

22

Partnership for Innovation

26 Leading Innovation and Seizing Opportunity in Conservative Industries

Do you use an innovation GPS?

16

30 New Skills, New Culture, New Business

Innovation Taking a Central Role

18 2 THE FUNNEL

The Holy Grail

34

Rethinking Health Insurance

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EDITOR’S NOTES Dear reader, There’s a proverbial tale about four blindfolded humans feeling an elephant. One of them, feeling the tail, states that it is a snake. The second one, with his hand on the animal’s back, states that it is a wall. The third one, feeling the elephant’s leg, states that it is a tree trunk and so on. The moral is that all of these people, by focusing on a single aspect of the animal, are missing the holistic picture and not realizing they are all touching an elephant.

We are starting the year 2019 full throttle, analyzing corporate innovation from various angles so that you are able to see the elephant and not lose yourself in just one of its aspects. Each aspect, like the freedom to create, the ability to be agile, leadership and daring, thriving communities is important in itself. However, overly focusing on one aspect while neglecting others is a recipe for failure, as my partners and I have seen over and over again in leading corporations around the globe. The numerous articles in this issue aim to give you a holistic view of the many aspects of corporate innovation - a multifaceted discipline.

This year’s Roadtrip TLV innovation conference is a celebration of the ever developing discipline of innovation management. The tremendous interest it generated attests to the growing hunger for knowledge and tools around this profession, which we see developing in front of us. Just like forty years ago when there were no clear guidelines to marketing management and today you can study it as a profession, so we believe will be the case for innovation management in the coming years around the world. We hope to contribute our part through this special edition which contains interviews with many of the speakers from this year’s conference.

Let’s change the corporate world one innovation venture at a time!

Ahi Gvirtsman

Chief Editor & Duco Global Partner

THE FUNNEL SHORTS 4 THE FUNNEL

01 WHAT’S IN THE WORKS FOR GOOGLE X GOOGLE X, FOUNDED IN 2010, OFFICIALY X DEVELOPMENT LLC., IS GOOGLE’S MOONSHOT PROJECTS DIVISION. CEO ASTRO TELLER WRITES ON THE WEBSITE, “AN X PROJECT MUST SOLVE A PROBLEM THAT AFFECTS MILLIONS OR BILLIONS OF PEOPLE; IT HAS TO HAVE AN AUDACIOUS, SCI-FI SOUNDING TECHNOLOGY; AND THERE HAS TO BE AT LEAST A GLIMMER OF HOPE THAT IT’S ACTUALLY ACHIEVABLE IN THE NEXT FIVE TO TEN YEARS.” PROJECTS ARE SEMI SECRET, BUT THESE ARE SOME OF THE THINGS THEY PUBLISHED THEY ARE WORKING ON.

MAKANI

VERILY

Makani energy kites have been a part of X for the past 6 years. They look like model airplanes with added propellers. They are about the size of a small jet plane, and are meant to harness wind energy.

These kites generate up to 600 kilowatts of energy, which is enough to power roughly 300 homes.

Working since 2012, Verily is a collection of ideas focused on improving medical tech. Some of the products include smart contact lenses that can accurately measure biological markers in our eyes, nanotech that can identify and latch onto cancer cells along with wearables that can tell when those nanoparticles find the cells and eating utensils that can help users with hand tremors or limited mobility.

PROJECT LOON

WAYMO

This is a socially conscious project working to bring high-speed internet to areas that are difficult to access. It uses balloons made from polyethylene (the same material as grocery bags) that travel close to the atmosphere and transmit high speed data. The balloons are powered by attached solar panels.

Waymo is Google’s attempt at a driverless car and are considered one of the leading autonomous vehicle projects. Waymo cars use LiDAR radars and cameras to detect objects and obstacles in the environment around them, along with various systems for computing, steering and braking, and an onboard computer built specifically for self-driving.

A report (Feb. 2019, US Bureau of the Census) discovered that businesses owned by immigrants have higher rates of innovation in 15 out of 16 criteria.

Separating the political questions on immigration, the researchers chose a range of measures to help answer the main question: “How much do immigrants contribute to innovation?”

The criteria included variants from detailed product and process innovation, to several forms of R&D, to intellectual property rights associated with innovation, including patents. The only measures where immigrants have notably lower performance compared with natives is for copyrights and trademarks.

03

GPS WINS INNOVATION AWARD

The four inventors responsible for creating the first global positioning system (GPS), have been awarded the Queen Elizabeth Prize for Engineering, considered the world’s most prestigious prize for engineering excellence.

The inventors, Dr Bradford Parkinson, Professor James Spilker, Jr, Hugo Fruehauf, and Richard Schwartz revolutionised international communications and, for the first time, enabled free, immediate access to accurate position and timing information around the world.

Today, an estimated four billion people around the world use GPS, and its applications range from navigation and disaster relief through to climatemonitoring systems, banking systems, and the foundation of tomorrow’s transport, agriculture, and other industries.

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02

THE IMPORTANCE OF IMMIGRATION TO INNOVATION

DRIVING INNOVATION

BY THINKING MORE CREATIVELY TOGETHER

AN INTERVIEW WITH CHRISTOPHER CHAPMAN, FORMER DIRECTOR OF INNOVATION & CREATIVE AT DISNEY AND THE FOUNDER AND CO-CREATOR OF WEOVERME. Q: I’d like to start by asking what this role of Innovation and Creative at Disney entailed.

A: There are two large pillars under creativity and innovation. The first is training the workforce in innovation and creativity techniques in order to enhance its proficiency around these skills. We all know that large companies change and so it is about retaining what Walt intended the company to be essentially while changing. The second pillar is about inventing ways of generating customer value through what I call “Return on imagination” vs. return on investment. Both of these integrate as the training activities also generate innovation projects that push the organization forward.

Q: Is innovation a teachable skill?

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A: My answer is an emphatic YES! I will use an analogy to demonstrate. Think of major league baseball. If you wish to teach someone how to bat and you put them in the batting cage, they can get very frustrated swinging at a 95mph fastball. That’s very different from playing baseball with your uncle as a child which is completely teachable. Today one can go to an academic institution and get a Master’s degree in creativity, but for the vast majority of people, the challenges of creativity require a simple pitch and catch in the park and not a professional level batting cage. Therefore, I think we should take a step back and discuss how we define creativity and what is its utility for most of us. Creativity is when you come up with something new that is also useful. If it’s a pure expression of self then it is art. If it is new, useful and also generates a return on your investment then it is innovation. In the United States, there was a report released that discussed something called “The fourth grade slump”. They noticed there’s a great dip in the creativity of children and that, as they get older, it is taught out of them because they are told that they’re not creative. Tests become standardized and reward them for basic skills they are good at, basically causing people to associate creativity with arts and crafts. Finance is one of the most creative fields there are but people who reach this discipline have had years of associating creativity with other things - not math or financial management. Basic creativity is inherent in almost everyone and simply needs to be awakened.

CREATIVITY IS WHEN YOU COME UP WITH SOMETHING NEW THAT IS ALSO USEFUL. IF IT’S A PURE EXPRESSION OF SELF THEN IT IS ART. IF IT IS NEW, USEFUL AND ALSO GENERATES A RETURN ON YOUR INVESTMENT THEN IT IS INNOVATION.

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TO THINK MORE CREATIVELY TOGETHER Q: There are two schools of thought around creativity. One is a Western approach which is about structured processes leading to creativity step-by-step, like a recipe. The other is an Eastern approach (e.g. “The artist’s way”) which talks about summoning creativity and not trying to control it. What school do you see yourself belonging to?

A: I would say that both and that’s what I believe has brought to the success of my approach.

What lead to my recruitment to this position at Disney was my dual ability to express the curious, dreamy side while, at the same time, being able to add a very clear business side to such dreams.

The reticular activating system is an area of your brain which becomes more active when you are relaxed and so our system for generating creativity includes means of having participants feel relaxed. Our methods allow you to choose the type of creative thinker you’d like to be and the place where the two approaches meet and collaborate is where great things happen.

Q: If I attend one of your workshops as a Disney employee, or today, as an attendee at your WeOverMe workshops, what would my experience be?

A: In our workshops, you would learn how to think more creatively together. This has three key pillars: • Framework - We like calling it creative problem solving. Some call it design thinking or an innovation process. This is about acquiring a skill set.

