Transcript: What is the insurance against Innovation Dilemma?
Read the full transcript of The Startup Project episode with Taylor Black, Principal Product Manager at Microsoft. Host Nataraj Sindam and Taylor discuss why corporate incubators act as insurance against the innovator's dilemma, the challenges of proving ROI for low-yield innovation activities, and how to apply venture ecosystem discipline within a large enterprise to ensure long-term survival and growth.
2023-04-30
Host: To me, it always made sense for large companies to have some kind of incubator or accelerator model because one of the reasons I think we are seeing in this bare cycle sort of like when the wave sort of, you know, falls down, you see who's a naked scenario.
Um, I think any company who's which survives multi-decades has to have multiple large businesses. And I think in a lot of ways, I mean, looking back, a lot of companies didn't uh look for long-term opportunities as much as they should.
Like we can talk about like uh Amazon, you know, putting billion dollars into their phone, but I would argue the potential on the upside of success was so high, they should have put in, you know, one more billion and tried the next version.
Uh, and I would like argue the same with Facebook in a sense, like now they're doing this metaverse thing. Uh, and sort of again retreating that back now.
But I feel like even Facebook with all its cash flow, uh didn't really think um, because they always self-constrained themselves to be a social company. Uh, like I think that's sort of like a self-imposed mental model on themselves.
Like I would not impose themselves like a social company.
Yeah, you were good at Facebook and WhatsApp, but I mean look at how many great technologies that came out from Facebook, open source community and like putting that social as a blanket on your company, I think sort of set a backstage for all these technologies which could be, you know, productionized and, you know, capitalized, right?
Uh, that's I feel like a lot of companies, especially the large companies with very good cash flow, sort of missed out on business opportunities because of that reason.
That's my personal view on like a lot of companies could have it if it is well run, um, and should have it because of this reason, right?
It's sort of like you are the innovation dilemma that you'll encounter at some point as a large company and you have to have a sort of a backup backstopping mechanism to that innovation dilemma which every company will eventually face.
Um, So I feel like the innovation uh accelerator or a incubator will sort of act as that uh, you know, that part of small investment.
It's sort of like an insurance to the uh to innovation dilemma that you will eventually encounter anyways if you're a large company. Yeah.
Guest: Yeah, no, I think you're right. There's a there's an inherent problem there too though is that um uh innovation is inherently a low yield activity.
Um, and so within and it's my kind of rule of thumb that within two or three years of any program like ours existence, um, finance is going to come and say, where's the revenue? Where's the ROI?
And if you don't have a data driven way of showing your your anticipated revenue or your anticipated ROI on the basis of your activities, then uh, it's entirely legitimate that you get cut.
But there's a there's a there's data driven ways of showing that. The whole venture ecosystem depends on the fact that you're able to show future revenue on the basis of what you're doing now. Uh, that's how you raise funds, right?
Um, and so every uh innovation program inside an enterprise has to have that same data driven hygiene.