The world around us is changing rapidly. There is now more pressure on established companies to innovate. The challenge most companies face is how to develop new products for new markets, while managing their core business at the same time. The principles and practices outlined in this book provide companies with a blueprint of how to manage innovation while they execute on their core business. The Corporate Startup provides frameworks, visualizations, templates, tools and methods that can be easily applied to develop new products and business models.
We welcome author of “The Corporate Startup: How established companies can create successful innovation ecosystems”, Dan Toma, welcome to the show
A reminder to our listeners sign up to the newsletter on theinnovationshow.io and you will be in with a chance to win one of 2 prizes, Dan has kindly offered us a copy of the Corporate Startup Book and access to the Corporate Startup video course worth €480 on https://thecorporatestartupbook.com/ (Winner Announced July 30th 2020)
Dan Toma – The Corporate Startup
[00:00:00] Steve Jobs : [00:00:00] Stay hungry. Stay foolish.
[00:00:14] Aidan McCullen: [00:00:14] The world around us is changing rapidly. There is now more pressure on established companies to innovate the challenge. Most companies face is how to develop new products for new markets while managing their core business at the same time. The principles and practices outlined in today’s show, provide companies with a blueprint of how to manage innovation while they execute on their core business.
[00:00:39] The corporate startup provides frameworks, visualizations, templates, tools, and methods that can be easily applied to develop new products and business models. We welcome author of the corporate startup, how established companies can create successful innovation ecosystems, Dan Toma. Welcome to the show.
[00:01:00] [00:00:59] Dan Toma: [00:00:59] Thank you very much for having me.
[00:01:01] Aidan McCullen: [00:01:01] Well, we started a show, just a reminder to sign up to the innovation show newsletter on the innovation show.io. Dan has kindly offered us the copy of the corporate start a book and access to the corporate start of video course worth 480 Euro. On the corporate startup book.com.
[00:01:19] So Dan, thank you for that in advance.
[00:01:21] Dan Toma: [00:01:21] No worries. My pleasure.
[00:01:22] Aidan McCullen: [00:01:22] And while I’m in the tanking mode, thanks to our sponsor for today’s show Microsoft for startups. So let’s get down to it. Dan and I wanted to start with a comment by the former CEO of Nokia, who admitted that it is sometimes difficult in a big successful organization to have a sense of urgency and hunger.
[00:01:43] No company can defend only. If you have a high market share and you are a market leader, if you start defending you cannot sustain Nokia’s former CEO also remarked later that established companies can only change when they have a charismatic [00:02:00] leader or a crisis. And you respectfully disagree with this notion.
[00:02:05] Because by the time a crisis or a charismatic leader comes along, it’s often too late to respond.
[00:02:10] Dan Toma: [00:02:10] We’ve been seeing this over the past months, right? With the, with the chronic crisis. Here’s the crisis. Here’s the burning platform. If you want. Now, the companies that were not set up to defend against change were to work within a new Baron dime.
[00:02:27] They’re having a hard time. In general, when we’re talking about transformation, generally we talk about change. I would usually bet on a companies that have a system rather than on the companies that rely on hero in heroics. Unfortunately for most companies, they just rely on that one great player or in that one.
[00:02:45] Great idea to make it big.
[00:02:48] Aidan McCullen: [00:02:48] Historically, you say management teaching has tended to focus on strategy as a method for finding longterm competitive advantages. Once a competitive advantage has been found managers, then go [00:03:00] about protecting it through good financial management and operational excellence. In contrast, contemporary management thinking recognizes that companies should be managed to quickly explore current competitive advantages.
[00:03:13] And move on to the next advantage. And you tell us here, in order to do that, companies need to use the right management frameworks. It’s just too simplistic to advise established companies to act like
[00:03:26] Dan Toma: [00:03:26] what’s happening is that the world is changing too fast for you to actually develop something and then just defend it for the next couple of decades.
[00:03:33] I think the competitive advantage. Off large organizations that are successful in today, world comes from on their assistance. So their sustainable competitive advantage is their ability to transform. Their sustainable competitive advantage is their ability to innovate and stay relevant. And the other big advantages to this is that this is very easily defendable.
[00:03:59] Nobody [00:04:00] can copy you or system. Nobody can copy you or culture, whether in the past, if you were just creating one product, Obviously, you’re not hoping for that, but you could see that a competitor was just coming into your market, just copying everything you were doing all the way down to the details of the product, or if you’re a sales strategy and all that sudden they were there eating away at your market share.