• Mindset - Here we focus on daily behaviors that enhance creative abilities for people. I perceive creativity as a habit, an approach which sometimes surprises people because they think

it is something you keep in a drawer and pull out when you need it. Mindfulness, intuition, bravery, how to show up, how to make sure you aren’t stomping on others’ ideas - this is what we teach at this stage.

• Toolset - This allows us to create systems to do it faster. We can look at great ideas, how they came to be and how we may facilitate ourselves and others using tools in order to gain insights to new ideas and refine ideas with feedback.

The entire experience is very hands-on, where people jump in and create while working with one another, learning from each other.

WHEN TITLES DISAPPEAR AND THEIR HUMANITY IS ELEVATED, THEY CAN SOLVE ANYTHING

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Q: I hear you using the word “together” many times. So your approach is focused on the ability of people to be more creative together?

A: Exactly. The power alley, if you will, is when people come together. Many corporations that we work with have silos and a separate “creative team,” already implying to everyone else that they’re not creative because only that one team have “creative” in their title. The more traditional teams, like Finance and R&D, are all in silos. We bring them together and everybody is shocked because, when titles disappear and their humanity is elevated, they can solve anything.

There’s incredible power when someone from Finance sits with someone from R&D and from the “Creative” team and there’s this moment when they start saying “Oh my goodness this is so amazing - I think we should build it and start our own company!”. We are very passionate about the things that bring us happiness. This co-creation causes our brains to produce Oxytocin and Serotonin because it involves human interaction.

We don’t have tables at our workshops and, when we break into groups, people sit facing each other. We just completed a two-day, 16-hour workshop and one of the participants came up to me and said, “Sometimes when you finish these workshops you feel as if you ran a marathon. I feel right now as though I could run a marathon!”

This is because this experience leaves you with a sense that you are filling your cup as you rediscover what it feels like to create as a tribe, together.

Q: What you are telling me is that even at Disney, which the average person perceives as highly innovative, the same corporate maladies that an average organization is afflicted with exist as well?

A: That is true. It is rather comforting to know if you work for a corporation. It is a bit sad, actually, but comforting at the same time. When I was at Disney, I trained people everywhere - HongKong, Europe, South America, North America - and the barriers to creativity, this approach of “I am not creative,” is universal. It is true for various corporate cultures as well. Even at a company like Netflix, where creation permeates through everything, one still encounters this at an individual employee level. I believe that the ability to create together well is a central tenet of leadership. If you are a greatest designer in your organization, that still doesn’t mean you will be a great manager of other designers. Leaders have to give others a sense of security and safety so they may thrive. This is very related to creativity because it is such a fragile place to be when you are creating.

A: Let me demonstrate this through examples of what not to do. Corporations tend to survey their employees, analyze the data and then come up with some sort of acronym such as BRAVE: Boldness, Respect, Agility, Values, Essential outcomes or something of that nature. Acronyms are great but there has to be proof that is measurable in some form or sense. They simply release this acronym and say: “Everyone is now going to behave according to this approach. GO!” There has to be a way to measure this and hold leaders and employees accountable to this. When you don’t do this and leave this at a platitude level then you cause people to leave and start companies that will disrupt you. A leader declares that there will be no meetings on Fridays in order to allow employees to be more creative but doesn’t set any ground rules as to how this will be enforced. She could, for example, set some sort of playful accountability such as having to buy a bag of cookies for everyone if one does hold a Friday meeting. When this isn’t done - guess what, two weeks later, everyone is back to holding meetings on Friday.

Another great element of leadership in this sense is basically showing up. As a leader, if you are sitting in your ivory tower, shooting down employees’ ideas while not being accessible to them, you will not generate the trust that is so essential for innovation and creativity to thrive. I had a person telling me that while he was at Hulu, the door to the CEO office was open to him and he was an intern. He now works as a designer for another well-known corporation and can’t even get a meeting with a VP. A final example is simply how Pixar was started by a Disney employee who got fired for thinking differently and promoting computer animation at a company that considered that as blasphemous thinking. He sold his idea to Lucasfilm and later became the executive producer of Pixar. Disney acquired Pixar eventually for over $7B and it was essentially started by its own employee. The talent was inside the company.

There’s no way around the fact that transforming your organization into being creative and

innovative requires both grassroots activity but it also mandates leadership. Leadership not in the sense of professional management but rather in the sense of leading your people through this transformation, by actually showing up and holding everyone accountable to it, thereby, supporting the grassroots movement that is making it happen.

THERE’S NO WAY AROUND THE FACT THAT TRANSFORMING YOUR ORGANIZATION INTO BEING CREATIVE AND INNOVATIVE REQUIRES BOTH GRASSROOTS ACTIVITY BUT IT ALSO MANDATES LEADERSHIP.

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Q: Since most leaders reading this aren’t going to perform open-heart surgery on their organizations tomorrow morning based on this interview, what advice would you give such leaders in order to enhance their ability to create this “safe” environment for creativity?

FORMALIZING THE INFORMAL: CREATING CHANGE THROUGH INFORMAL NETWORKS

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DANIEL SEEWALD - FOUNDER & CEO OF DELIBERATE INNOVATION, FORMER HEAD OF WORLD WIDE INNOVATION AT PFIZER

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In 2013, Pfizer faced an uncertain future.

With several blockbuster brands approaching their patent expiration, then CEO, Ian Read, recognized that Pfizer had to signal to investors and employees that innovation went beyond its pipeline of products and extended to its pipeline of people. The CEO was eager to spread an innovation mindset and culture across the 90,000+ employees. But there was also a recognition that change cannot be easily accomplished through leadership decree. Leaders can demand that their employees follow rules and regulations, but they cannot readily shift the hearts and minds of their employees. To realize the CEO’s vision, my team decided to build a very different change management model. Rather than build a traditional, top-down program, we modeled it on a decentralized, social movement.

The Dare to Try initiative at Pfizer began with centralized support but quickly pivoted to a decentralized approach. Employees from across the various geographic regions and divisions were initially recruited based on skill as well as passion for innovation. The role of these champions centered on three objectives: (1) to evangelize the Dare to Try mindset and practices, (2) to apply these practices to solve local challenges with local teams and (3) to recruit and mentor members of the local network. Although these champions operated with considerable autonomy, my headquarters-based team complemented their efforts by pulsing periodic promotion, training and resources to help support

the efforts of these local clusters of champions.

Within a couple of years, these clusters began to form into self-sustaining networks with unique identities, personalized communication channels and strategic plans.

These networks proved to be an effective means of reaching employees in an authentic way. With only 600 active champions in the network, we estimated that they reached a majority of the 90,000+ employees on multiple occasions. And after three years from the program launching, the impact of Dare to Try was evident. Performance data showed a steady increase in both the volume of innovation sessions, and more importantly, a sharp increase in new creative concepts entering teams’ strategic plans. Equally as important as performance, an ongoing attitudinal survey showed a remarkable change in the collective belief in the organization’s ability to innovate as well as individual’s ability to act more innovatively.

But perhaps most telling were the fingerprints left all around the organization. Emails and thankyou notes were regularly sent to champions in the informal networks. Employees proudly emblazoned Dare to Try stickers on laptops and office doors. Employees were acting more entrepreneurial as could be seen by the spinout of a novel healthcare start-up, known as Springworks Therapeutics. Even leaders routinely inserted “Daring to Try” as a new action-verb in their communications, including in the Pfizer annual report.

HARNESSING THE POWER OF INFORMAL NETWORKS The staying power of the Dare to Try movement was more than good fortune. It was a function of deliberate experimentation and learning. Over time, several principles emerged that were major contributors to its success. Here are a few of the insights that I gleaned over those years that can help an organization create a more authentic cultural movement.

KNOW THY NETWORK.

One of the lynchpins in jumpstarting your informal networks is deeply understanding the existing network structures first. Many networks already existed within Pfizer and these networks likely exist within every organization. At the outset, our team conducted a network analysis of the key influencers, central connectors and innovation evangelists. Initially, our method was qualitative in nature but, over time, we used more quantitative methods through employee surveys and an organizational network analysis (ONA). By bringing together a heterogenous team and conducting interviews across the organization, many of these hidden networks and influencers were characterized and mapped. From this research, we were able to recruit our first groups of champions, many of whom remained actively involved more than five years later and would later lead their local networks.

