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Spinning Out

As former Head of Innovation at two government agencies, over the last 6 years I’ve met, chatted and shared stories with other Heads of Innovation or Chief Innovation Officers all over the world. All companies tell you how innovative they are but when you dig a little deeper, you realise everyone is dealing with similar challenges.

I first came across the founders of rready (a Switzerland-based startup that provides software products to foster employee-driven innovation) at the 2019 Innov8rs Conference in Paris when they were still part of Swisscom. When I heard earlier this year they were about to spin out, I was curious. Frankly, the idea seemed inconceivable.

A company that is prepared to invest money and its people’s time in exploring and developing a business model completely unrelated to its core business is unusual. Often, leadership simply cannot see the point in doing so. Or just don’t want to challenge the status quo - Kodak being a notorious case in point. On top of this, spin-outs are fraught with difficulties. Everyone has different, usually incompatible agendas; it gets messy, it can get nasty. In government, even more so - policies, bureaucracy, rules and regulations tie you up in knots.

The story of how and why rready’s founders left the safe confines of Swisscom provides some important lessons for innovators and corporate innovation leaders.

Lesson 1 is for Corporate Innovators: Stop thinking like an innovator and start acting like an entrepreneur.

rready’s founders are the entrepreneurs most intrapreneurs dream of being: they’ve secured a sizable venture capital investment, their business is growing and they are fulfilling their vision. Yet, I’ve found relatively few corporate innovators who demonstrate entrepreneurial rigour and discipline in the way the rready team did. Instead, I see corporate innovators enjoying their sandpit a little too much and being complacent about evidencing product-market fit. They don’t understand why customers aren’t chomping at the bit for their product, and nor do they seek to understand. There can be a sense of entitlement, that their idea is so brilliant it should simply be adopted by the business without question. Instead of being driven by a compelling vision and demonstrating end-user benefit, they become driven by their egos.

In the ‘real world’, an entrepreneur’s career would be over before it had even begun if they behaved this way. If you are an intrapreneur, you job is not to persuade the ‘dumb’ customer that they need your product or just retro-fit end-user benefits to a solution you’ve already designed and built. Your job is to understand what problem you’re solving for your end-user, what the existing alternatives are for them and how you can create new, sustainable value for them.

Another behaviour I’ve seen from corporate innovators is a tendency for heroics. Some intrapreneurs prefer the heroics of circumventing the system over the challenge of trying to change it. In fact, many pride themselves on their ability to do this and revel in what they perceive to be their success against the odds. In reality, what they are doing is perpetuating the systemic barriers to innovation, meaning those that come after them face exactly the same challenges. It would be far more heroic if instead of finding ways around them, these intrapreneurs tackled and helped to fix cumbersome and broken internal processes. This means engaging and influencing stakeholders, not ignoring them.

Essentially, it’s the difference between an inventor (someone who comes up with an idea or new technology) and an entrepreneur (someone who turns that idea into a viable business model). A good idea is not enough. The rready team understood that they needed to find product-market fit through rigorous testing and iteration. They understood who their stakeholders were and actively addressed their concerns. This meant engaging all those deep systems (HR, legal, compliance, commercial etc) early in order to find a viable business model. Yes, doing this is difficult. And if you are innovating in a large corporation, you may decide it’s not worth it - after all, one luxury you have compared to an entrepreneur is a safe job and a steady income. Tackling this stuff takes grit and determination and commitment to your vision.

Lesson 2 is for Corporate Leaders: Build for organisational agility, not stability

There is another narrative here, which provides a lesson for corporate leaders. The bottom line is that, in order to grow the business and to move at the pace required of a startup, rready had to spin-out. The constructs of a large, established and successful corporate are built to sustain and maximise core business operations - its structure and processes are built for scale, efficiency and consistency, not for innovation. Exceptions to the status quo require permissions and organisations struggle to be sufficiently agile to adapt to and capitalise on new growth opportunities.

Despite a forward-thinking leadership and collaborative culture at Swisscom, rready’s Founding Team still had to navigate internal politics and stakeholders, and policies and processes designed for the core business. They did this really well, but it was painstakingly hard. Although Swisscom had attracted these entrepreneurial-minded individuals in the first place because, in the team’s own words, Swisscom is an ‘innovative company’, they still had to jump the hurdles of Swisscom’s deep systems. This meant they couldn’t hire the right people at the right time or adapt fast enough to capitalise on the increasing traction they were getting and market opportunity that was presenting itself.

As I’ve said, intrapreneurs have a responsibility to work with corporate stakeholders and help evolve and modernise systems that are not favourable to innovation. If you are in a leadership position and responsible for any of those deep systems, there is a responsibility on you too to understand what the barriers to innovation are and to work with intrapreneurs to evolve existing processes or develop new ones. Your job is not to maintain and protect the status quo - your job is to enable the progress of the business. Navigating organisational politics and processes can often feel like ‘whack a mole’ for an intrapreneur - as soon as you’ve resolved one problem or addressed one nay-sayer’s concerns, the next one pokes its head up. It can be exhausting and demotivating and is one of the reasons many corporate innovators leave. As a leader, you have a responsibility to create an environment and a culture where innovation can thrive, not falter.

With the spin-out of rready, Swisscom lost some incredible entrepreneurial talent. All four of the founders and all but one of the team left Swisscom to form rready. These were skilled entrepreneurs, talented, determined and hardworking. Imagine what else they could have done for Swisscom if they had stayed? Wisely, Swisscom ensured the rready team members left on good terms and the door is hopefully open for them to come back (and bring with them the wealth of experience they will have gained), should they wish to do so. However, many organisations push out their best entrepreneurial talent and shut the door on their way out; sometimes intentionally because the individuals are considered too disruptive, but more often than not, quite unintentionally by making it all so damn difficult to innovate and then treating them as an outsider.

Retaining entrepreneurial talent is important for an organisation’s future. Removing some of the systemic barriers described above will remove some of their pain. Valuing and rewarding entrepreneurial talent and thinking is also essential - and actions speak louder than words here. Talking about how much your company values innovation and entrepreneurship is no good when those taking risks and trying to shift the status quo are consistently passed over for promotion. And when entrepreneurial talent does walk out your door, as it inevitably will at some point, leave the door open. Your organisation can only gain from the connections and experiences those people go on to develop.

What Next for rready?

Although only small and still in start-up mode, rready is already facing the challenges of having to think about how it exploits and matures its existing portfolio whilst simultaneously exploring new value propositions. There is no corporate HR or finance system to hold them back, but nor is there one to fall back on. Dave Hangartner (rready’s CEO and one of the founders) told me the challenge now is about the strategic choices they have to make about how they invest their time and resources, just as any company of any size needs to do if they are to stay in the game. I’ll be watching rready’s continuing story with interest; their journey is just beginning.

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