What Did I Learn in INSEAD: First Story

130 years ago, using 7,000 meter tons of iron, this great tower that has been the tallest tower in the world for 41 years was built, it is the Eiffel Tower.

At the top of the tower is a room in which the tower architect Gustave Eiffel was receiving the most prestigious visitors, and in the picture below is Gustave Eiffel hosting the famous inventor Thomas Edison. The first thing that came to my mind when I stood in front of this room was the persistence and dedication, which is the most important thing we learn from Thomas Edison, the one who failed a thousand time before he succeeded in making the light bulb, “Never get discouraged if you fail. Learn from it. Keep trying”. Also, he said: “Results! Why, man, I have gotten a lot of results. I know several thousand things that won't work."

One of the most important lessons that we should learn at the school of Innovation is experimentation and persistence. We also learn from Edison not to waste our time in inventions that people do not want; Edison says: "Anything that won’t sell. I don’t want to invent, because anything that won’t sell hasn’t reached the acme of success. Its sale is proof of its utility, and utility is success."

 I moved from Paris to the city of Fontainebleau, one hour driving from Paris. In Fontainebleau, you can find the ancient INSEAD University, one of the best universities in the world.

When I arrived at the hotel - inside the university campus - and finished the accommodation arrangements, I decided to go out and go to the grocery store, so I passed among the university buildings which were very beautiful at night. I love seeing the students staying and studying as groups at a late hour. I stopped in front of one of the buildings for some time, just looking, thinking, and pondering. I always love going back to school, “Student Always”.

The next morning, we started a five-day executive program in "Leading Digital Transformation and Innovation". We start every day from nine o'clock and end at almost seven o'clock in the evening, a long time but it worth it.

On the first day, I decided to summarize certain lessons and stories that we will learn and present to you in useful briefed articles.

Every day, I go back to my room in the evening, relax a little, and then I start working on the articles, it is taking hours every night. It was a good opportunity for me to review the material again and again and connect the dots.

Nathan Farr is the amazing professor delivering the program. He had his Ph.D. from Stanford University, and he has different books and articles around the innovation and digital transformation. He met Elon Musk and prepared a case study about Tesla, and he met Jeff Bezos and prepared a case study on Amazon, and many others.

Since we are talking about innovation and digital transformation, I will start with this beautiful story about innovation and digital transformation at Mastercard. The case was prepared by Nathan and other professors in INSEAD last year. I am here sharing some interesting parts of the story with some comments and new updates came after publishing the study.

Mastercard had spent decades battling Visa, but despite its best efforts remained in second place among global payment processors. They found that 85% of people pay through cash, and only 15% is the market of credit cards, where Visa is leading.

Mastercard decided to search for opportunities in the blue ocean, “the cash”. While searching, they found something interesting, the electronic payment gateways and the data it generates have great opportunities, so they focused on it, and acquired a big company in this field.

They also focused on changing the internal culture through having a dedicated team for innovation management. This team focuses on managing the programs and processes that generate, qualify, shape, and develop innovation opportunities and ideas throughout the company. At a more general level, they aspire to create a culture of innovation, with a focus on developing an innovation funnel. They work to generate and capture good ideas from inside and outside the company (using an idea management tool), and to advance them by crafting the business case and communicating the story effectively.

To nurture ideas through the innovation funnel, Labs organize events such as “Take Initiative”, a two-day hackathon for developing and testing ideas around a specific challenge. The output would include a working prototype, a 90-second pitch video, and an executive presentation. Strong ideas are supported by labs and the business units so that there is follow up and delivery for the ideas. “Take Initiative” events that have been hosted in 8 countries and 15 locations.

R&D Team: The goal of the R&D team is to accelerate the testing of ideas, which in many companies took months. They provide a shortcut – the resources and capabilities (e.g., designers and coders) to move an idea from the “back of your mind” to a testable prototype. With strong engineering capabilities (particularly in payment protocols), and an understanding of user needs, the team helps develop prototypes and user journeys. Then it tests these with clients at one of a dozen showcases around the world and gathers feedback.