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CREATING AN INNOVATION MOVEMENT AT PFIZER

PROVIDE A PULPIT.

While my head-quarters team stayed involved in teaching, coaching and supporting the various champion networks, the most meaningful action we took was to facilitate communication within and amongst the various champion networks.

Storytelling and conversation must happen without intermediation in order for the networks to stand on their own. To do that, my team provided multiple platforms for connecting the networks.

A regular “talk show” series was held in which my team would blend late night TV entertainment together with corporate information sharing. We also designed and normalized the regular use of an internal social media platform that enabled network members around the world to connect and share ideas and practices. By building out the infrastructure and normalizing it, over time the networks independently operated and communicated with one another, which built familiarity and trust. Even smaller micro-networks would form, as we found in Latin America, where a WhatsApp group formed to request immediate help or input from the local network of champions.

BUILD THE BLOCKCHAIN. Quality and trust within the network are of high importance. As the informal network evolves and grows, there is an increased risk that current and future members may fail to meet the desired standards of the network. This can undermine the credibility and value of the network. It is essential that the network become increasingly rigorous and self-policed in its membership. We saw this practice in action within an informal network in Canada. Network members wanted to expand their membership and undertook the responsibility of recruiting, designing training and coaching the new members. Similar to the way a blockchain works, they took recommendations on new network members, but it was up to the network to validate. When multiple members on the network chain validated a person, a new network member was added to and trusted by the “blockchain.”

FORGO THE FORMALIZATION.

There is a very delicate balance between galvanizing a grassroots-like movement with decentralized networks and maintaining executive support. While my team tracked and reported a battery of performance and attitudinal metrics to demonstrate the ongoing change, we also tried to avoid the formalization that would undermine the grassroots nature of the movement. While it remained important that the champions receive manager support, we eschewed the traditional sanctioning of the roles within the Human Resources system. And while we worked with the champion network to set-up goals and objectives, we intentionally did not measure or report on them and allowed for it to be a individually-driven process. Treating these professionals as adults went a long way to keeping them engaged. Perhaps most interesting, we ignored the traditional change management approach of creating “train the trainers” and leveraged the insights from the Montessori Method, which emphasizes guided choice, encouraging freedom within limits, and building a reliance on networks of experienced peers, to reinforce learned concepts.

Change does not happen in a day and change is rarely led by a single person. Creating real and lasting change requires a thoughtful and deliberate approach that should be led by the very people who you want to be the change in the company. While it is certainly much easier to build an internal public relations campaign and issue an edict, as many companies will do, these programs inevitably fail the moment your leadership team stops promoting it. Instead, by tapping into the existing structure and nature of informal networks in your organization, you can turn your organizational decree into a movement that transforms the DNA of your organization.

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HOST A HAVEN. Changemakers also need physical spaces where they can plant their flag. Across the globe, Dare to Try spaces began to emerge. It started with my team creating a space in our New York Headquarters and then socializing a simple manifesto on how to build your own. Within a short amount of time there were similarly inspired spaces popping up all around the world, from Groton, Connecticut to Zurich, Switzerland. These spaces signal that the network and movement are legitimate and that a haven has been created where the usual rules and behaviors are different from the traditional corporate culture. They also become a capsule of the change that you want to see across the entire organization.

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DO YOU USE AN INNOVATION GPS?

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innovation in established corporations, we all know where we wish to go. “You should be more like Amazon (or Google, or Apple - fill in your favorite holy grail company name)” is a phrase executives hear quite often but it is equivalent to telling voyagers of the 17th century that they should travel to the lost city of Atlantis. They hear stories about this magical place and what it looks like and they will surely identify it if they came across it but does anyone actually get there? What are its longitude and latitude?

AHI GVIRTSMAN IS THE FORMER VICE PRESIDENT AND GLOBAL HEAD OF INNOVATION OF HP’S SOFTWARE DIVISION, THE AUTHOR OF THE BOOK “THE PEAK INNOVATION PRINCIPLES” AND CHIEF PRODUCT OFFICER AT DUCO. HE IS CONSIDERED A GURU OF ORGANIZATIONAL INNOVATION AND HIS METHODS ARE BEING IMPLEMENTED IN VARIOUS ORGANIZATIONS INCLUDING THE TEL-AVIV MUNICIPALITY, ISRAEL’S NATIONAL FEDERAL BANK, NETIVEI ISRAEL, IDF AND IAI (ISRAEL AEROSPACE INDUSTRY).

The age of exploration was a time period between the early 15th century and early 17th century during which many ships, originating from Europe, travelled across the seas searching for new trading routes and partners. The need to develop accurate tools to help seafarers navigate and find their way became a great necessity. In 1537, Pedro Nunes published his Tratado da Sphera which dealt with navigation through the perspective of mathematics for the first time, and sought for accuracy in what was essentially an artisan task at the time. As navigation maps appeared, it became clear that measuring one’s longitude and latitude were two critical techniques required to pinpoint a location on the map and thus understand how to correct course in order to reach a desired destination.

When setting out on what is currently an adventurous voyage of implementing

The equivalent in the world of innovation management would be a set of parameters that can be measured objectively and that let executives know how far along a company is in that voyage. They would tell you where you’re off course, instruct on what needs to be done in order to correct course and be clear about what will happen if it is not done. Such a tool represents an approach that looks at the transition from a functioning organization that struggles to innovate into a stillfunctioning organization (you can actually derail an organization if you take the wrong steps) that is also innovation proficient. This transition is truly a voyage.

It takes time, it takes determination and consistency and, most of all, it is an acquired skill. Just like seafaring captains learn how to navigate their ships to their destination so can innovation managers learn how to guide their organizations.

Over the years, I have been implementing innovation eco-systems both directly as an innovation executive in a Fortune 50 company and as a mentor to innovation managers of various types of organizations. What this allows me, having seen literally hundreds of innovation professionals, is to identify patterns and thus understand where the next invested effort will yield the most leverage.

Having synthesized what I learned about hundreds of organization, what now guides me is the understanding that organizations should keep their eyes on three parameters. Just like the latitude and longitude of navigation, so are these three parameters what innovation executives should be evaluating and striving to improve if their organizations are to reach the safe harbors of innovation proficiency.

to innovation efforts or is this a very small group of die-hards that dedicate time and effort for this lofty goal? Moreover, is it only the innovation manager burning the midnight oil in order for innovation projects to make progress? Organizations committed to innovation allocate people’s time and resources for innovation related activities as champions and contributors. Committed organizations set aside budgets for experiments so that the innovation funnel can make progress. As the saying goes they “Put their money where their mouth is”, go-ahead is the parameter that determines whether the stage is set in a way that will allow innovation to thrive as opposed to a constant uphill battle.

PURPOSE - Whatever innovation activities you may be doing, are you setting yourself up to generate real, tangible outcomes in your organization or are you setting innovation projects up for a rude awakening as decision makers shy away from investing in them?

Innovation managers that score low on this parameter tend to be very frustrated about the fact that the hard work they put into innovation activities isn’t generating results mainly due to the fact that decision makers aren’t willing to pull the trigger. This isn’t due to malice or lack of caring. Decision makers simply have other things to invest in that they perceive as higher priority. As innovation managers, we must learn to navigate ourselves into a favorable position with regards to this parameter. If go-ahead is about resource allocation, the parameter of purpose is about getting management commitment to the outcomes of innovation activities.

SCALE - Is your organizational innovation system built to scale? Having a single person doing everything is a pattern still very common with innovation leaders that I meet. Innovation requires knowledge and, the broader the supporting community, the more knowledge is readily available and thus the more projects can be supported. Scaling innovation requires a well-defined process because scaling something that isn’t guided by a process will simply generate chaos. Scaling also requires having the right tools for automation and analysis purposes.

Why is scale important? Imagine an innovation project that’s being delivered. What are the odds that it fulfills its promise within three years? It depends on how high one sets the bar in terms of potential ROI. If we’re talking about horizon 2 or horizon 3 innovation then I would argue that it is at around 20% i.e. if we place our hand in a bowl with five balls, four white and one black and we pull out the black one it means the project was successful. Assuming we wish to have a probability of 80% that at least one innovation project we build will be successful over the course of three years, how many such projects should be released in parallel? The answer is 7. Working our way backwards from 7 projects released at scale, how many experiments should we run? How many ideas should we have submitted? Based on my experience, the ratio from raw idea to release at scale is around 100:1. This means that whatever innovation system you create has to be able to handle 700 quality ideas in three years, which works out to be about 250 quality ideas per year based on the above goals and assumptions, which are quite conservative. Innovation is not something you dabble with. It is something organizations must commit to.