[00:04:22] If you, on the other hand, invest in your system, if you only had to invest in the people in the company and the culture who invest in having people with the right mindset on the, on the team, those things are defendable. Those things are actually sustainable over a longer period than just, just investing in a product.
[00:04:41] So I think that most companies should focus primarily on their internal system and their value creation system, rather than all one single product or one single business model.
[00:04:50] Aidan McCullen: [00:04:50] And those people listened to the show who work in larger organizations or who are in leadership in larger organizations know the way it goes.
[00:04:57] You’re in a board meeting, [00:05:00] maybe one of the board member, it says, Oh, we need to act more like a startup. But as you say, as Steve blank says, as Alex Osterwalder says. You can’t act like a startup because you have to mind the business as it is today, or it was yesterday and explore new businesses as they are tomorrow.
[00:05:19] Dan Toma: [00:05:19] Larger organization should not be confused with startups and startups should not be confused with larger organizations. My background is in startups and I was VP of Salesforce startup, and I know that the investors there. We’re saying that we will only get a financing ground. If we build a strong sales team, despite the fact, me being the VP of sales, I was always against that idea because the startup didn’t yet it’s value it’s value proposition was not strong enough.
[00:05:47] We ended up hiring a lot of people just to get that financing round. And that actually was very poor decision because our runway was just way shorter now with all those people on board. So what was [00:06:00] happening is that the investors were advising us to be more like a larger organizations. And actually we were a startup.
[00:06:07] And the same mistake I’ve seen when I was with the larger organization, people were telling us management was telling us more like startups. Well, we can’t because we have an existing user base to serve. We have an existing brand. We need to define, I cannot go there and create the experience and then damage of brand, which is we’re recognized as one of the top three brands in the world.
[00:06:26] Aidan McCullen: [00:06:26] I’d love to talk a little bit about your experience VP of sales for a startup, because that’s a common problem that you haven’t actually found your product yet. And that’s the sole focus is to find a sustainable product. And then you bring in the VP of sales. All the pressure goes on the VP of sales.
[00:06:44] You end up selling. Products that somebody will buy rather than the actual right product for your business. And this is where the decline comes. And as you say, that runway is coming in, it’s getting shorter and shorter.
[00:06:57] Dan Toma: [00:06:57] Yeah. It was one of the biggest issue we had in this [00:07:00] company. We were, we were, obviously we weren’t onto something.
[00:07:03] So we had a product. However, we were not really sure how to, how to engage with our audience. I mean, we were seeing a lot of people were coming to the website, creating an account. Staying in a trial for 30 days. And then all of a sudden, a huge drop we were expecting to drop, but not 99% drop or 95% drop.
[00:07:21] So for me, it meant that our value proposition was not a hundred percent right yet, but then the investors were pushing us. You need more sales because if your conversion rate is 5%, it means that it’s a numbers game. So you need to add a lot of people on at the beginning of the funnel. He’s that old saying nothing kills a bad product faster than good marketing.
[00:07:42] So this was exactly what so we were doing. We were, we were essentially throwing money at the problem instead of throwing brains. So basically instead of focusing on solving the value, the position on identifying the right value, the right features, the right everything for us customers, we were just saying, okay, let’s add more customers in the pipeline.
[00:08:00] [00:07:59] And actually that took a toll on the, on the, on the runway and ended up taking a huge toll on the company.
[00:08:06] Aidan McCullen: [00:08:06] For someone who doesn’t understand startups. Sales as a metric, they do understand, and metrics are a huge part of the problem for legacy organizations for large organizations as well. When it comes to innovation because measurement of new business models within organizations can kill a boarding killer product success with known business models can be measured using traditional metrics like profit return on investment or AR or accounting rate of return, a net present value.
[00:08:36] What searching, which is what you talk about has to be measured in an entirely different way.
[00:08:42] Dan Toma: [00:08:42] We’re working on a new book. Now it’s called innovation accounting. You can check or progress on innovation, accounting, book.com from the corporate startup, where we had one chapter innovation, accounting. Now we want to blow it up to one book because it’s just a topic that you need to talk about it at large at scale, not just in a chapter, essentially what’s [00:09:00] happening in larger organizations, is that in their pursue off.
