Innovating To Win

VC Funding and Innovation

It seems that even in innovation, there is some wisdom to be gained from the tortoise and the hare.

Venture capital firms are feeling the economic pinch as are most companies.  Wealth investors who have pledged money for portfolio funds are finding the impact of the global financial crisis is putting a strain on their ability to meet contractual obligations.  As a result, capital calls are not going as well as the venture firms would like.  Rather than strain relationships with key investors that they may rely on in the future, time tables for cash infusions are being stretched out.

All this translates into a paucity of available investment for emerging companies.  Many VC firms are pruning their portfolios by turning off the flow of cash to companies that don’t meet more traditional performance metrics.  Early stage companies are finding it difficult to find funding as later stage companies with less risk seem more attractive to the VC community.  Does this portend the death of innovation?  Not at all.

Believe it or not, innovation happened prior to the modern VC model, and it can flourish without it.  Our current notion of venture funding only dates back to roughly 1946.  What’s more, it’s not clear that the VC model has been that good for innovation.

The goals of the venture firm are not aligned with innovation.  Innovation is hard; it takes time and patience.  Venture companies are interested in time to return.  Most venture companies are looking at three to four year monetization horizon.  Their interests are in maximizing the return for their portfolio funds and not necessarily in successful innovation.  As a result, VC funded startups are often encouraged to run at a pace that destabilizes the company and undermines their ability to become a sustainable enterprise.

There are options available to early stage companies.  For example with a strong value proposition, it is possible to get future customers to provide funding with prepaid commitments of future purchases of the new product.  (This is how I funded my first business venture.)  If your product value proposition interests with a major player’s space, you may be able to get them to provide angel funding in exchange for an inside track in a partnering relationship.  This has the added benefit of setting up a future exit partner.

Without going through all the funding avenues that may be available, the two cited provide good examples of life without VC.  These options can leave you with more control and equity in your enterprise, and hence more autonomy to pursue your vision.

Don’t be discouraged it you think that the lack of stacks of VC money are going to inhibit your success.  The fact is most companies that have a meteoric rise also experience just as rapid a decline because they did not have the opportunity to burn-in the business model and achieve a sustainable venture.  If you look around at the successes that have had staying power, they tend to have taken time to reach their potential.

Obama Innovation Poll Closing Soon

Our current informal innovation poll closes this Friday.  This time, the question is: “Given Obama's picks to lead his innovation agenda, what do you think of Obama's innovation vision?”

With the passage of the stimulus bill, it seems a very timely issue.  Don’t miss this opportunity to make your voice heard on this very important topic.

If you haven’t cast your vote yet, you better hurry!  You can cast your vote using the Vizu poll widget in the side bar on the left.

A new poll will start on Monday, February 16th.

Brilliant Execution Requires Innovation

I just saw a tweet from enterprisey that said: “We need focus on delivery, not perpetual churn so Innovation Leadership team meeting closes on a high with us all chanting "No New Ideas"!” 

Yikes!!  What a scary thought.  Enterprises are right to feel that they must focus on execution for success.  But they must not confuse execution with doing the same old same old.  It case you haven’t noticed, the rules are changing all around us.  Of course if you have a pulse, you already know that.

In these very volatile times, no one can afford the luxury of complacency, and no one can risk sticking their head in the sand by adopting the position that if we just do what we have always done, just more efficiently, everything will be okay.  Clinging to old paradigms when the only certainty is the unprecedented scope and scale of change is reckless and dangerous.

The successful executive must understand that brilliant focus on execution must include innovation and new thinking.  Everything must be open to discussion; nothing can be so sacrosanct as to be above examination.

Doing More With Less

Each new day brings grim news about more companies reducing staff to lower expenses in the face of lowered revenue projections.  In many cases, these cuts go well beyond the fat into the organization’s muscle.  How do these cuts affect the innovation capacity of the organization?  This is a fundamental question for managers caught on the horns of a frightening dilemma.  Budgets must be slashed, and personnel cost is one of the biggest segments of the budget pie.  Innovation is the key to successfully navigating through these uncharted waters, but personnel cuts undermine the enterprises ability to deliver on its innovation objectives.

We see it happening all around us.  Experienced workers who carry the highest cost burden are shed to stabilize the financial health of the company.  But as these workers walk out the door, so does much of the intellectual capital of the enterprise.  What can companies to mitigate the blow?

The generation transference and leverage of corporate knowledge assets has rapidly become a critical issue for companies.  Retained workers must be able to tap into the knowledge of absent mentors if companies are to avoid reinventing the wheel and repeating the mistakes of the past.  In the best of times this is a challenge for organizations.  I was talking to a scientist from a consulting company who confided that a big part of his business was solving problems for client that they had already paid him to solve in the past.  Why?  Because as workers moved through their career cycles, new workers had a tendency to go through the same learning process as their predecessors.  This process is now accelerated as external pressures push some workers out of the system more rapidly.

For many organizations, this self-induced demographic shift is having some very severe negative consequences.  For others, while the loss of these workers is felt, the blow is not so catastrophic.  In many of the situations I see, the difference is defined by the latter class of organization having adopted sustainable innovation practice and the supporting technology to enable it.  These companies have captured their tribal wisdom and put it into motion within the fabric of the organization.

If you have not already done so, it is not too later.  Knowledge harvesting of key resources can go a long way to creating a high-value repository of reusable assets.  Using technology to aggregate and implement a just-in-time delivery strategy for this knowledge greatly enhances the capability of the innovation worker population.

If you haven’t already looked at your strategy for doing this, start now before it is too late.

Eco Innovation in Tough Times

I was sitting with executives from a company in the lifecycle assessment space this morning.  As we were discussing the industry trends, I couldn’t help thinking about recent articles I’d read in the Wall Street Journal.  Eco-innovation is under a lot from pressure from the economic squeeze companies are feeling.

What does that mean to producers of products?  Can they put green initiatives on the back burner?  Will we see a return to high-impact practices of the past?  How should companies balance financial and green imperatives?

While there will be spot relief given to companies where distress and hardship can be shown, the climate is unlikely to produce a significant reversal in the trends of green drivers.  In the US, the new President has already given signals that eco-regulations will be strengthened.  Businesses will need to continue examining how to map out and operationalize green strategies.

However, this shouldn’t be viewed negatively.  Eco-innovation is an opportunity to find innovative paths that can bolster a company’s financial perform while making a beneficial contribution to society and the environment.  Pursuing a green strategy that considers cost profile and performance characteristics of implementation strategies can provide an expanded value proposition to consumers that doesn’t upset the financial equation.  Innovations that optimize product design or logistics can yield dual eco and cost savings benefits to the company.