Innovation managers that wish to stay the course must make sure that the three parameters of Go-ahead, Purpose and Scale are all at a similar level of implementation. As long as the three are balanced then we are making our way at a certain speed in the right direction. The higher level of balanced implementation, the faster we are going to get to the safe harbor of innovation proficiency.

The greater an imbalance between the three parameters, the faster we will veer completely off course with a real risk of the entire innovation agenda being restructured, de-invested in or scrapped altogether.

Over the course of my career, I have seen many innovation programs that adjusted course and many that did not. We, as a community and a developing discipline, have learned a lot since “The innovator’s dilemma” was written more than twenty years ago. We have known for a while now that innovation managers must identify parameters to measure themselves against and implement a balanced approach. We have now learned enough out of our own age of exploration of corporate innovation management to know how to leave ineffective means of navigation behind us and begin using the innovation GPS (Go-ahead, Purpose & Scale) to steer our way to the safe harbor of innovation proficiency.

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GO-AHEAD - Is the organization truly committed

INNOVATION TAKING A CENTRAL ROLE

INTERVIEW WITH SHACHAF SNIR, GLOBAL INNOVATION BUSINESS LEAD AT AMDOCS Innovation is an important component in Amdocs’ strategy and continues to grow and become more significant with each passing year.

I spoke to Shachaf Snir, Global Innovation Business Lead who has been with the unit for the last three years to learn more about the what they are working on and their plans for the future.

Shachaf believes innovation is necessary in an age of exponential change. Yet our current organizations were designed to be efficient and structured and are not equipped to handle the rapid pace of change and do not have the ability to quickly adopt and develop new technologies and processes. So, while organizations recognize they need to have innovation capabilities, surveys demonstrate that very few believe they actually have the tools and flexibility to handle exponential growth.

LOOKING BACK

LEARNING TO INCUBATE

Amdocs’ Innovation Unit has been around for about seven years, which makes it one of the veteran units of its kind in Israel. It is interesting to look at their journey - where they started, their current focus and where they hope to be in the future.

Shachaf believes that as innovation activity grows and the organization and its employees become more familiar with it, the emphasis should expand from culture alone to business value. According to Shachaf, “it is important to bring business results and execution in order to maintain organizational motivation.” Innovation that does not create impact will not be sustainable. In that perspective, organizations that implement innovation activities without taking into account these considerations, are “playing the innovation roulette” says Shachaf.

Shachaf believes that innovation means growth and innovation units must grow and evolve. Amdocs currently has active and varied innovation activities, running about 30 projects a year in Israel alone. They are focused on expanding their activity from the culture, education and ideation stage to taking ideas forward to the validation, demonstration and implementation stages as well creating more business value.

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STRUCTURE Today the unit consists of about 10 people and is divided into two teams.

• Open innovation - Works with the Amdocs ecosystem, collaborates with customers, partners,and academia to drive innovation. This is sometimes also offered as a service to Amdocs customers.

• Innovation Management – Drives innovation internally, by addressing business challenges, creating an innovation culture, and emphasizing the importance of innovation execution.

Shachaf believes it is also part of a generational shift: while Gen Xers expected the “innovation fanfare” of hackathons and festivals, millennials and Generation Z employees look at innovation as a way to increase their impact in the organization. Festivals alone do not “cut it” anymore.

As part of their shift towards execution, Amdocs is currently experimenting with different ways to bridge the gap between ideation and execution. In the past year, they have been experimenting with internal incubation processes and Shachaf described four innovation programs with different approaches:

- This three month incubation program is internal within a business unit. People in the unit start by presenting their ideas, and only the best ones are chosen for the program. After a validation process inside the program that takes about two months, using the Lean Startup methodology, ideas are pitched to a judging committee. The teams with the winning ideas are given two weeks to work full time and develop their idea. The time allocation is crucial to this program and only the best teams with the best ideas reach this stage.

This program is focused on incremental innovation

• JETS

- About eight months ago, twenty intrapreneurs were chosen from a 200 people unit located in Nazareth, and challenged to create a venture that brings Amdocs and their unit more business within existing markets. These intrapreneurs started by researching Amdocs activity as well as trends outside of it. Their goal was to recognize challenges in markets where Amdocs is active compared to needs they found in Amdocs internally and tried to see how they can bring in new business to their unit. At the moment, there are three active teams in this process who are working on solutions in the IoT, media and social marketing domains. All three fields exist in Amdocs but are brand new to the unit, and build on its existing capabilities.

This program is focused on adjacent innovation.

• SHAPERS

- A six month global program, to which only the best 30 intrapreneurs are chosen to join, out of 26,000 employees globally.

The purpose of this program is to formulate the next billion dollar idea by driving internal disruption - new markets, business models, etc. The previous cycle of this program created 5 internal startups, 3 of which are still active. The process includes intense training, with the most cutting edge lecturers and workshops.

Most of the process takes place remotely and the group meets face to face about three times for intense boot-camps and innovation sprints throughout the six months. For example, during the first weeklong boot-camp, participants learn about top trends from speakers such as Singularity speakers and entrepreneurs, practice cutting edge innovation tools and make sure they also manage to have a short meditation in the desert. After the bootcamp, the

teams work for two months and come back together for a “Hot House” which is an acceleration process, where they build a business case, work with mentors and present the ventures to the upper management (which for most people is a rare opportunity to meet them). Eventually, the idea is merged into the business unit. This process is focused on disruptive innovation.

• THE “FUTURE EMPLOYABILITY”

program is a fourth, very exciting incubation process led by Amdocs in cooperation with the Israel-America chamber of commerce Corporate Social Responsibility Forum, and other large organizations (such as Google, Intel, Teva, KPMG, WeWork and more) to affect social change.

The forum recognized the problem and understood that creating a cooperation between these companies had the potential to create something very powerful and influential on a national level. Therefore, they have set up a joint incubator for intrapreneurs and the Amdocs team is working on creating a process to develop solutions for challenges of the future workforce (in terms of skills, state of mind and capabilities).

THE FUTURE Innovation is an enabler of business success, and the true and full potential of innovation is yet to be fulfilled at Amdocs. It is an ongoing journey.

One aspect of that change is improving how the company measures innovation impact. One direction Shachaf sees Amdocs potentially going in is the adoption of models from 3M or GE, where managers are measured by the income that comes in from new ventures that were launched in the past three years.

Further development of incubation processes is another aspect the innovation unit’s future. The current processes that are now running provide an opportunity to examine what works better.

Two or three years into the future, Shachaf hopes to launch better repetitive mechanisms to carry out the best practices, based on the learnings accumulating today.

Shachaf Snir - Started out as a professional chef while he was getting his BA and MBA (specializing in organizational behavior and strategy).

One class he attended was with Nurit Cohen, from SIT, about being an innovation consultant, and it blew his mind. Even before the lecture was over he knew that’s what he wanted to do. After the lecture, he came up to her and asked how he can work in the field. He worked in the innovation team in a bank, developed the innovation department for a consulting firm and then, 3 years ago, joined Amdocs.

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• ECHOES

Talya Vaish/ The Funnel Director All businesses have a business model, and they all make alterations to their business model from to time, so business model innovation is an obvious staple in all strategic planning process, right? Done! Short article!

Well, not quite.

Business model innovation (BMI) is probably the most challenging type of innovation and requires flexibility, an ability to live with uncertainty and a willingness to change. Unlike product or even process innovation, business model innovation has to be tightly intertwined with the organization’s strategy. It actually involves many, if not all, parts of the company. It’s about enhancing the value of the company for significant, long-lasting impact.

A survey from 2015 (PWC) showed that 54% of CEOs worldwide have either begun to compete in nontraditional markets themselves or considered doing so. This shift can be done using existing products or within existing markets and, when done well, can be hard to replicate. But it is risky.

Business graveyards are full of companies that have tried and failed, even innovation superstar, Google, failed in its foray into the social media world with Google+.