[00:09:04] In my organization, they’re using a one site. So for almost everything, it’s a one size fits all for how much you’re allowed to spend on a hotel. Well, and it’s a one size fits all to how you measure her product and the one size fits. So it’s usually tailored to the most profitable business in the portfolio, which is usually.
[00:09:23] The legacy business, which is usually the business that the brand stands for. If you’re a telecommunication company is probably your core Delco products. If you’re a bank is probably credits where whatever else you are doing there. But searching is totally different my quarter. And I keep saying that you should ask the right question the right time, essentially.
[00:09:43] This is how a metric system needs to look in a larger organization. You need to have stage Gates and for every stage gate, you need to change the questions you’re asking the KPIs you’re using. Mostly recurrent revenue, annual recurrent revenue. These are great KPIs. However, they should only be used. [00:10:00] Once you were later in the, on the maturity scale, once you, once you’ve uncovered the value proposition, you know, that people want to have that problem solving so on and so forth, it sounds very cool.
[00:10:11] We’re a startup investor, right? I’ve been a startup investor. I’ve been in startups. We were never being asked questions such as what is your monthly, your current revenue? Two weeks after we launched. We were primarily asked questions regarding, okay. How many people confirm that they have this problem? Do you have any evidence that this is a big problem that people from outside of you or domestic geography suffer from and so on and so forth, relevant questions for our maturity stage?
[00:10:38] You know, you’re talking about parenting, you’re talking about raising kids. You’re not going to go to a five year old and ask them how fast they can run a hundred meters. I mean, you are going to ask them that question. That question is right, but then your benchmark should be for other, five-year-olds not to sign bold, finding a hundred meters
[00:10:56] Aidan McCullen: [00:10:56] is going to tell you what they think you want to hear, not what [00:11:00] they believe.
[00:11:00] Dan Toma: [00:11:00] Exactly. So that’s a big issue. I think. I think organizations should move away from one size fits all because in one size fits all, you’re not going to be able to take can. There is a law in, uh, in cybernetics, it’s called the Ashby law coming from William Ross Ashby. It says that if a system is to be stable, the number of States.
[00:11:21] Of its control mechanism must be greater or equal than the number of States in the system being controlled. What does this essentially mean for organizational design and for frameworks and system? The things we’re talking about is that you cannot hope to control. A diverse and ever changing world, which is in market.
[00:11:40] If you were internal systems are very, monolithic are very one size fits all.
[00:11:45] Aidan McCullen: [00:11:45] So many listeners of the show are corporate innovators. And those people that you address in this book, and one of the huge problems for leadership in large organizations and something, they probably just tick the box [00:12:00] with. Is where they should invest in innovation.
[00:12:04] And the debate is often around where and how those investments should be made. And what I mean by that is should an innovation unit or innovation team be physically separated from the main business or can innovation be managed within the company? And you say in the book, the feeling is that by creating innovation labs, managers can separate innovators from the toxic environment within the company.
[00:12:30] But these labs fail because companies do not build any managers and processes around them, allowing innovators to work on whatever they want. There is a common tendency to conflate creativity with innovation. Everyone sees successful startups coming up with great new products and this motivates managers to pursue the development of similarly cool, shiny new products via or in D labs, incubators and accelerators.
[00:12:56] But creating new products is not innovation. [00:13:00] And many corporate innovation labs are just innovation theater.
[00:13:04] Dan Toma: [00:13:04] First of all, innovation is everybody’s job in the company. I don’t, I don’t believe that some people should innovate and some people should not. The only difference is that on some people’s agenda, innovation is higher up on some other people’s it’s just lower and they let’s say to do list.
[00:13:21] Uh, however, I’m strongly against the idea of lab I’m yet to see a company which is building successful products just by having a lab. I think the labs are great. I think companies should continue doing labs, but don’t put all your eggs in one basket. Don’t bet the entire farm on the lab. Why? Because.
[00:13:46] We’re a company that’s 10,000, a hundred thousand, 400,000 people. The lab becomes a bottleneck. The lab can attend to so many ideas, right. But there’s always going to be a lot of ideas [00:14:00] which are left out. So I think that the companies should strive to create an internal system that looks beyond the idea of a lab.
[00:14:07] The labs should continue to exist, but be more. A or B change to, to mimic more technology labs rather than business labs. Again, a lot of organizations just look at startups and say, Hey, startups in the startup world, in the outside world, there are these things called accelerators, and we’re going to do an internal one.
