The walking dead – A story of corporate innovation (and AI)

Welcome to the magnificent corporate innovation theatre!

Corporations are a curious thing: On the one hand they’re really good at running their business, which is why they exist and where they make money. On the other hand, they want to innovate new business models, which is?not?why they exist and where they lose money… As the guys who make the money hold a stronger hand than the guys who lose the money, the guys making the money are the ones ultimately holding the chips. In other words: The legacy business decides over innovation.

Consequently, corporations suck at business model innovation (let alone; digital transformation).

Despite the simple truth stated above, innovation-thirsty corporations strangely seem to lack any kind of self-awareness regarding that reality.

Instead, they buy minority shares in startups, create innovation labs, do design workshops, have legions of agile coaches running around, run acceleration programs and – of course – let their senior managers hop on the silicon valley safari tour bus to watch those unicorns in their natural habitat.

However, all of those things are nothing else than homeopathy. Translate: They are cheap, the sugar (or alcohol) makes you feel good, and they totally lack any other working ingredient. There is no empirical evidence whatsoever that any of the above has ever lead to a substantial innovation, and certainly not; a digital transformation. And yet, many people seem to believe in those things. This is what we call: The magnificent corporate innovation theatre.

Just look through your LinkedIn stream to watch all the episodes of this year’s season of "The magnificent corporate innovation theatre"

This year’s season: "Artificial Intelligence" (a franchise of The magnificent corporate innovation theatre)

The show is hugely popular, and it’s easy to see why: It’s an experience of unseen beauty and exotic charm for the corporate world.

The stage is equipped with all the latest tech. Glaring spotlights are pointing to “disruptions” happening in every corner of the set. Actors wearing beards, T-shirts and sneakers are running around the stage waving colourful little papers, which they stick to the walls.

Every now and then some actors scream “innovation!” or "A.I.!" and show off a body, newly created from cardboard. They give the body some fantasy name with either too many vowels or too little (such as Valuu, Siroop or Immmr) and hold it into the PR spotlight. Then, some actors move the body around from behind -like a huge puppet- to make it appear alive as if it were a real thing.

If the overall business of a corporation would continue to be doing great, this show could go on forever. However, the guys who used to make the money, make less and less of it. Therefore, money to splash out is getting scarcer.

And this is because in the outside reality a totally different story is unfolding: It’s the first winds of the storm of the century, that are starting to loom and rattle the theatres. In plain English:

What we’re experiencing is the beginnings of a full fledged industrial revolution – maybe the most fundamental one ever,?and maybe the final one.

(Digital) zombies don't die

So, sadly the corporate innovation theatre show that we all admired so much, has to end some day; It’s only entertainment after all.

For some industries the show ended already (e.g. travel, media, software), for some it is ending right now (e.g. retail, fashion, sports), and a few lucky ones are still sitting in a theatre near you (e.g. banks, insurance, energy, manufacturing), playing along with some of their friends.?

But once the lights go on, it really feels the same everywhere: People enjoyed the show and go to bed feeling good. But when they wake up there is this terrible hangover and a strange feeling of something horrible that has happened the night before… They look around and… they find themselves looking at?(digital) zombies. And worse: Strangely some of those bodies are still walking!

A ‘digital zombies’ is a digital product, which appears to be a real thing, but for lack of customer adoption actually isn't.

You can actually just look at the next best digital innovation project around you. Chances are, it’s a digital zombie!

But they are so cute...

The thing is, those dead little bodies look so cute! As their managers invested so much of their time and money to create them in the first place, they treat them like their babies of sorts. Therefore, they strongly feel it must be possible to bring them to life. Otherwise, all that money and time would have been wasted. And worse; they ultimately would be considered bad managers admitting a failure.

So those managers find themselves stroking and consoling a dead body: They explain to it that the fat times seem to be over and that the body actually will need to slim down a bit. And to all the other stakeholders they explain that the dead body is well and alive and only suffered through a child illness. It will just need some more feeding and loving care to get well.

Hope dies last, as the saying goes. So do zombies.

Killing zombies

However hard those managers try to ignore the reality of non-interested customers for unreasonable amounts of time, inevitably at some point they start to think about ways to make the zombies disappear. They’re reasonable people, after all. Being nice people, too, they want to let the zombie die in the least painful way for everyone involved.

The managers could just use their no-more-money-phasergun to shoot at the digital zombies and kill them once and for all. Job done.

But they don’t. That would be too painful. They conclude instead that the best way is actually to just letting the bodies slip away from consciousness. From their own consciousness, mostly, and from their direct stakeholder’s, because outside their organization no one really noticed anyway.

In the best of worlds the managers eventually manage to slowly dry out the zombies’ financial feeding until they sleep away in peace once everyone has forgotten about them (iO? Immmr? Noow? Kaloka? None of them rang a bell, right?)

Mission accomplished.

After sobering out from the horrors, everyone goes back to the magnificent corporate innovation theatre to watch the next episode.

