The Black Holes of Innovation
Astrophysicists spend a lot of time studying Black Holes, a region of space time which gravity prevents anything from being emitted. Black Holes are powerful enough to prevent light escaping, thus they are hard to detect. They form when massive stars collapse at the end of their life cycles and the power of their gravitational field sucks in anything within range. Corporate innovation has a lot in common with Black Holes.
Over the past few years, companies let go large numbers of research scientists, middle management and other staff. It made the balance sheets look rosier, which combined with hundreds of billions of dollars in quantitative easing, that is cheap money, has resulted in companies with trillions of dollars of ready-to-spend cash on the books today. However, they did not invest in innovation, like Black Holes little or no capital emitted from these companies; instead, they sucked in all the smaller profitable companies within range. It may cheer investors and stockbrokers, but it left entrepreneurs and promising early start-ups without funds to develop their companies. It has to change.
There are moves within corporate culture to create ‘intrapreneurs.‘ In a recent article here on Innovation Excellence, John Webb wrote, “One of the biggest challenges for any intrapreneur or intrapreneurial venture is to navigate the idea or initiative through the maize of corporate decision making to get to the ultimate sources of power that can actually sanction the project or provide allocation of resources.”
There is an obvious contradiction here. Companies are downsizing staff and at the same time want to create a culture of internal entrepreneurship. From a psychological point of view, why would any employee risk association with failure when he or she sees colleagues fired? The internal politics of corporations operates as fiefdoms, freewheeling entities threaten the internal power of managers. Further, large corporations operate as a series of internal profit centers for products and services.
As much as Richard Branson believes “everyone becomes so immersed in what they’re doing that they feel like they own their companies,” the reality is that employees have little or no say over their future.
A practical alternative one that will emit capital from the corporate Black Holes is to invest some of those trillions of dollars in promising start-ups. This does not mean that companies dole out money to every good idea and just let them go one their merry way. Within companies, there are many talented middle managers; most hit a glass ceiling in their career path. As they get older, many with mortgages and children heading to college keep a low profile. Not rocking the boat is a preferred option. Internal politics becomes more important than enterprising ideas. However, there is another approach.
- What if companies funded promising start-ups?
- What if middle managers oversee the investment?
- What if companies pay their salaries for a guaranteed period of five years?
- What if these middle managers were only answerable to one executive in charge of these investments?
The benefits are manifold, if the investment succeeds then the middle manager is now an executive of a small growing company, in charge of his or her destiny. He or she gained hands on experience in being an entrepreneur. The large company has a stake in a profitable new venture. Within the “mother” company, young up and coming talent moves up and sees there is a future nirvana beckoning in the form of a possible “Intrapreneurship.” There is no threat to existing fiefdoms, no risk to profit centers. Corporations cease to be Black Holes.
Just one other point, it is worth noting what happens eventually to Black Holes, they keep sucking in mass and energy until they explode and become insignificant white dwarfs and neutron stars.
image credit: bullet holes isolated on black from bigstock
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Peter Doyle is an award winning media marketing, news and documentary producer using rich media to accelerate innovation and commercialization. Check me out at https://www.linkedin.com/in/peterjdoyle
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Hello Peter: Provocative post. As someone who experiences these relationships continually from both the perspective of outward facing corporations, and start-ups (that I sometimes represent to corporation), I feel reasonably qualified to comment…at least in the context of consumer packaged goods companies. Perhaps your comments refer more to other industries (e.g. computer/telecommunications).
I agree that navigating corporate channels to key decision makers and champions can be extremely challenging for external parties. However, it is not impossible, especially if the parties are keyed into what kinds of opportunities are of greatest interest to the companies. It also helps if you’ve established a track record of credibility with the respective companies.
Further, I have found that companies in general, are disinterested in investing in start-ups and the like unless the return on investment is extremely low risk. This is a common misconception among start-ups who believe that companies (specifically consumer packaged goods firms) are seeking investments in promising concepts…in general, they’re not. Most are interested in a technology or company reaching commercial stage before they take a very serious look.
Finally, I wasn’t aware that companies are doing wholesale layoffs of their scientific/technical staffs, and that they were doing so for short term balance sheet “beautification”. I thought it was more because the economy has been tough, and layoffs (which can be cyclical based on economic trends) reflected this more than anything else.
Like yourself, I am intrigued with the idea of intrapreneuring, as it seems like a promising way to nurture new opportunities, provided that the right folks (with entrepreneurial mindsets) are put in the right roles, versus expecting corporate managers to display the type of behaviors and talents that distinguish entrepreneurs from others).
Again, I enjoyed your post and will look to read others’ comments.
Thank you for your very informed reply. Just a couple of remarks. With respect to lay offs especially in pharma, there have been major cuts over the past few years, some of the work has been outsourced overseas. One indication of this is that many companies have moved to Open Innovation to find new product lines.
The hardest part of getting any start up going is in the early stages. They have a term for it “Valley of Death.” Start Up companies operate for the most part on very tight budgets. It is very easy for a big company to come in and buy up a going concern, even if they pay extra. What sort of risk is that? But if they are interested in “intrapreneurship” within their own companies, it doesn’t bode well, especially as the employee mindset is one of doing their job and staying out of trouble. Risk involves stepping outside the comfort zone, if large companies will only invest in proven technologies and products, why should an employee put their security on the line to do something management will not do.