[00:14:26] Yeah. But you need to understand that the outside world also has multiple investors and the outside world has way more ideas than you have internally. So don’t build a lab. That would be my advice. And again, I think it’s a mindset issue in most large organizations. So you have to address that with, with training.
[00:14:46] You need to address that with people cross-pollinating and learning one from the other, rather than separating one unit or one group of people from the core. Otherwise you’re going to run the risk of these people being hated by the people in the [00:15:00] court. And one of my favorite examples here is the Yahoo brick house.
[00:15:04] Yahoo was probably one of the first companies that said, Oh yeah, we’re going to build a lab and we’re going to send it outside of that. Or because we don’t see them being able to thrive and succeed there. And they send it off to the brick house in the center of San Francisco. And in six months, eight months time, everybody at the headquarters was hating the guts of the people, a brick house, and they ended up shutting it down.
[00:15:25] It ended up being a huge cultural mess for you, who to clean up.
[00:15:29] Aidan McCullen: [00:15:29] This is what Clayton Christensen talked about. May rest in peace about the soaking sound of the core dragging you back in. But also then you have, as you say, for example, somebody sent on secondment to the lab, so they get a flavor of the lab and then they come back and they report back to the core of that.
[00:15:47] All those guys do is sit around on beanbags and. What a great life they have where we’re paying for it over here. So you can see it from both sides. You can see your play, that toxicity breeds, and actually one of the hot ideas to keep [00:16:00] them separate. So they don’t become toxic, but then they become the cause of that toxicity.
[00:16:05] Dan Toma: [00:16:05] That’s all. I’m, I’m all for integrating the lab in the headquarters. Yeah. And I’m all for destroying the lab. In my opinion, I think this is based on what the, what Steve blank was writing about a couple of years ago, he was saying that that the signpost organization that failed that innovation is going to be having a lap, have the lab that’s assigned pose that, Hey, the, the way you were, your innovation is structured and framed.
[00:16:27] There doesn’t work. I couldn’t agree more. And I think that the, the purpose of the lab is the end purpose. The end goal of the lab is to actually disrupt itself. When an organization’s succeeds in innovation and succeeds as having an embedded culture of innovation once they no longer need the lab. So in essence to do the job of a lab is for them to no longer exist.
[00:16:51] Aidan McCullen: [00:16:51] I worked in a very legacy organization and the way I kind of articulated it was I was head of innovation. Was. That [00:17:00] incentive lab, or even a digital team being a vertical within the business, they need to be a horizontal. So the pillar that they are needs to topple over and integrate into the rest of the organization and be a positive vampire and change the mindset of those other people’s right.
[00:17:20] The organization. Because back to that idea of mixing people together, When people mix on the, have these kind of conversations that spark open around the water cooler, that’s when the ideas start to share, that’s when you mix the legacy with the new and you can actually solve real business problems,
[00:17:39] Dan Toma: [00:17:39] just keeping people, keeping people separate and keeping people outside and another building in another, in another zip code, that’s not the way forward.
[00:17:48] And again, Most large organizations that have been on that path. They actually closed down their lab just recently, a pharma company in Europe has done the same. They basically took the idea of the lab [00:18:00] and they integrate it in existing business units because that’s the only way you can ensure that the product is being creating.
[00:18:05] The lab gets adopted by client businesses because in a business unit, that’s where our product can scale. It cannot scale in the lab. The lab is good for agility for speed. We’re uncovering what people want, but not for scale. So scale needs to happen in an instant organizational where you have the doors with the right mindset off doing and scaling stuff.
[00:18:25] The searchers there are great for, for, for some things, but not for everything. So I think it was a great decision to, to integrate that within, within a business unit and I’m all for the labs and take the lessons learned and make sure that everybody in the organization understands that innovation is everybody’s job.
[00:18:45] Not just, not just the selected group, young people that like to dress up in hula shirts and wear sneakers. It might be higher up on some people’s agenda and lower on some, on some others people’s agenda. But at the end of the day, if we want to succeed, everybody needs to be,
[00:19:00] [00:18:59] Aidan McCullen: [00:18:59] I’m actually concerned about lab workers at the moment.
