The Exchanges

Q Oh, really? Seriousness and introspection this time around. What do you mean?

A So I think that corporates, both based on the lessons they've learned in the late nineties, which was their last foray into the Valley and other startup ecosystems, as well as the disruption that they're starting to feel today from startups. They are trying to, they're thinking a lot more carefully, or they want to think more carefully Of what is the right way to approach ecosystems such as the valleys. And of course, this time the world is a lot more complex. Uh, we have more than one ecosystem that matters. We have many more technologies that matter, but again, they're coming into it, at least the ones that are serious about it with a, with a lot more, um, more serious intentions.

AI assessment note: “corporates, both based on the lessons they've learned in the late nineties”

Q but wonder, how can it compete with what a new class of startups can do? And when you have other companies that have a whole different type of data that IBM does not have access to, like Google and Facebook, for example, and what they're doing, and that's just an example of AI. This plays out in countless domains where can a big company actually compete with startup driven innovation?

A So I would say the short answer is yes, because when we talk about startup driven innovation, we, we think of it as the corporation adopting many of the practices that make startups successful. One of these practices, significant partnering, And knowing who to partner with and how to develop these partnerships efficiently. So to us, I mean, to, to Brad Power, my, uh, coauthor, uh, in the HPR article and me, this was one of the, the most successful aspects, uh, that, uh, IBM has, has done. And we encourage them to, to continue, to continue doing it because I think corporations are starting to understand that, uh, In this environment, regardless of how much capital they want to throw at the problem and how big and how good they are, they cannot solve things on their own, and they need to co-innovate. Steve and I are finding that corporations that have adopted open innovation principles, where they are co-innovating with other large corporations, are becoming more successful At adopting startup driven innovation.

AI assessment note: “the short answer is yes, because when we talk about startup driven innovation”

Q And what's, what's the answer to that? Why can't they?

A Well, first of all, in, in our business, um, there is the, there is the aspect of trust you need to develop. Uh, but more importantly, I think you need to, As a corporation, you need to demonstrate that you're, what you're trying to accomplish. Just because you have a venture fund and just because you're willing to spend some, some money doesn't mean that you become a value add partner of a startup or of a group of startups. So what we have found is that the ones that have a particular reason, they're trying to solve a particular problem, They have engagement from the highest levels of the corporation. It's not only anointment, but there is actually engagement on a continuous basis. They are the ones who are putting the right foundation to be able to truly take advantage of, of the startup, of a startup ecosystem.

AI assessment note: “Just because you have a venture fund... doesn't mean that you become a value add”

Q Can it even become the center? The center. Cause I just don't think there's ever been a case where that's happened.

A So I don't think it becomes a center, but, but it becomes the transformation agent. The whole idea is that corporations do not experiment enough in our view. What can a corporation take away from Silicon Valley or from any other innovation ecosystem is not the fact that you come into touch with Two or three or 10 startups is the fact that there is a set of now best practices, and one of these that you can take away, best practices of how to create startups, how to finance startups, how to manage a portfolio of startups, and what is important about this is that the corporations need to find ways to experiment rapidly and inexpensively. And, and what we have learned here to do very well Maybe better than any other ecosystem around the world is how to quickly start companies, to get them financed, to allow them to pivot as necessary, how to back our winners and let our, uh, not so strong, uh, players move on. Um, and I think the corporation needs, needs that type of a playbook. So, um, the, the innovation outpost becomes that Change agent for launching these experiments. I think a number of these experiments become very successful. So essentially you need to find ways and what we are advocating is how do you change the core?

AI assessment note: “So I don't think it becomes a center, but, but it becomes the transformation agent.”

Q but wonder, how can it compete with what a new class of startups can do? And when you have other companies that have a whole different type of data that IBM does not have access to, like Google and Facebook, for example, and what they're doing, and that's just an example of AI. This plays out in countless domains where can a big company actually compete with startup driven innovation?