The (industrial) revolution kills the inhabitants

While everyone was watching the show in the magnificent corporate innovation theatre, some tech company meanwhile started to attack the zombie’s parent (i.e. their core business that used to make all that money in the past). No one took that tech company as a serious competitor at first; they had only been around for a few years and besides, they didn’t know a thing about "our industry".

But then, all of a sudden, the zombie‘s parent stumbles and goes down to its knees…

At first, the zombie’s parent’s stumbling feels strange: After all, so many smart people tried so hard to protect the parent in the course of the battle in the storm.?

The mother Zombie

But suddenly parts of the shiny skin crumble away and it turns out that the well-established parent company, that seemed so unshakable and lasting over all those years, so strong and so confident of being able to reinvent itself… was actually?THE MOTHER ZOMBIE!!!

One could have assumed it earlier, though. After all, the apple doesn’t fall far from the tree: A zombie child stems from a zombie mother.

The tech company and the mother zombie then continue to fight a few years of epic battle in the midst of the industrial revolution storm.

Getting killed in the storm

Finally, the tech company dries out the mother zombie’s feeding by squeezing out the remainder of its margin and profits. The dying mother zombie gets torn apart into bits and pieces, which end up being eaten by other mother zombies (competitors) or zombie sharks (private equity).

That game is called "market consolidation".

Then everyone is dead.

All the managers, business analysts and journalists observing the situation come up with different interpretations of what has happened; It was quite a complex battle field after all. For instance, there were so many competitors fighting side battles shouting “industry consolidation!” or “restructuring!” and everyone else focused on the “big tech” stories in even more regrettable industries such as media or e-commerce. Plus, the economy was bad.

You can read one real life case study of such a mother zombie going down in our story about Kuoni.

In the end, everyone involved concludes that losing the battle was nobody’s fault.

What is totally clear, however, is that the master zombie has been killed in the storm. Or, in other words: The industrial revolution has killed the establishment.

The end.

Or not?

Are there survivors?

Now that you are aware that digital zombies are out there, you should try to prevent them and even more importantly; avoid your legacy organization becoming a mother zombie. You have a fair chance of doing so by correctly setting up the whole arena for new business development (new business is what innovation ultimately is).

It’s you, who can make the difference!

Do this right and you eventually avoid getting killed in the storm.

Don’t worry if you didn’t set up everything correctly at the outset (most companies didn’t). You still have a fair chance to reset your setup right now. But hurry up, the storm is looming!

We have spent a lot of time experimenting and researching in the corporate innovation arena ourselves. And we have paid our fair amount of teaching money with failed attempts in corporate venture capital, internal innovation and joint ventures. In all our time doing and researching corporate innovation, we have only found a handful of companies and approaches that seem to be working in the long run (it’s early to draw conclusions on an industrial revolution – most of the mother zombies still stumble around – but evidence is starting to grow).

The seemingly successful cases all have a few things in common, out of which the single most important in our experience is the following:

Keep new business separate from your legacy, protect it, and give it the necessary degrees of freedom it needs to prosper.

Take a look e.g. at the Viessmann group with its clearly dedicated vehicles such as?VC/O, the Otto group with its digital spin-offs such as?About you?and?Project A,?or the Migros group's?Digitec-Galaxus. All of them have in common, that they have a very clear mission and that their parents leave the teams achieve their mission by themselves.

If you don’t have such a set up at this point, i.e. one that assures you create an environment where new businesses have a fair chance of prospering, that’s where you need to start.

How not to be a Zombie

It boils down to a simple imperative for top management:

Assure you have the right mission and governance at the very top.?

This is really something top management needs to care about in the first place, and it’s easy to see why: No one, let alone a whole organization, can move anywhere in a storm without:

a) directions, i.e. a crystal clear mission, vision and strategy, and

b) being enabled to run fast, i.e. the right (agile) culture and independent governance.?

Zombie-avoiding recipe

Given the strategic imperatives sketched out above, there is a simple recipe that you and your top management can apply:

• Get a?very clear understanding?of what and how big your long term problem actually is. Just accept the facts, as brutal as they may be. Don’t allow for gut feeling.
• Define a?very clear set of goals?based on the problem understanding (and I’m not talking about stuff like “get more entrepreneurial and agile”); We’re talking hard goals in terms of ROI and/or EBIT here.
• Define a?crystal clear strategy?how you are going to achieve those goals. A strategic diversification is almost always part of this.
• Set up a?dedicated governance and leadership?structure, directly attached to the CEO and/or president, which a maximum amount of autonomy.
• Enable a?highly performing, highly independent agile culture?within that clearly dedicated governance.
• Establish a?high-performing process?to create a deal- and innovation-flow, meticulously managed by people who really know their business.
• Start?building your portfolio of future business.?Not all of your bets will succeed. You actually do have to account for the occasional zombie. But as long as you don’t feed it for long, that’s perfectly fine. Just kill it once you recognize it, so you can focus your resources on scaling the bets that do play out.

That’s it. That’s how you create growth through new business, not zombies. And that’s how you can gain resilience against the storm of the industrial revolution.

Let’s create a better (corporate) world without (digital) zombies!?