[00:19:03] So not the idea of the lab, but the people working there because we’re in this time of crisis and most likely. Facing into an economic downturn. And during those times the theater labs, so that what Steve blank talks, when you talk about the idea of innovation theater labs, they get scaled down. So we’re really going to see who is real about their innovation during these times, but it could be a great opportunity to integrate those people.
[00:19:31] Like you say
[00:19:32] Dan Toma: [00:19:32] no for that. And I’ve been supporting organizations that are on that. Often I’ve been supporting organizations that said, Hey, we, we, we had a lab. We want to scale this. We wanted to transfer me. I’m primarily working on Scandinavia. And let me do incorporate the white transformations there.
[00:19:48] Right? I would say this can Navy a market is fairly mature. We’re at least more mature than I’m seeing in central Europe or Southern Europe. I cannot speak for Asia or straight or North America, but I’m seeing them being more mature [00:20:00] because they are, they’ve already tried the labs. And they’ve seen the, the positives and the negatives.
[00:20:05] They know they want to do full on corporate transformations, changing everything top to bottom and integrating the lessons learned in the lab, in the processes, in the value creation processes within the established business unit.
[00:20:19] Aidan McCullen: [00:20:19] And what does that look like, Dan? So what, you know, you say you’re supporting them.
[00:20:23] What kind of work for example, that you can share with us
[00:20:26] Dan Toma: [00:20:26] essentially free four pillars. We are helping them with one of them is innovation strategy. You cannot talk about creating innovation or living off innovation, meaning that you’re going to have successful innovation products coming out. If you don’t have a very clear strategy, we actually outlined that in the book as well.
[00:20:43] We say that every company should have and innovation teases, essentially. It’s basically the investment thesis concept from the VC world. Taking an applied internally in the, in the company. So that’s one stream of work. Then obviously every company should create their product lifecycle, their innovation [00:21:00] framework.
[00:21:00] Cause that actually is it’s going to help with the KPIs. It’s going to help with the skill that’s going to help with the methodologies that are being used early stage requires one thing and later stage requires something else. So creating the product life cycle that everybody agrees. On in the company, it’s very important.
[00:21:19] And then obviously capability development, right. People, or it’s good that you have the processes. We’ll let people know about it, but didn’t need to be trained to follow the process and, and be disciplined in following that. And then later on, we’ll talk about culture, leadership development and, uh, and innovation, accounting.
[00:21:34] How will we measure all that? All the things that we’ve created. So there’s this, usually our projects that last anything from three to five years. So you cannot expect to change your 15,000, 50,000 people company. Within, uh, within one year or two. And it requires a lot of leadership support. And that would say that in Scandinavia, I found most leaders being very supportive of innovation, a very supportive board of transformation on like in more [00:22:00] conservative countries.
[00:22:01] Like I would say Germany or France were, were even even Spain or Italy.
[00:22:05] Aidan McCullen: [00:22:05] It’s probably shows a little bit about the cultures of those countries as well, where innovation exists. I wrote an article about it recently about how. The difference between the innovation theater and true transformation. And I use the analogy of, if you think about breakfast, so the idea of bacon and eggs, the hand is involved, but the pig is absolutely.
[00:22:31] So this is what is actually needed. You need, and we’re going to, we’re really going to see who is living up to that mindset.
[00:22:39] Dan Toma: [00:22:39] Yeah, you’re right. I mean, everybody, my professor of entrepreneurship was saying this in the NBA, that if you enter a deal, we should decide if we’re pigs together, what she comes together or hands together.
[00:22:50] Right. So if we are committed on this, where we’re all involved in this boat, it’s going to be difficult. For, for her party to be committed and not one [00:23:00] involved. And I believe that in some organizations on the people in the lab are very much committed to innovation and very much committed to transforming the legacy organization and, and helping it survive in the future.
[00:23:12] And come up with new offerings. And on the other hand, some of the leaders are just involved in innovation saying that, yeah, we support innovation, but that’s just written on the annual report and a couple of slides that nobody sees. And I believe that they should all come together and they all should strive to have the organizations survive in the future.
[00:23:31] And not only off the current business, but of. Future businesses. You know, I keep saying that every time, every time I’m talking with a company that has given me an example of a great product, we just launched. Right. And, uh, I keep saying, yeah, you basically just told me that you launched a moonshot, but my question for you is can you have a space program?
[00:23:51] Cause it’s wonderful. I think too, to put a man on the moon and it’s totally different thing to, to build NASA. Because the idea of larger organization [00:24:00] should, I mean, what larger organizations to strive for is having space programs, meaning that you’re able to launch moonshots on a constant basis, not just one pet project of that one executive.