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54%

of CEOs worldwide have either begun to compete in nontraditional markets themselves or considered doing so

There are many theories discussing best practices for business model innovation. Some experts say to stay close to the core while others advise of methods that prepare the company for this change. The truth is that there is no one grand, unifying theory for creating successful business model innovation. Due to the fact that it is highly dependent on recognizing long-term opportunities, most organizations find it difficult to be systematic about it and may miss out on relatively simple ways to ensure long-term success.

Business model innovation starts (and ends) at the business model - There are many ways to structure and define a business model but they usually consist of the organization’s resources or products, unique value to customers (market), processes - which connect the resources to the customers - or how the finished product/ services gets made - and profit formula. All these elements are interdependent, and often become more interdependent and less flexible over time. It is part of the natural behavior of organizations and people - they become used to activity A leading to desired result B and are reticent to stray from that success. This makes changes harder.

business model

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resources/ products

Customer value/ market

processe

profit formula

Business units nowadays are designed and measured for maximum efficiency rather than for identifying unmet needs. As innovation professionals, the most common resistance we hear is that there is absolutely no time or manpower that can be spared for innovation. This is even more pronounced when looking at the organization as a whole, where even innovation has to become more efficient. The only types of innovation you can perform naturally within an existing business model are those that build on and improve the existing model and accelerate its progress. In other words, those innovations that are consistent with its current priorities. The first step of business model innovation is temporarily sacrificing that efficiency for long term gains. The second step is to understand the timing and, through that, the best approach to changing your business model.

How do you know if you should go into business model innovation It sounds appealing: business model innovation opens up new opportunities, new markets, new customers and more. Literature presents IBM, Apple, Rolls Royce and others who have revived and thrived through business model innovation.

It also likes to remind the readers of companies like Blockbuster who didn’t wise up in time, did not carry out business model innovation and have disappeared. Of all types of innovation, this is the ones that holds the promise of a successful future.

But it is not easy! It is a virtual rethinking of all aspects of your business from the foundation and challenging the basis that is currently paying the bills.

Some indications that business model innovation should be explored: • Static customer base • Consistent industry-wide decline • Inability to keep up with the rest of the industry • Significant technology development in the industry that has also been adopted outside of it • Requests from customers • Degradation in innovation metrics.

Approaches to Business Model Innovation In research published in 2016, Christensen, Bartman, and van Bever recognized 5 approaches businesses, that they considered advanced in their thinking and innovative activity, used when approaching BMI: •

•

•

•

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•

Recognizing potential gaps in future growth by comparing the current innovation’s distance from core product - Categorizing innovation by how similar it is to existing products and markets is a useful tool used for funding innovation but can also be used to understand how diverse your innovation efforts are and whether you are planning for long term changes. Similar to a diverse investment portfolio, it is about creating a diverse product/market portfolio.

Working with external disruptors - In one of our previous editions (Summer 2018) we discussed how corporations can address external disruption.

This approach to BMI involves those techniques to either purchase or partner with the disruptors and count on them to bring the new business model. The risk with this approach is that the new model may never become inherent to the company and will ultimately fail.

Moving the Parts As discussed before, a business model is made up of interdependent components. Unlike a brand new business, changing one or more of those parts creates the alchemy that leads to a new business model within an existing organization.

resources/ products

Customer value/ market

profit formula

business model innovation model

M&As as central internal business model disruptors - While this approach has to be carefully done as to not create an ineffective metaconglomerate structure, M&As can be a strong tool for BMI. Start a new business by understanding customer needs - Use existing products or techniques and income from existing lines to open new, separate business units Resist forcing new models into existing units - Executives often have a need to create order and have a place to put new businesses, while what they require is organized chaos. This independence is important for the first stages of a new business model and requires the careful care of senior management to make sure it’s not absorbed and dissolved.

processe

resources/ products

Customer value/ market

processe

profit formula

Examples The good

The bad

In 2008, veteran German car manufacturer Daimler launched Car2Go, a car sharing service. Car2Go started as an experiment by company employees and was developed in their internal incubator and kept separate from the rest of the business units. It fulfills Dailmer’s core business - providing mobility - but users rent, rather than purchase, to achieve that objective. Today Car2go is the largest car sharing company in the world, with over 2,500,000 registered members and a fleet of nearly 14,000 vehicles in 26 locations in North America, Europe and Asia.

Why Google+ failed: Google saw Google+ as an extension of its search business and chose to integrate Google+ into its existing products and business. Google+ accounts were integrated into other Google products, and the business saw the incorporation of information from users’ social networks as a way to generate improved, tailored search results. Viewed through the lens of Google’s business model, a social network allowed the business to generate greater revenue and profitability by better targeting advertisements and delivering more advertisements through increased usage of its product platform.

However, consumers apparently didn’t see the value from combining search and social networking; to the consumer, the purposes are very different.

Business Model Innovation is both important and complicated (as many things in life often are). It does not have to be dramatic as in some of the examples described above, but should always be done with consideration of strategy and ideally through a systematic approach based on the organization’s current business model and long term objectives in mind.

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there is no one grand, unifying theory for creating successful business model innovation

PARTNERSHIP

FOR INNOVATION USUALLY WHEN ORGANIZATIONS THINK ABOUT INNOVATING IT INVOLVES SOMETHING LIKE INTERNAL IDEATION AND THE DEVELOPMENT OF SUCH IDEAS OR OPEN INNOVATION WHICH INVOLVES EXPOSURE TO STARTUPS AND THE POTENTIAL INTERNALIZING OF THEIR TECHNOLOGIES. THE OUTCOME FOR SUCH AN APPROACH CAN BE THE ENHANCEMENT OF EXISTING BUSINESSES OR THE CREATION OF NEW ONES. HOWEVER, THE ACTIVITY AT MICROSOFT WHICH IDIT GAZIT BERGER IS INVOLVED IN AS MEA TECHNICAL DIRECTOR IN THE ONE COMMERCIAL PARTNER (OCP) ORGANISATION, TAKES A DIFFERENT APPROACH THAT IS ESSENTIALLY ASPIRING TO INNOVATE

BY PROXY. Tell us about the One commercial partner organisation and your role in it.

Q: How does this approach of Microsoft reflect in the way that it actually treats its partners?

A: Essentially, when companies wish to innovate, they take one of two approaches. One is to try to be the best at everything, which is very difficult, and we see companies that have a single central offering without anything else that can match it. An alternative to this approach is to create a platform that invites other faster actors to innovate and set it up so that their successful innovation contributes to your success in some way. You don’t have to be the best at cyber security or AI but by allowing other actors to perform their innovation as part of your platform it means value for you and your customers, if you set it up properly. This is something that Microsoft has been investing a lot in over recent years. It invests heavily in other avenues as well, naturally, but this approach in particular is rather unique.

A: For years, Microsoft has had an ongoing relationship with various types of partners as part of the Microsoft Partner Network such as System Integrators (SI’s), Managed Service Provides (MSP’s), Independent Software Vendors (ISV’s) and so on. As we launched the One commercial partner Organisation we made the mental switch of saying that those actors and the startups are not our partners but that, in regards to innovation, it was rather the opposite. In this context, we consider Microsoft as the partner to their success. It sounds like a marginal nuance, but it carries a significant meaning that is pervasive to everything that we do.

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Q:

A: Microsoft has great strength in the enterprise world with access to thousands of customers in various verticals. Startups find it very difficult to get attention from large enterprises and at the same time these enterprises are actively seeking to innovate within their domains. These enterprises, that are Microsoft’s customers, are looking to us as a trusted partner to offer them opportunities for innovation. I’m not talking about a better operating system or innovation around the servers that run an operating system but rather innovation in their business domain such as agriculture, energy generation, automotive and so on. For these customers, having a trusted partner way beyond a vendor or provider like Microsoft serving as a conduit for dynamic actors to offer and deliver their innovations offers these customers a tremendous amount of value.

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Q: It takes a certain amount of humility from a huge and respected organization like Microsoft to basically say that it is great at what it does while still recognizing that 5-10 years from now its ability to thrive may lie in its ability to partner with an organization that is a modest sized startup at this stage.

How does that translate into value for Microsoft in the shorter term?

Q: So far you describe the benefits that startups get from working with you as mainly access to a development platform and access to enterprise customers which is very difficult for young companies to get.

