A Problem With Innovation At Big Co’s: What’s The Exit?

Say you’re a big company. You recognize that you need to innovate to stay in the game, to keep from being unseated by all of the upstarts around you. You create a team to do it for you, building and launching new, separate products almost as though they were startups.

They’ve figured out how to sort ideas, discover which are good and which are bad, execute on them, etc.

The problem then is: what is the exit for the successful products?

With startups it’s easy: the exit is either acquisition or IPO. In either case, the people who funded the product get a clear return on their investment, and everyone is happy.

With innovation inside a big company that’s not the case: there is no buyout at the end. The product has to either be a) absorbed by the core business and managed by them, or b) it has to be permanently staffed and run as a new arm of the company, or as a spinoff.

If you think about it, those two options are actually like the startup ones of acquisition and IPO. The difference is that:

  • For a product to be absorbed by the core business, the core business has to a) be set up to absorb them and b) has to perceive real, immediate value to acquiring the product. This requires foresight and planning on the part of the company, and also maybe makes truly disruptive ideas less likely to get absorbed (disruptive products will not be perceived as having real, immediate value to the core, which will be focused on sustaining innovation).
  • For a product to be permanently staffed, it has to be far enough on its way to turning a stable profit that the company will fund it – it has to be near the light at the end of the tunnel, which is tough place to get to for any truly new product.

Both of these create challenges for finding a real “exit” for innovations at big companies.

And yet, if you’re that big company, you recognize that you have to innovate to stay alive. So what’s the answer?

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Sorting Out The Good Ideas From The Bad

Imagine this: someone in your organization has an idea for a new way to generate revenue for the company.

Imagine they have some clout within the company, so their idea gets traction internally, and everyone is talking about it.

The question is: is it a good idea, or a bad idea?

You don’t initially know, regardless of whatever the consensus may be within the organization. There are lots of factors that could tip the answer one way or another. And lots of bad ideas seem good initially, and vice versa.

The first task in dealing with any new idea like this should be to determine: good idea or bad idea? And the goal should be to get a decisive answer, for as cheaply as possible, as quickly as possible.

Factors to consider include:

  • Is there a market for this idea?
  • Is the market big and/or growing?
  • Does this build on our core strengths?
  • Would there be enough of a margin to make it worth our while?
  • Can we execute this idea correctly?
  • Is there a public appetite for this kind of idea from our company?

There are lots of ways to get these answers. Some ways are long and expensive, some are fast and cheap. Some give a false sense of security, some don’t give any concrete sense of certainty at all, beyond just a directional sense (which of those two things is better? I prefer the second).

But however you do it, you want to put an idea into a process and have it come out the other side as either a) good/funded b) bad/de-funded. And you want it to get through that process as quickly and for as little cost as possible. And of course you want to be right.

This, in a nutshell, is the process of early product ideation and development. Any company building and launching new products has to get good at it, and bake that deeply into their company process.

Otherwise, you end up with products that are bad (i.e. money losers) that took way too much time and money to reveal themselves as such, and good ideas that never got made into products at all, because their resources were sucked up by the bad ideas.

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When Are You Actually Better Off Without Infrastructure?

I started off the week with a quote from the president of Quartz about how legacy media companies are hindered by their infrastructure, and how Quartz has been blessed not to have to deal with that.

Here’s an interesting thread from Quora I came across yesterday, relevant to that idea.

The question posed is:

Why was Germany able to beat its World War II victors to become Europe’s export superpower?

It continues:

Being the loser, Germany started at a severe disadvantage after world war 2. Yet, its economy recovered so much that it became Europe’s export superpower.

Interesting question! How could a country essentially starting from zero go to beating the rest of its competitors within the space of a few decades?

The top answer:

Basically, because West Germany had to start from scratch, it had no choice but to purchase the best their money could afford. Other countries only replaced infrastructure as needed as removing the old infrastructure was a major cost. This gave West Germany a competitive advantage over countries that didn’t have to rebuild so extensively. France and Russia thought they got a good deal when they went in and seized old German industrial equipment to rebuild their industries. The old German equipment was better than their own, but it forced Germany to buy even better equipment. So while in the short run, France and Russia did well, West Germany did much better in the long run.

Sometimes you’re better off without infrastructure. Sometimes you’re better off actually starting from zero.