[00:24:14] And that comes from everybody being committed, doing innovation the right way.
[00:24:19] Aidan McCullen: [00:24:19] I love that, man. That’s a great analogy because if you think about a startup, like you have been through yourself, right. You’re constantly pivoting. And if the idea is like, we need to hang our hat on this one product, then you’re going to look for every way to protect that product.
[00:24:34] Like the way a legacy business does with creating a business model. They’re going to actually, like you say, a pet project is going to become the thing you need to hang on to and protect with everything you have, because if the mindset isn’t right. An executive is going to see it as a failure themselves.
[00:24:49] And it leads me to this lovely thing you’re saying in the book here is that oftentimes. Innovation has seen as Oren D spending and R and D spending [00:25:00] generates more patterns held by a company. But the number of partners held is not the same as innovation. And I say this in full realization of making these, my mistakes myself, because when innovation work is not connected to any strategic vision or North star, the output is just a random bunch of stuff.
[00:25:18] You might be lucky. And you may become a hero by accident, but it’s not by design. And your work is saying that businesses organizations need to create a system that does not rely on a hero heroics or look.
[00:25:33] Dan Toma: [00:25:33] And the other fig we’re mentioning here is that talking about R and D spending and all that stuff, essentially what R and D is, and I’m overly simplifying.
[00:25:43] And I hope I’m not going to offend people that are listening to this show that work in R and D what R and D is doing is essentially transforming money, financial resources into ideas. Right. They did create a new pattern. They create a new, a new one [00:26:00] molecule and new technology and new, whatever new vehicle, new, whatever what innovators are doing.
[00:26:06] They’re converting those ideas back into money. You are going to be totally dysfunctional as, as a company. If, if you don’t have both sides of the equation covered, however, Derek companies that acquired, we are the R and D and I’m looking good. Apple, I’m looking at Tesla and they’re very good at innovating.
[00:26:27] So they are very good at taking the acquire technology. They are very good at taking an LCD or a microchip, putting it into a product and selling it. Do you four 20 times what they initially paid for? And I think that’s the innovation side. And I think, yeah, if you look at the BCG top 50 companies in the world, and then if you look at the statistics on top of 20 highest RMS, these spenders, you’re going to see exactly what I’m just saying.
[00:26:56] Now, the fact that on the top 20 R in these [00:27:00] spenders is a bunch of companies that actually don’t make it on the top 50 most innovative companies.
[00:27:06] Aidan McCullen: [00:27:06] Again, I’m putting myself in the lab here and I’m saying to myself, With the lack of a North star or a clear direction or a strategy to work too. I’m just going to create stuff because I might stumble across a solution.
[00:27:23] But the big thing is that oftentimes it doesn’t have a problem big enough for that solution. So there’s no problem to sell the solution to.
[00:27:31] Dan Toma: [00:27:31] If you’re in that particular scenario, if you’re in that particular city I would totally encourage you. We’ll go to management and make a case for corporate wide transformation, make a case work.
[00:27:41] Very clear innovation strategy. Just make the case for, Hey guys. You know, we have this lab, you are pumping a ton of cash in, in, in us every year. However, I would like to know what I should be working on next year. Besides the buzzwords, I’m just hearing such as AI, [00:28:00] IOT, self driving cars, whatever. I need to have specific strategic options I should go for.
[00:28:07] I need an innovation thesis. That’s the job, because if you’re not going to raise that flag, prove the things that you were saying in your lab. You’re under risk of your lab being discontinued. Next time, the CEO changes and I’ve been there. I’ve been in a company where the CEO initially was very supportive of innovation.
[00:28:26] However, he left the company and then the guy that took over was the ex CFO. And he was running the company with an Excel sheet. Guess what innovation equals liability because equals cost. So we were the first group that was slashed, obviously he had his reasons. I mean, for years we were not able to create good products.
[00:28:45] Why was that? Because we didn’t have a very clear strategy. And when we were just basing everything we were doing off the luck or intuition, or gut feel. And that was not sustainable in any way, but discontinuing the [00:29:00] innovation side of the organization was not the way forward either.
[00:29:03] You’re not exiting the situation. You have to go and try to fix it.
