iSPIRT Foundation, Confederation of Indian Industry (CII), The CII-Suresh Neotia Center for Innovation, NSRCEL at IIM Bangalore, CIIE at IIM Ahmedabad and Mahindra Leadership University came together to host the first of the Global Leadership Seminar series on 25th September, 2020.
Our inaugural speaker was Dr. Alex Osterwalder, the well known author of the Business Model Canvas, who spoke about his latest book, The Invincible Company. The talk was followed by a fireside chat with two industry veterans, Rajan Anandan, MD of Sequoia, former VP of Google South East Asia, and a prolific angel investor, and Sanjay Behl, CEO India & Co-Founder Nextqore Private Limited, and Chairman of the CII National Committee on HR & Leadership.
Prof. Rishikesha Krishnan, Director of IIM Bangalore, gave the welcome address and said that he was a big fan of the Business Model Canvas and has given many copies of the book away. Alex started his talk by saying that no company is invincible. The only thing they can do is to constantly reinvent themselves. The most successful companies reinvent themselves when the going is good. In a crisis, it is often too late for a company to reinvent itself. Great companies compete on superior business models in which technology, services and innovation and price are embedded. Great companies are also able to transcend industry boundaries easily. An example of an innovative company that transcends industry boundaries is Tesla, which sells cars, batteries and data. Alex said that his favorite example is China’s Ping An, which transformed itself from an insurance company into a conglomerate. Ping An broke out of industry boundaries to build Ping An Good Doctor, which now has 300 million users. Alex said that the pharma companies of the world could have also made such a transition but they defined their industry boundaries too rigidly.
Note: The full video of the seminar and fireside chat embedded below
Alex said that companies need to be ambidextrous and be able to both exploit existing business models and explore new ones, but both these require very different skill sets.
Quoting Clayton Christensen, Alex said that there are three types of innovation:
Efficiency innovation: Using robots in warehouses would improve efficiency, but was not enough for survival.
Sustaining innovation: New car models, digital transformation etc are good examples
Transformative innovation: Completely new business models. For example Amazon started as a book seller but went on to become an infrastructure provider with Amazon Web Services.
He said that most companies were not doing enough of transformative innovation that created value for customers and organizations. He said that it was possible for a company to disrupt an industry with inferior technology. Sharing the example of Nintendo WII, he said that it was not based on proprietary technology, but off the shelf components including motion sensors, that appealed to an underserved market of casual gamers who did not worry much about graphics and technology.
He suggested that companies could build an Explore portfolio by investing a small amount of money in a large amount of ideas. You cannot pick the winners upfront but learn from the VC industry where typically 6 out of 10 ideas will fail, 3 out of 10 will make some money, and 4 out of 1000 will be home runs. The German engineering company, Bosch is exploring this model. It gave 200 teams 120,000 Euros each and gave them three months to test their ideas. Seventy percent of these teams were cancelled after six months. 60 teams get a follow-up investment of 300,000 Euros, and finally 15 got further investments and were moved to the Exploit phase. This is what companies like Amazon have been doing for a long time.
Rajan kicked off the fireside chat by saying that innovation is a leader’s job, and that titles like Chief Innovation Officer are dead-end jobs delegated to those who cannot run businesses. He pointed out the trillion dollar market cap companies that exist today are founder driven companies. Sharing the example of Google, he said that, in Google people get noticed for doing the Big New Thing, and not just for keeping the machine running. Rajan argued for purposeful, targeted innovation, and for making adjacent bets. He said that Google Payments was one of the bets that they made, which has paid off well. Another was the Internet Saathi, which was an idea brought to him by Google employee, Neha Barjatya, which made sense as an initiative that aimed to bring women online. His take was that one has to think like a VC and make selective calls. He felt that the approach of making 200 bets and seeing what would work, was not feasible and gave the example of Sequoia, which manages $5.5 billion dollars but has a portfolio of only 200 companies. He also argued that, when it comes to innovation, and chasing new areas, you have to put your best people on the job.
Sanjay, who has worked in large companies like Levers, Reliance, Nokia, and raymonds before going on to start his own IOT company, NextQore, said that most of our larger companies are built for efficiency and not innovation and disruption. These companies rewarded predictability, but the world is now unpredictable. They are vertical, matrix organizations in a world that is flat, and has moved to platforms. They were trained to manage scarcity, but we now live in a world of abundance. These organizations were trained to manage linear change, but change has now become exponential. He said that the immune system of large companies was trained to reject innovation, and they need to now look at replacing scalable efficiency with scalable learning.
Alex said that innovation is becoming a profession. Therefore, these frameworks will become essential since CEOs now want a process for innovation, and less of an ad-hoc process. Rajan seemed to be all for targeted innovation and big bets while Alex’s model was to take a lot of small bets, and scale them up. Which approach should CEOs go with? Can innovation be turned into a predictable process, or is it something that depends on the leadership driving it. Write to us with your comments and let us know what you think.