What other benefits do I get access to as a startup when I become your partner?

A: Microsoft’s greatest strength is its channel.

We don’t sell anything directly but rather through partners, channel partners. Our channel is made of SIs, MSPs, ISV and CD’s (Licensing Solution professionals and Distributors selling to Value Added Resellers) It is basically a network of partners looking to provide value to their customers, and through P2P (Partner to Partner) motion can provide greater value to their existing customer base. Achieving market penetration through enterprises alone still limits you to the top 200 enterprises in a geographical area and the 200 salespeople that have access to them.

If you extend the network and make the SI’s, MSP’s, ISV’s and channel partners all part of this potential target for innovation than your potential for success and achieving market penetration becomes much higher.

Q: What action do you take when a startup joins your network in order to increase its chances of success?

A: Let’s start with technical enablement. First of all, we connect them to one of our Azure certified partners in order to make sure that they can take advantage of the platform’s capabilities.

We are constantly updating the platform. What this does is it allows startups to move faster as they can leverage services that already exist on the platform rather than having to develop them in-house. This reduces time-to-market and the cost of maintaining it later on. Second is the topic of performance because it is very important to deploy the SW in a way that offers optimal performance based on the model of usage for the product. The third one is how to optimize for cost. This may sound trivial, but it has significant implications long term and you should know how to do this right from the outset. These three are offered to the startups early on and most of them take advantage of at least one of the three.

Then there’s the marketplace which is for all of the solutions that exist today on our platform and allows startups to simply be out there and thus, our partners get visibility to everything they can use and bring to their customers and all from the comfort of their living room along with the option to try and buy. Beyond that, there’s our Biz Dev team that will drive our Co-Sell motion: Microsoft sales and the rest of the team that gets regular exposure to customers can tell whether a solution that appears in the marketplace can fit certain customers simply from this ongoing relationship and so connect the startup to that potential customer.

Lastly, there’s the topic of sales compensation because while we cannot sell the startup products and services for them what we can do is connect the startup to potential customers and we created a compensation model at Microsoft where salespeople will actually have more to gain from enabling the sales of an innovation from a partner than from selling a Microsoft service even if there’s direct competition between the two. We actually help them build a strategy for penetration so that they get exposure to reasonably sized enterprises and start accumulating a portfolio of victories before they go after the largest whales.

At times, a startup may be apprehensive since Microsoft has a product that directly competes with it and we always reassure them that the salesperson has more incentive to sell their product than the Microsoft one. Even if a deal is closed with an enterprise customer without the Microsoft sales executive being involved, they still get compensated. Once this happens, the salesperson becomes aware of the startup’s offering and of the fact it had a win at one of his accounts and that motivates the sales team to get acquainted with the startup and offer its product to additional accounts they are in contact with. We actually have clear target KPI’s that are reviewed at senior levels for this. As a result it is more than simply a compensation incentive but on top of that the overall performance evaluation of salespeople depends on their performance related to their ability to co-sell with partners.

This means that if a salesperson contributes heavily to the success of the partner / start up, it won’t simply manifest in his bonus but also in the evaluation review he gets from his manager.

Q: This incentive structure sounds like truly putting your money where your mouth is and can be a real reason to trust you for the various startups out there. Any change in incentive structure is usually very challenging to achieve in an established corporation, especially when considering what you said about giving preferential treatment to the startups compared to Microsoft’s 1st party services. How does such a shift come about.

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A: This came directly from the CEO and is sponsored by him. Pure and simple.

This is reflected in other partnerships that he established and sponsored with SW vendors that were at the time some of our fiercest competitors. Currently, we have very strong cooperation relationships with these companies. The market potential is so huge that we can get a lot more business working together than we would ever be able to through head-on competition.

The One commercial partner organization and the co-sell motion focuses on partnering Microsoft with fast moving startups, increasing their chances of success while creating tremendous value for its customer base. It is an approach that complements Microsoft’s direct innovation efforts with activities that generate what is essentially innovation by proxy.

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LEADING INNOVATION AND SEIZING OPPORTUNITY IN CONSERVATIVE INDUSTRIES INTERVIEW WITH ORLY STERN IZHAKI, VP OF DIGITAL AND INNOVATION AT MENORA MIVTACHIM Q: You work for a large financial company. What is the most significant challenge that you face promoting innovation in such a conservative industry?

A: The biggest challenge is changing the mindset because innovation touches every layer of an organization. Innovation is not something that you do by yourself. It involves many people across the organization. Veteran organizations have been doing things in a certain way for many years and have certain habits that are rooted in every corner i.e. finance, legal, compliance.

Innovation requires the cooperation of everyone and so this existing mindset has to be shifted in order to create the changes that innovation requires.

ORLY STERN IZHAKI

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IS THE VP OF DIGITAL AND INNOVATION AT MENORA MIVTACHIM, ONE OF ISRAEL’S LEADING FINANCIAL FIRMS. IN HER PREVIOUS ROLE, ORLY HEADED THE INCEPTION AND CREATION OF PEPPER BANK, A DIGITAL BANK, FROM SCRATCH AT LEUMI, ISRAEL’S SECOND-LARGEST BANK.

Q: Let’s clarify what you mean when you say “mindset”.

A: It is in many areas. It is, first of all, the realization that innovation cannot always be measured with clear ROI and financial companies are very oriented towards clear ROI. In addition, innovation is about trying and failing and if you fail “it’s no big deal,” like what Amazon does. Financial companies are very risk-averse and calculated in their decision making which goes counter to this approach.

When you talk about new business models and new products that aren’t natural for a company it is very difficult to get buy-in.

In order to create something that is very advanced and customer-centric you must have the ability to iterate quickly, which isn’t the natural order in such organizations.

When I was at Pepper, we had a mandate to make decisions that were counter to what the organization was used to doing. Often we would get an answer “you can’t do it because there are

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regulations that forbid it” and only when you actually doubt that and say, “I want to see the clause in the government document that says it is not allowed,” and actually check, you find out that there’s no such regulation in place. At times, the gatekeepers are relying on institutional memory that simply isn’t true anymore. So as I learned this lesson, in my current position as digital and innovation executive for such a conservative institution, I know it is my job to doubt the common wisdom and verify that it indeed holds true.

Q: Quite a few organizations place the innovation function under VP digital. While it does make sense because these responsibilities have a lot in common, there are arguments against that as well. Where do you see the differences between the two?

A: First of all, these are two terms (digital and innovation) that every person will define differently. There are quite a few touch points and they should work together in my opinion but there are some distinctions that are very important.

To me, digital is mostly focused on the customer experience and what you invest a lot of your energy in are the “customer journeys”.

Innovation is about rethinking and disrupting your own business.

The commonality is that both demand changes in business thinking and a lot of openness.

Innovation allows you to get quick wins with focused ideas and open innovation that can accelerate the process. Digital is a very deep process that takes much more time. When you wish to implement digital end-to-end you have to dig into every corner of the organization.

One example of where digital and innovation converge is when I wish to turn a certain business process that is form-based into a fully digital process, which requires the conversion of various formats of forms into digital format.

In such cases, a technology developed by startups can be a shortcut to success and so the exposure I get to startups as part of the innovation activities becomes an opportunity to make leaps forward on the digital side of my role.

However, innovation is much broader to me. Innovation is about broadening the scope of what insurance means, for example. Let’s consider a product we released six months ago called “cyber insurance” which wasn’t even required a few years ago and is a necessity for companies these days.

Developing such a product internally is close to impossible. Getting the idea from a startup and taking it through the steps to implementation in the company is definitely the responsibility of innovation. Another example could be a startup that brings AI-based technology. I wouldn’t consider this as part of the digital side of my role because it isn’t a natural part of it but, on the other hand, this does introduce fundamental shifts of improvement to many of our internal processes and so that’s an example where there’s some overlap.

Q: Talk to me about the difference between a strategy that implements digital vs. the innovative part of it. At times, I meet Strategy VP’s that tell me that because digital is part of their strategy and they have a clear plan for implementing digital for the foreseeable future, there’s no real need for a concerted innovation effort. What would you say to that?

A: It is about innovation serving as shortcuts for digital and about building a foundation in the organization that is more adept at internalizing such opportunities in order to leapfrog the competition. These leaps will not be achieved with a project plan and milestones. There’s an element of unpredictability to it and an element of seizing opportunities quickly, as they appear.