[00:29:08] Aidan McCullen: [00:29:08] Let’s Jump to the innovation framework itself done because you start off here by telling us, unlike a product roadmap, which a legacy organization is used to, or even a startup is used to because they can just focus on one thing, an innovation roadmap.
[00:29:23] Is a roadmap for multiple products,
[00:29:40] So. Back in my day, product road maps were, were very important. I don’t know. I don’t know if they’re still so relevant today as they used to be seven years ago, but the innovation roadmap is actually a different type of roadmap is a roadmap that encourages learning. So you’re not necessarily looking at the features [00:30:00] you’ve delivered as much as you’re looking at how many learnings you’ve got in a certain unit of time.
[00:30:05] Where, what does the learning tell you about your vision? What is that learning, telling you about your particular business model that you’re thinking of bringing to the market? That’s basically innovation roadmap. It’s a place where you go to and say, okay, how many learnings do I need to get? And on what particular topics do I need to get those learnings?
[00:30:28] In order for me to make it to the next stage. Yeah. Every product is built on desirability viability and feasibility and an innovation roadmap focuses primarily on uncovering desirability. First focus, second on, on the feasibility of the idea. And then it becomes the viability of the idea. And actually it’s not linear, so it’s not one after the other.
[00:30:48] Yeah. You’re basically checking all three at the same time, but you have primarily emphasis on desirability first and then primarily emphasis on visibility and then on viability. That’s the big [00:31:00] difference you want in a product roadmap and innovation roadmap
[00:31:03] Aidan McCullen: [00:31:03] within the product roadmap, then business models becomes really important.
[00:31:07] We’ve done shows on business models before, but I love the way you talk about how a shift in business model can absolutely change the focus of a business. An example is. A shift from car manufacturer to mobility solution. And we saw this recently with diamond his car to go on another interesting one, I thought was the big question about iMessage versus WhatsApp and is WhatsApp a viable business model?
[00:31:33] Dan Toma: [00:31:33] Well, when you take a step back and discuss the fact that for large organizations to survive and to better manage innovation, they should become stellar. Managing a portfolio of business models. And again, the emphasis is on business models. I’m a highly thing that the companies should manage. A business model is not product because you might have 20 products and they all look different to you.
[00:31:57] However, they’re all based on the same business [00:32:00] model. If the underlying assumption behind this business model dies. Then all the products that are based on that business model die consider an example of a bank, right? They have 101 credit cards. However, the business model is the same. So if people will stop taking credit in the future, Or in depressant now, right?
[00:32:20] With the COVID, a lot of people no longer want to use their credit cards. Then it doesn’t actually matter how many products you have in that particular business model. So it’s very important to do a portfolio of business models. And this was actually one of the lessons I’ve applied when transforming the large bank in Norway, from my product portfolio to a business model portfolio, same, same goes for morbidity.
[00:32:43] Same goes for automotive, right? It doesn’t matter if you have the, a class B class C class III classes as diner does, right? Essentially they’re all the same business model. It’s pay for an asset, but these people will no longer want to own that asset. Then you’re left out to drive. [00:33:00] This is why it’s important for them to, to think about new business models and think of a portfolio of business model.
[00:33:06] In my opinion, the company of the future is going to be basically a company of companies, a company, the future of corporation of the future is going to look more like VC company. Then it looks like a 19th century, India fuel revolution type of organization where essentially what’s going to happen is that you’re going to have common resources that are shared, but every single.
[00:33:27] Entities responsible for their own P L and if they don’t survive, they don’t survive, but you’re not going to have socialism, but you’re not going to have money taken from a successful business model and thrown into the other one. Just for the fun of it. Everybody should be supporting their own P and L and talking about the WhatsApp, right then WhatsApp versus messenger.
[00:33:47] I mean, teleco companies in Europe have been sitting on the WhatsApp solution for ages. Before WhatsApp came along and the, there was that they didn’t want to invest because they were afraid children’s SMS will, here’s a [00:34:00] scenario for you. You’re either going to cannibalize yourself where somebody else will do it for you.
[00:34:05] But that the legacy solution is still going to die no matter what. And I think where I hope that a lot of executives learn that lesson, especially in telco business, they learned a lesson from, from WhatsApp. Is it successful for Facebook? Only time will tell. I don’t know. They try having people pay 50 cents for it.
[00:34:24] And nobody wanted to do that. I don’t know if the communication channel is considered a commodity by the people we’re not. Again, I think time will tell if the investment was worth four for Facebook.
