This fascinating story on The Rise of the Drone comes from the Washington Post earlier this week.

In the article, Peter Finn describes how Abraham Karem, an engineer in Los Angeles, created the first prototype of what would one day become the Predator Drone.

What’s interesting about the article (once you get past the coolness of the fact that he built the drone in his garage), is the fact that “the military establishment and most major defense contractors had little or no interest in [drone technology]”

In hindsight, this might seem odd, but this is a challenge that faces every client I’ve ever worked with. At it’s root is the question, “How can large companies systematically identify and pursue opportunities for growth”.

Based on my experiences, there are three simple reasons why large companies struggle in this arena. While simple to describe however, they are incredibly hard to solve.

1. Big Companies struggle to prioritize the right ideas

Most companies have no shortage of ideas. However many companies fall into one of the following traps. They believe that they need more ideas (the fallacy of the never-ending search for the perfect idea), or they don’t prioritize the right ideas (or portfolio of ideas) - viewing every opportunity through the lens of their existing business model (like the military establishment and drone technology).

2. Big Companies struggle to allocate resources to disruptive opportunities

Even those companies that do manage to create a balanced portfolio of new growth opportunities, often struggle to provide the appropriate resources to pursue these ventures either ‘over-resourcing them’ and smothering them with too much love and attention, or simply prioritizing the (inherently short-term) needs of the core business over long-term growth. Within the Innosight family - we call this the ‘sucking sound of the core’.

3. Big Companies struggle to execute against disruptive opportunities

Of those companies that make it past the first two hurdles, this third hurdle is often the one that trips them up. Big companies are like efficient organisms designed to execute upon a well-understood business model. The strong management structure (the brain and nervous system of the company) searches constantly for incremental revenue gains and efficiencies by setting up and overseeing simple processes (new product development, six sigma etc) and metrics (NPV, NIBT) to measure success against established revenue/cost targets.

Pursuing a new opportunity - one which might require a different business model requires new processes, new metrics, and fundamentally, a different type of management - one which most successful companies have simply forgotten how to do because it’s been many years since they were a startup.

So - how can big companies systematically identify and pursue new growth?

1. Companies must develop a strong platform to identify and prioritize ideas.

Industry Trends, Employee insights, Customer Observation and Non-Customer perspectives are all essential parts to this equation. The best-in-class companies use simple processes which minimize the decision makers, involve the senior-most leadership, and align long-term strategic goals with underlying customer needs to make their decisions

2. Senior Leadership must set aside resources for the pursuit of new growth opportunities

The best-in-class companies I’ve worked with have discrete budgets set aside for pursuing disruptive opportunities. Funds that will not evaporate during tough quarters. These budgets are not blank checks by any means, but a stated commitment by the firm’s leadership to investing in long-term growth.

3. Companies need to develop an incubator mindset to nurturing new growth opportunities

Best-in class companies understand that new growth opportunities require a different management approach which embraces the approach that the most successful entrepreneurs take instinctively. As Steve Blank put it, “a startup is a temporary organization assembled to search for a scalable business model”. Our most successful clients have embraced this management approach, staffing projects with the right type of teams, treating project teams as ‘searchers’, training their teams to ‘get out of the building’ and understand their customer’s underlying needs, measuring their teams success not in terms of traditional financial metrics but the pace at which they learn, adapt and understand their markets.

Companies that do this well can create incredibly powerful teams. They blend together the best of both worlds - enabling their teams to act with speed and agility like entrepreneurs, without stifling them with corporate overhead and bureaucracy. Furthermore, they give them access to the best resources that corporation has to offer (brand, information, potential customers, etc) something that most entrepreneurs would kill for….