There’s a lot of competition from tech giants and startups and we must be able to be agile in our response. This isn’t something that simply happens. Organizations must prepare themselves and develop these organizational skills. This is, in my opinion, why innovation as a concerted effort is so important.

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Q: Let’s talk about open innovation. What do you see as your role in that regard?

A: First of all, it is clear to me that we have to compete for startup attention because other competitors are also going after them. We have to make ourselves startup-friendly as an organization. Second, we have to respect the startups. At Menora, we regard startups as partners and not as service providers, which is the default mindset for corporations.

• We have to respect the startups’ time first and foremost. For example, if we don’t think it’s going to work then we let them know instead of dragging them along as corporations tend to do.

• We will not bring them to overcrowded, timesucking meetings and waste their time.

• We cannot ask them to sign a 100-page NDA. • We cannot have them on a binding contract for six months or more.

• We have to realize they don’t have a battery of lawyers so they cannot handle long, detailed legal documents.

We actually invest in this, actively work on this and improve constantly as we go. It is due to the realization that, if we wish to change the mindset, it starts with how we speak to startups and how we behave when we work with them. We run training seminars for various stakeholders and teams about the importance of this and we can gradually see how things are positively changing.

Q: At the end of the day, decision makers have to shift budgets and resources and deliver at scale.

How do you deal with this challenge?

A: We are still trying to identify the right working model. A few rules of thumb that I follow are: • Minimal required integration. If the startup can do the R&D work then I will shift the responsibility to the startup to reduce points of potential friction.

• Prioritization is key. We have to be very precise about what we, as innovation, think has to advance to production, so we define very clear success KPI’s per pilot.

• Focus on Business Value. We are very precise about our business challenges as decision making guidelines to prioritize the pilots that should advance so that they are in alignment with management preferences.

Q: You said that “innovation has to be done with the entire organization”. What services do you get from organizational functions? Which ones assist you with knowledge that you need, roadblock removal etc’. In other words, when you say that with whom can you work to innovate?

A: I think there’s a broad realization in our company that it has to be in this playing field otherwise we’ll be in trouble. Therefore, I can see initiative from the various units and

supporting functions that wish to innovate starting from management and to the last of the employees. The first thing you must do is to clarify the business model. I’m not talking about ROI but about your business model, i.e. how will you market it, how will you sell it, where will the business impact come from, etc. To me, this is the mandatory indicator of whether to move forward or not. When the business units initiate innovation, this is the first evaluation that we do.

The second thing we evaluate is the legal part to see that we aren’t running the risk of violating regulation. We get this support from the legal team.

The finance team assists us with our assessment of the business model.

I can also say that management is pushing us in that direction and coming up with their own ideas or are inspired by things that are happening around the world. So this is another critical part of the organization from which we’re getting support.

Q: You say that the first thing you do when you encounter an opportunity is to clarify the business model, even before thinking about a pilot. You consider whether there’s business potential.

A: Yes, and if it is internal then I will consider how the idea merges into the existing business processes. I believe that technology issues are always solvable, eventually. You rarely hear about technology issues that cannot be solved and become a real inhibitor.

Q: Do you follow certain methods or is it an intuitive approach?

A: We use a lot of design thinking, validate a lot of assumptions and follow a lot of research. I strongly believe that anything that is customer facing must be constantly validated. I tell my team they always have to meet the customers, ”look into their eyes” and see what they really think. Customer-facing validation is essential.

Otherwise, you run the risk of building a product that you fall in love with but that no one uses.

That’s something that we invest a lot of effort in. It is always about the customer value and experience.

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• We cannot expect them to come to our offices and burn out trying to connect to our backend systems.

• Procurement processes have to be much faster than normal. For example, if I do a 3-month pilot that hardly costs any money I cannot afford to get stuck with procurement for weeks and months.

SUSANA JURADO APRUZZESE HEAD OF INNOVATION PORTFOLIO-PRODUCT INNOVATION AT TELEFÓNICA, SPAIN

Q: What are your roles and responsibilities at Telefonica?

A: I’m part of the Core Innovation organization within Telefonica’s Commercial Digital Office.

An internal innovation area, with teams that consist of Telefonica employees, focused mainly on creating digital products and services for Telefónica.

My role in particular is running the innovation process and the intrapreneurship program. A program we started in 2011 by testing how we may run internal ventures in a corporation and established in 2012 with the definition and launch of a new innovation framework we call Lean Elephants. Naturally, there are still things we can refine but we continuously improve and adapt ourselves to what we learn and to an organization that constantly changes as well.

Q: What is your objective running this program?

A: Our main objective is to create new businesses for Telefonica and we are doing that. But there is a secondary effect, intrapreneurs that rotate in and out of the intraprenuership program bring the new skills and culture they acquire during their experience with us back to their units, and little by little this affects the overall culture of the company. One of the main skills they take back with them is the ability to handle uncertainty, thus when new things appear that are unclear to everyone else how to address, they are capable of transforming such things into simpler “pieces” to make them manageable.

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Q: Please tell us about the internal innovation process at Telefonica.

A: Essentially, is the combination of a stage gate model and innovation calls. Employees can submit their ideas for innovation projects through our Innovation Calls, those whose ideas get

NEW SKILLS, NEW CULTURE, NEW BUSINESS

1. PRE-IDEATION

- To nurture our innovation funnel we rely on our aforementioned Innovation Calls, where employees submit their ideas around the innovation opportunity areas we have identified for the company and decided together with leaders of business units. The submitted ideas are evaluated by experts in different areas of the company and a committee of various stakeholders and leaders from across the corporation and the best ones get selected.

2. Ideation (Duration = 3 months)

- At this stage all you have to do is validate the customer, the problem or need solved and the solution proposed. In other words, achieving problem-solution fit. Also estimate the potential size of the opportunity (not the classic business plan). During the ideation phase the intrapreneurs’ job position in their original organization remains open for them while they to work full-time in their innovation ideas. Once the three months are over, they present the results and plans for the next phase to the stage gate committee. If the idea moves to the next phase, the people who submitted an idea get to choose whether they wish to continue leading the project into the next phase and rotate into the innovation unit to continue dedicating 100% of work time to this project. If they decide that they do not wish to do so or if they aren’t successful in their validation then they simply return to their original unit. We actually have in-house intrapreneurs on the innovation team that can take ideas whose original owners elected to return to their original units.

3. Prototype - This stage is about testing the solution with customers and learning whether it will be successful if we build the product. It is a basic implementation of the product to test whether customers will actually consume it and engage in case we decide to build it.

4. Beta - At this stage we build the first version

of the product, the minimum marketable product and test customers’ willingness to actually pay for it. It is the only way to test the assumptions behind the business model.

From this stage on, the executive sponsor is required to have more skin in the game naturally since we need to have access to the assets and resources of the business unit to start commercialization.

5. Product – In this stage we industrialize the product and focus on customer base growth During this stage and the stages preceding it the innovation organization is responsible for the project.

6. Scale-up

- Scaling a profitable business.

It usually implies transferring the product to a business unit. This is a transitioning stage where responsibility and ownership over the project moves from the innovation organization to the business unit. The innovation team is heavily involved up until a point when it can officially transfer full responsibility to the business unit.

Q: In most organizations it is very difficult for an innovation team to influence the project as it is built and delivered and the business units simply revert to their usual way of thinking. They build instead of focus on learning and they scale immediately instead of gradually. How do you get this level of access and control so deep into the process?

A: Up until very recently we weren’t part of the later stages of scale. We realized that the probability of failing for the business units at scaling-up was very high. The organization is used to executing efficiently an existing business model rather than growing a new one. It is a skill that some of them don’t have. We realized that we simply have to be involved in this scaling-up stage and jointly execute the stage with the business unit.

Currently, we don’t just transfer a product to the business unit but we also transfer the knowledge and skills of how to grow a new business. We are also involved in the actual execution up until the point where we see that we can let go. I can’t say we have discovered the silver bullet of how this should be done but we are constantly learning and making progress around this challenge. My main insight so far is that there is great variability between the various scaling projects and so any procedure you create must have great levels of flexibility. In addition, learning from past experience must be baked into the process.