A So I would say the short answer is yes, because when we talk about startup driven innovation, we, we think of it as the corporation adopting many of the practices that make startups successful. One of these practices, significant partnering, And knowing who to partner with and how to develop these partnerships efficiently. So to us, I mean, to, to Brad Power, my, uh, coauthor, uh, in the HPR article and me, this was one of the, the most successful aspects, uh, that, uh, IBM has, has done. And we encourage them to, to continue, to continue doing it because I think corporations are starting to understand that, uh, In this environment, regardless of how much capital they want to throw at the problem and how big and how good they are, they cannot solve things on their own, and they need to co-innovate. Steve and I are finding that corporations that have adopted open innovation principles, where they are co-innovating with other large corporations, are becoming more successful At adopting startup driven innovation.

AI assessment note: “So I would say the short answer is yes, because when we talk about startup”

Q Can it even become the center? The center. Cause I just don't think there's ever been a case where that's happened.

A So I don't think it becomes a center, but, but it becomes the transformation agent. The whole idea is that corporations do not experiment enough in our view. What can a corporation take away from Silicon Valley or from any other innovation ecosystem is not the fact that you come into touch with Two or three or 10 startups is the fact that there is a set of now best practices, and one of these that you can take away, best practices of how to create startups, how to finance startups, how to manage a portfolio of startups, and what is important about this is that the corporations need to find ways to experiment rapidly and inexpensively. And, and what we have learned here to do very well Maybe better than any other ecosystem around the world is how to quickly start companies, to get them financed, to allow them to pivot as necessary, how to back our winners and let our, uh, not so strong, uh, players move on. Um, and I think the corporation needs, needs that type of a playbook. So, um, the, the innovation outpost becomes that Change agent for launching these experiments. I think a number of these experiments become very successful. So essentially you need to find ways and what we are advocating is how do you change the core?

AI assessment note: “So I don't think it becomes a center, but, but it becomes the transformation agent.”

Q You have an article out with another coauthor about evaluating moonshots in Harvard Business Review. Can you tell us what that framework looks like?

A The moonshot is a, is a major effort by a corporation, uh, with the idea of, of addressing a big or a big problem. So in the case of, of IBM, which was the company that we evaluated through our framework, they, they are developing Watson and Uh, as a, as a new type of software platform, uh, which uses artificial intelligence and can be used as the, as the building block for building, for creating the next generation of applications, uh, whether they're enterprise applications or, or consumer applications. And they're investing significant sums of money in order to see them through. They need to consider a variety of, of dimensions. And one of the dimension that That we talked about is experimenting with business models before they, uh, they identify the, the right one. Through this experimentation, Analyze their failures as much as they analyze their successes because they can learn a lot from these failures. And one of the issues that many corporations have and their employees is that they become risk averse because they do not want to fail. And when you're, our point is that when you are involved in moonshots, not everything is going to go as planned. And if it goes as planned, it means that you didn't take enough risks. Um, so they, they really need to impart that type of, of approach to their employees.

AI assessment note: “one of the dimension that That we talked about is experimenting with business models”

Q Right. And so the question that I have is when you describe this as a big structural shift, what are the ways that over the past hundred years to now that companies have had to change their organizational structure and where might, where might we go next? Like how is the nature of the firm being redefined? I always love this topic.

A So we have some hypotheses and, and one of the major hypotheses that we have is that the innovation outpost is If done correctly, can become a major change agent for the, the corporate structure. How this type of, uh, organizations can start impacting the way you do research, the way that you are changing from being an horizon one corporation to being an horizon two and horizon three corporation, how you need to To change your core without throwing away all your DNA. I mean, so, so these are very, very important and, and very critical problems for corporations to start thinking about. We do not believe that everybody would be able to make that leap, and frankly, some of the statistics show that the, the, the life of the corporation, of Corporation is, is shrinking, right? You have companies that are, that remain independent or for, for shorter time.

AI assessment note: “the innovation outpost is If done correctly, can become a major change agent”

Q And what's, what's the answer to that? Why can't they?