Labs as a Service Team: Mastercard Labs also offers its services to clients to help them augment and build their capabilities to innovate. They help clients, develop their own innovation processes and generate ideas, quickly build prototypes, promotional videos and business plans and then pilot the resulting ideas.

Mastercard Accelerate Team: This team finds the very best start-ups globally, links them with the needs of Mastercard’s clients, and then helps them do business. This startup accelerator screens up to 1,600 start-ups each year, some of which would ultimately work with Mastercard and receive investment through a corporate venture capital fund.

Mastercard Start Path: In October 2019 Mastercard launched an award-winning program that enables later-stage tech startups to rapidly scale through unparalleled access to Mastercard’s technology, solutions expertise, and partners around the world.

The Ideabox Funnel: The most visible initiative from Labs is a program called Ideabox. Unlike a static suggestion box, this is a structured program that runs throughout the year to generate, test, and develop new ideas into commercial businesses. The two-track program includes one track for a specific innovation challenge with a submission deadline, and a continuous “general track” to capture ideas that do not fit a specific innovation challenge.

The program receives several hundred ideas every year, which Labs evaluates based on the nature of the problem addressed, uniqueness to Mastercard, and potential scalability. Promising ideas advance to the first of three stages: Orange Box, Red Box, and Green Box. Many of the projects never advance beyond the Orange Box stage—but failing fast is a natural part of the process.

Orange Box: This stage gives employees a chance to explore their ideas and think like an entrepreneur. They receive $1,000 and 60 days to prepare an executive presentation and present it to one of the executives.

Red Box: This stage is designed to turn the idea into a concept by building a prototype and testing the value proposition. It is at this stage that ideas are adopted by a Labs portfolio manager and an executive sponsor. The team receives $25,000 and 90 days guide for prototyping and testing the idea.

Green Box: The Green Box stage was designed to create a commercialized product from an official incubation project inside the Labs. Team members are interviewed before they get incubated. They leave their job for six months to work on the project and upon completing the project, they have the option to go back to their department or to lead the new startup within Mastercard.

At all stages of the process, the evaluators looked at the ideas through three lenses:

• Client Lens: Does the idea address a distinct client pain point or opportunity? Is there a clear, addressable market? Do many other clients have a similar pain point?
• Feasibility Lens: Is the idea something Mastercard can feasibly implement? What is the right technical solution, operating model, and route to market? Should we build it, buy it, or partner for it? To what degree does it promote a great user experience?
• Commercial Lens: Is the value proposition clear? What value does the idea create for clients and for consumers? To what degree is it potentially able to generate revenue for Mastercard?

While the program provided a structured funnel so ideas could make their way through the corporate labyrinth – which characterizes every big organization – Mastercard Labs VP insisted that the new businesses were a secondary outcome; the primary goal was to “create innovators, not innovations”. He recognized that building the organizational capability to innovate was as important as the projects themselves.

Mastercard innovation and digital transformation provided an inspiring story. We all can learn from it, either we take it all –after considering some of the comments I will mention- or take parts of it according to our company’s conditions and culture.

There are some comments and thoughts on the story of Mastercard. We can see that Mastercard did a great job and came up with a lot of initiatives, but at the same time, this could be a reason for losing the focus, which happened in many different companies.

Making the final call for executives in the ideas selection and acceptance could not be the best approach. Some of the companies like Intuit and my company “Elm” do a peer voting, which is much better, especially in the initial stages.

Measuring the projects' success probability by the expected ROI could not be the best way. Such traditional measures are almost always wrong—if you are pursuing a disruptive future, then projections are often so inaccurate that they more fiction than science.

The last comment is about the reward given to the idea owner. I can see that the amount of money given as a fund to formulate, prototype, and test the idea and its business model. It is important to understand how to keep the owners of the ideas motivated so they can keep the momentum and dedication throughout the long journey. For some of the employees, building his own startup, if the idea passed all the boxes could be enough to keep him running; for others, it could not be enough. Finding the best motivation formula or the minimum effective dose is important, and it could differ from one company to another.

The story of Mastercard inspired me to talk about the story of innovation in Elm. I think we are building something similar to Mastercard, and even better in some of the areas. The story will be revealed once we have all the chapters completed.

Looking forward to talking to you again through the next article, from INSEAD.