[00:34:36] Aidan McCullen: [00:34:36] One of the things I often think about this done is. We tend to measure those investments again, back to the legacy measurement models.
[00:34:45] So in profit or return on investment or AI or whatever it might be, but one of the things you get out of a lot of work like that, or investment like that is capability. So you build capability, you build [00:35:00] scar tissue, you build muscle, and then that muscle can be used for something else. And oftentimes it’s that, that,
[00:35:07] Dan Toma: [00:35:07] and I think most companies should strive for that.
[00:35:10] How many companies are doing that? Well, we don’t know yet. I guess only time will tell
[00:35:14] Aidan McCullen: [00:35:14] again, I get that they’re under pressure where nobody knows what’s going to happen. Now, the world has changed. Immeasurably and tech companies are taken off and small businesses are struggling. So I wanted to ask one final question.
[00:35:28] And this has to do with those smaller business because we focused on legacy organizations or startups, but say I’m a small SME. And I’m listening to this show and I’m going to myself, what the heck can I do with this information? What does it mean to me? What would be the message for those people?
[00:35:47] Dan Toma: [00:35:47] I think that the message for them is keep doing what got you to the point where you are now.
[00:35:53] I think in most organizations, what we’re seeing in legacy organizations is that they lost that innovation ethers. [00:36:00] They lost that hunger for becoming better somewhere along the way. From the moment when they were founded to the moment they were no longer owned. The word were managed by the founders.
[00:36:10] Were the family. And I think for an SMB that’s still family owned. It’s still have the, still has the founder at the helm. I would just say, stick to your guns. Keep being innovative. Keep questioning yourself every day. As you used to when you were building your business, what it is today, and you’re going to be just fine in the future.
[00:36:30] And if at one point you want to exit where you want to let your business be managed by somebody, make sure you hire somebody that follows in the same footsteps mindset wise.
[00:36:40] Aidan McCullen: [00:36:40] And then for a message for those people working in the corporate labs, those people who are wondering what the heck’s going on at the moment, what would be your message for those people?
[00:36:50] Dan Toma: [00:36:50] My message for those people would be that they are essential workers for the organization. However, they need to raise [00:37:00] their hand if they don’t believe the organization is having in the right direction, when it comes to how they organize. Innovation. So don’t be happy because you have bean bags in a cool office in the downtown district.
[00:37:14] Just making sure raise your hand and say, Hey, in order for me to succeed, I would actually need X Y set to happen at headquarters. We need to have a bit more of a presentation to the board level I would need to have, I have a very clear way to integrate. My ideas back into the business unit. So don’t just be happy to on the fact that you have a cool office, because that can be gone in the next day.
[00:37:37] Aidan McCullen: [00:37:37] I’m just picturing actually that conversation, that difficult conversation. But if another way to do it is send the leader of the business this episode and they’ll get the messages. Well, I’m fine. Final final message. Then for, for the startup, Dan, for those people working in startups, you’ve been there.
[00:37:56] What’s your measures for those people
[00:37:58] Dan Toma: [00:37:58] be humble and be curious. That’s what’s [00:38:00] going to get you through everything. If you’re always going to ask yourself, why does this happen? Then the solution is halfway developed.
[00:38:08] Aidan McCullen: [00:38:08] Beautiful, lovely way to finish a nasty. That’s why at this top of the show, I start with that.
[00:38:13] Steve jobs, quote, stay hungry, stay foolish. Eat means exactly that. I means keep learning and stay hungry for more knowledge and that idea of beginner’s mindset. Then where can people find out more about you? The book. Your future books, et cetera,
[00:38:29] Dan Toma: [00:38:29] social media, LinkedIn, you can find me on there. My name’s Ben Tomo on Twitter.
[00:38:34] The handle is then tow underlying
[00:38:38] Aidan McCullen: [00:38:38] and don’t forget, sign up for the newsletter on the innovation show.io, and you’ll be in with a chance to win. One of two prizes. Dan has kindly offered us. One is a copy of the corporate set of book. And the second is a prize worth 490 Euro, which is the corporate startup video course.
[00:38:53] On the corporate startup book.com many thanks to our sponsor, Microsoft for startups and to our guests [00:39:00] today, author of the corporate startup, how established companies can create successful innovation ecosystems. Dan Toma. Thank you for joining us.