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selected have the opportunity to work full-time on their ideas, becoming intrapreneurs. Innovation projects are managed through stage-gates and a metered funding approach, it works like a VC investing in internal ventures i.e. incremental funding, validated learnings so that we gradually decrease uncertainty and as a result to increase the level of funding as the projects mature. The stages of the process are as follows:

Q: Most innovation managers I meet find it very difficult to get employee work time allocated as a rule. Tell us a bit about how that works at Telefonica.

A: When we started we were allowing people to remain in their main role in parallel to working on their intrapreneurial project with let’s say a 50/50 split of their time. What we discovered was that the day to day routine and timelines were consuming most of their time and so they weren’t able to invest the required effort in the innovation project. We have since changed that and currently employees are rotated into the innovation unit full time for the duration of their innovation project.

You can imagine that it isn’t simple for managers to let go of employees for a period of three months. However, at the same time these managers understand that such activities are going to generate the future business of the company and so they allow it as long as we negotiate the timing of the employee moving to the innovation team according to workloads and the ability to do an orderly handoff. We also make sure not to have too many people from the same unit working in an innovation project at the same time. In addition, the employee doesn’t disappear and remains available for specific calls and inquiries from their original unit. They understand as well that the employee they get back will have new skills and levels of motivation to dedicate to the core business.

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Another thing we do is that during the pre-ideation stage is give our employees some unstructured time through our 10Fridays initiative. Where employees with ideas are asked to make a very simple submission online (idea as a tweet and a basic description) and the ideas go through a filtering and evaluation committee. Employees that submit ideas that get selected during this stage are given ten Fridays, i.e. 20% work time for a period of 10 weeks, to dedicate to their initial validation work as preparation for potentially submitting this idea to an Innovation Call.

Q: What would you say are the main challenges that you’re still facing today?

A: The reason we were able to get employee time allocated for this purpose and the budgets required for the innovation team and its activities has a lot to do with the style of leadership of our CEO. He states very clearly that innovation is the key to the future success of Telefonica. This way of thinking of our senior management permeates into everything that we do and so when the innovation team requires the cooperation of the business units that style of leadership affects it significantly.

1. Scale-up

In fact, we even get leaders coming to us, asking to have their employees take part in our innovation calls. This is actually a source of pride for them and they are willing to allow those employees to rotate into the innovation unit. We also find that the Human Resources department understands the benefits for employees of working as intrapreneurs. They are actually our internal allies when negotiating with managers of various levels about the transition of their employees into the innovation team when their ideas are selected and become innovation projects.

Another very important point is that decision makers from the business units are part of the process from even before the call for ideas.

They are part of defining the challenges that are communicated to the employees and for which they are expected to submit their innovative ideas.

These decision makers are also involved in the various selection committees and thus their buyin and commitment is acquired for the individual projects that flow through the innovation process.

As decision makers are brought into the process as a whole and have had influence over the content that flows through the process it is much more likely that they’ll support the need for employee time out of their workforce at various stages of the process and other decisions that other organizations find more difficult to make.

A: I’d say the main remaining challenges are: – Scaling-up projects and transfer them to the business units as we don’t have the silver bullet for this just yet.

2. nnovation impact measurement

While we do have a model that is working we still have to measure the impact on the business. I’m not just talking about revenues and efficiencies. I’m also referring to impact on talent and how that talent impacts the business. Also, impact on the brand and image of the company. A remaining challenge is how to demonstrate that to the company in a language that the company understands.

3. Intrapreneurial role definition

Intrapreneurship is perceived as a type of product management but the risk intrapreneurs are running is higher than regular product management. They run a professional risk because they are moving into another area of the company new to them and running an innovation venture with a lot of uncertainty. While they are protected as part of the innovation program and will find alternative roles even if they fail, the company as a whole still doesn’t integrate this role into its various processes. This intrapreneurial role is actually a new profile of role inside corporations and measures should be put in place to recognize it as such rather than trying to distort an existing role in order to determine things like criteria for promotion, compensation, evaluation and so on.

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Q: All the things you describe necessitate very strong management support. How were you able to get such support?

RETHINKING HEALTH INSURANCE REGINA VETTERS,

HEAD OF DIGITAL AND INNOVATION AT BARMER

Innovation sounds like the Promise Land: unheard of products and services, followed by new business models, new sources of revenue and potential vertical integration with other value streams or a revolution in the way the current business is run. Platform businesses like Uber or Airbnb, autonomous driving and smart farming are great examples in this regard.

In healthcare, we are also seeing groundbreaking innovations. For example, Amazon is designing a newly integrated value-chain that includes pharmaceuticals, insurances and customers; new developments in AI are showing superior results in diagnostics, and adherence is being tracked through smart pills. Doctor-patient-relations are undergoing massive changes.

As a statutory health insurance, we see the healthcare system changing (albeit slowly) but defining our own role is not easy. Several hundred pages of regulation define what our business is about and what it has to look like. Yet, our customers are living in a changing world and expect us to innovate our approach in service delivery.

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BARMER is Germany’s second largest health insurance company, covering more than 9 million lives, with roughly 14,000 employees and 400 service points. In the old world, following regulations and administering customer benefits was the core of our business model. While we still follow regulations, we are also starting to push boundaries (a little).

INNOVATING OUR CORE

COLLABORATION WITHIN THE ORGANIZATION

Opposed to unregulated businesses, who can go into uncharted territory to build new business models and try new solutions, we are restricted by regulations to work on our core business, which is a curse and an advantage at the same time. A curse because it is probably the hardest job to change the core processes; an advantage because this is how we create change within the organization. We cannot take the liberty other innovation hubs do and start with blue sky ideas.

We need to evolve the business itself.

We started building our innovation hub two years ago to spearhead this activity. We built a team of 16 people, staffed with employees - half of whom have worked at BARMER for several years and are well-connected within the organization, and the other half are external experts that bring new perspectives and expertise. This mix of multidisciplinary people is crucial for our work.

After 2 years, we clearly see change at every level of the organization. We see projects that start with customer needs, collaborations within and outside the organization, brave decisions by management and initiatives by employees.

We are very happy about our achievements and, of course, this wind of change has to keep on blowing. How did we get here?

Health insurances are not businesses that have a wealth of experience in developing products. We traditionally work on processes. Our innovation hub identifies projects and works on making them happen. In the beginning, we focused on customer journeys with a bit of involvement in core processes to establish our practice and to understand the organization. As we matured, we worked our way into working on more critical processes.

Our projects demand that people from various departments, who traditionally just hand work over to each other, work together. We saw this explicitly when we worked on a customer journey for families expecting a child. Various departments served specific needs of the pregnant mother, but did not work together until we started working on the customer journey.

Collaboration across departments is just one component, but frontline staff are also part of our projects. The staff is crucial because they bring their firsthand experience to the table. Actually, they are the ones most excited about inventing new ways to serve our customers.

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ALWAYS INVOLVE CUSTOMERS

EXTEND NEW WORK BEYOND PROJECTS

Like other innovators, we put our customers in the center of all our thinking. This was difficult for some of the colleagues involved in the process, as it is very uncommon to start with something that is not the law or our processes. Health insurance accompanies customers from birth (and sometimes even supporting the fertility treatment) to death. Imagine what is possible when we put the customers with their health goals and motivations at the center of our work.

We listen to our customers and start projects by understanding their needs, beliefs and fears, continuously testing our ideas with users. For instance, our role in the life of pregnant mothers had been limited to forms and administration.

While working on the customer journey of pregnant mothers, we identified that administration is actually quite a pain point for them and that we can support women by making the necessary administration – even with other organizations – transparent, easy to understand and more supportive.

We also made sure to get the organization involved beyond our functional partners. Right from the start of our innovation hub, we brought in people from within the organization. Employees apply to join us for a 3 month period, to work alongside our innovation team. The employees not only learn tools and frameworks of the innovation process, they also gain an in-depth understanding of user-centered innovation and agile development.

They return to their departments with a new mindset and become our most valuable ambassadors.

It takes time, but it’s fruitful We strive to quickly recognize better processes, products and services that help our customers and we already have some wins and new products.

But as you might have guessed, the work on our core processes takes time and is hard work.

Every change of mindset and every new helpful product makes us happy and motivates us to keep going. We believe that our approach gives us an advantage in the long run, because the world will keep on changing and BARMER is prepared to keep renewing itself.

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