A Well, first of all, in, in our business, um, there is the, there is the aspect of trust you need to develop. Uh, but more importantly, I think you need to, As a corporation, you need to demonstrate that you're, what you're trying to accomplish. Just because you have a venture fund and just because you're willing to spend some, some money doesn't mean that you become a value add partner of a startup or of a group of startups. So what we have found is that the ones that have a particular reason, they're trying to solve a particular problem, They have engagement from the highest levels of the corporation. It's not only anointment, but there is actually engagement on a continuous basis. They are the ones who are putting the right foundation to be able to truly take advantage of, of the startup, of a startup ecosystem.

AI assessment note: “Just because you have a venture fund... doesn't mean that you become a value add partner”

Q It seems like every major company in the world has a innovation outpost in Silicon Valley and elsewhere. One thing that's interesting is you guys actually caution that some of this can become sort of innovation theater. And I'm curious to hear the difference between How do you know it's just not innovation theater and it's going to lead to something fruitful? It's not just like another failed siloed function.

A That's a very good question. And what we are seeing is that a lot more companies want to establish a presence and most of them interpret this presence with the establishment of a venture effort. Uh, but that does not make them, uh, to be truly embeddable into the, into the valleys ecosystem and, and put them in a position to really take advantage of, uh, everything that, uh, this, uh, area has to offer, and by extension, other, uh, ecosystems, startup ecosystems around the world. So, uh, what we try to caution is Just because you're sending some executives here, uh, as a corporation, it doesn't mean that you're automatically positioning yourself to, to take advantage of the, uh, of our, of Silicon Valley. And, uh, maybe even more importantly, just because you're establishing a fund, it doesn't mean that now you're going to start seeing a tremendous deal flow and the right deal flow, uh, and, uh, participate actively in Obviously benefit the, uh, the, the, the corporation that you represent.

AI assessment note: “Just because you're sending some executives here, uh, as a corporation, it doesn't mean”

Q It seems like every major company in the world has a innovation outpost in Silicon Valley and elsewhere. One thing that's interesting is you guys actually caution that some of this can become sort of innovation theater. And I'm curious to hear the difference between How do you know it's just not innovation theater and it's going to lead to something fruitful? It's not just like another failed siloed function.

A That's a very good question. And what we are seeing is that a lot more companies want to establish a presence and most of them interpret this presence with the establishment of a venture effort. Uh, but that does not make them, uh, to be truly embeddable into the, into the valleys ecosystem and, and put them in a position to really take advantage of, uh, everything that, uh, this, uh, area has to offer, and by extension, other, uh, ecosystems, startup ecosystems around the world. So, uh, what we try to caution is Just because you're sending some executives here, uh, as a corporation, it doesn't mean that you're automatically positioning yourself to, to take advantage of the, uh, of our, of Silicon Valley. And, uh, maybe even more importantly, just because you're establishing a fund, it doesn't mean that now you're going to start seeing a tremendous deal flow and the right deal flow, uh, and, uh, participate actively in Obviously benefit the, uh, the, the, the corporation that you represent.

AI assessment note: “Just because you're sending some executives here, uh, as a corporation, it doesn't mean”

Q Right. And so the question that I have is when you describe this as a big structural shift, what are the ways that over the past hundred years to now that companies have had to change their organizational structure and where might, where might we go next? Like how is the nature of the firm being redefined? I always love this topic.

A So we have some hypotheses and, and one of the major hypotheses that we have is that the innovation outpost is If done correctly, can become a major change agent for the, the corporate structure. How this type of, uh, organizations can start impacting the way you do research, the way that you are changing from being an horizon one corporation to being an horizon two and horizon three corporation, how you need to To change your core without throwing away all your DNA. I mean, so, so these are very, very important and, and very critical problems for corporations to start thinking about. We do not believe that everybody would be able to make that leap, and frankly, some of the statistics show that the, the, the life of the corporation, of Corporation is, is shrinking, right? You have companies that are, that remain independent or for, for shorter time.

AI assessment note: “one of the major hypotheses that we have is that the innovation outpost”