Entrepreneur or corporate explorer? A new choice for innovators

Andy Binns
·4 min read

The Great Resignation is turning into the great startup boom. The rate of startup formation in the U.S. is now roughly four times what it was before the pandemic.

Tired of proposing ideas to senior executives that do not want to know or who are afraid to take a risk, these are people grabbing the chance to realize long-held ambitions to be an entrepreneur. But are they making the right choice? Does a manager with a great idea have to go it alone?

Conventional wisdom is that corporations cannot innovate because executives are too covetous of their profits to risk pursuing unproven ideas. So, while they are willing to entertain new ideas, they rarely invest enough to see them prosper.

It is true most corporations struggle with innovation. There is a long list of firms that either no longer exist or are mere shells of themselves, driven out of business by sudden shifts in technology or customer preferences. Blackberry or Nokia phone anyone? One study concluded that 50% of the companies in the Standard and Poor’s stock index will be replaced by the end of the decade.

Though disruption is a fact of 21st-century business, it is not the only story. “Big company wins again” is not as eye-catching a headline as “Iconic brand goes bankrupt”–but it is just as real. Some firms have figured out how to build disruptive innovation inside existing corporations. These include well-known names like Amazon, Microsoft, and Panasonic, as well as lesser-known ones such as LexisNexis, Analog Devices, and UNIQA Insurance.

Microsoft moved from making money on the software installed on servers and personal computers to cloud-based services. The onset of the cloud enabled an explosion of new services and solutions from customer relationship management software (Salesforce) to human resource management (Workday), and team communications (Slack). If the conventional wisdom was right, then Microsoft should be struggling. Instead, it figured out how to reinvent its traditional business into the Office 365 online service, deliberately disrupting its own installed base.

Microsoft is a great story, but it is not isolated. Amazon has created multiple new businesses. It did not stop at becoming the world’s dominant retailer. It moved rapidly into entertainment, electronics, and technology services. Amazon has developed a system for ideating, incubating, and scaling new ventures that rivals anything that Silicon Valley startups can achieve. They actively encourage employees to step forward with new ideas, giving the best opportunity to form “two-pizza teams” (teams small enough to be fed with two pizzas) and validate the idea.

Converting these ideas into real businesses still requires someone with entrepreneurial skills. I call them corporate explorers. They have much in common with their startup cousins: They see something wrong in the world and want to fix it. However, instead of seeking venture capital backing, they choose to build a business inside an existing organization.

At Panasonic, this is Yoky Matsuoka. She is a serial entrepreneur, who was on the founding team of Nest, the smart sensor company acquired by Google. She chose Panasonic as the right partner for her vision of A.I.-enabled consumer services. This resulted in Yohana, a personal assistant service designed to help busy parents free up time that is now being trialed in Seattle. At LexisNexis, Jim Peck launched a data analytics business that within twenty years has become a multi-billion-dollar unit–now larger than its parent company.

As corporate explorers, these managers chose to pursue entrepreneurial ambition inside existing companies. They accept the frustrations and constraints of innovating within an established firm, rather than following the seemingly logical choice of finding a venture capital backer. The key reason is that they believe they can go faster and further if they use the assets that the corporations already have, but that a startup lacks.

Companies like Panasonic and Microsoft have a customer base that knows and trusts their brand. These firms also have technical and production capabilities that a new venture can build on and scale fast, while startups need to build everything from the ground up. Corporate Explorers like Peck, Matsuoka, and others, can convert this into new revenue with the same entrepreneurial zeal that characterizes the best of Silicon Valley.

Setting corporate explorers free has a material impact on a company’s growth and can be decisive in winning the battle for talent in the Great Resignation. Keeping your most innovative managers inside the company is vital. It can be achieved by creating more opportunities for them to step forward and become corporate explorers.

Andy Binns is the co-author of Corporate Explorer: How Corporations Beat Startups at the Innovation Game, together with Professor Michael Tushman from Harvard Business School, and Professor Charles O’Reilly from Stanford. They are all co-founders and directors of the Boston-based innovation advisory firm, Change Logic.

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