When is that? I would say it’s:

  • When the world has changed, and your infrastructure, or the infrastructure of those around you predates that change.
  • When you have the expertise to build new infrastructure from the ground up to take full advantage of new world opportunities.
  • When you have resources to do so.

That’s the world, and the situation, that Germany found itself in after the war, and it worked that to its advantage. Is that the world media companies now find themselves in? And which ones are working it to their advantage?

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The Samsung Accelerator Model – Could It Work For A Company Like The Times?

Yesterday I went with a colleague from work to visit someone at the Samsung accelerator here in NYC and talk to them about how they run things there. What an interesting place. They basically run a variation of the Betaworks model, which is to say they:

  • create very small, dedicated teams. Tiny. Like three people to start.
  • give them a huge degree of autonomy over their products
  • set up a board for each, just like they are a startup
  • evaluate them quarterly based on “startup metrics” that the team and the board have agreed to in advance
  • get out of the way and let them run

The teams launch things that are very rough, then iterate, cutting away at the stuff that doesn’t work and doubling down on the stuff that does. Along the way, teams/products that aren’t hitting their metrics are taken offline, at those quarterly review points.

It’s all very much like the way startups run, but the interesting thing is it’s all run by Samsung, one of the biggest tech companies in the world. What the execs there had to get comfortable with to do this was 1) giving up control over the direction of these products, 2) getting used to seeing rough works-in-progress out in the market with the Samsung name attached.

They got used to both of those things, and the accelerator seems to be working great for Samsung.

Could it work for a company like The Times? It would be interesting to see.

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Quartz President On “The Advantage of No Legacy Infrastructure”

Snippet of the day, from an interview with Quartz president and publisher Jay Lauf last week in Campaign Asia:

Q. Where is the publishing industry still going wrong?

A. Many publications are still slow to shift to the habits of their readers. There’s so much legacy cost and infrastructure to tear down before you can [move to a digital/mobile focus] in a sustainable way and I think it’s very difficult for [legacy publishers]. I sympathise with them; I root for all of us in publishing to do well. They have classic ‘innovator’s dilemma’—there’s still enough revenue being generated in traditional channels so it’s difficult to shift focus to channels that are not as easy to monetise. There’s no quick fix. We’ve had the advantage of no legacy infrastructure so have been able to calibrate the cost side in a much more disciplined way.

Full article here (behind a paywall with no free trial!).

Longer post tomorrow on this.

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What Companies Like The Times Need More Than One or Two Successful New Products

Yesterday I wrote about the accelerating change in the ways in which people consume news. In the space of twenty years we’ve gone from a world where everyone consumes news in one of three ways – newspaper, tv, or radio – to a world where the way you consume your news breaks down into a large and increasing variety of groups segmented not only by age but by personal tastes for devices, formats, etc.

I think everybody keeps thinking in the back of their minds that all of this will settle down and we’ll get back to that world of 3 stable formats for news (just with new formats). I don’t see that happening. News is no longer just a destination in people’s lives, it’s also a raw ingredient. As such, it will get mixed around in an ever-increasing number of ways for consumption. And that doesn’t end in the foreseeable future.

Any news organization that wants to exist and thrive in that environment for any extended period needs not one or two new shiny products, but a steady stream of new products, to meet the continually evolving needs and opportunities of the marketplace.

To get that, you need a good, functioning, healthy ecosystem of innovation.

You need to be able to pluck ideas from wherever they bubble up in the organization, test them, validate them or invalidate them cheaply and quickly, and then have a good system for deciding what comes next. Do you kill the idea? Do you continue exploration? Does it become part of your core product or does it become a new, standalone product? Or maybe even a separate venture entirely, a Newco? And then how do you build that, and monetize it, and continue to develop it after launch?

That’s the kind of full ecosystem capability that news organizations are going to need in the future to stay in the game, more than any one new successful product per se. It needs to be continual, ongoing, and it needs to operate like muscle memory.

Is The Times on its way there? Maybe.

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The Wild, Wild Near-Future Of News (Or Why It’s A Great Time To Be In New Products)

Around a hundred and sixty years ago the New York Times, and a lot of other newspapers, got their start. Newspapers had been around for centuries in proto form, but technology advancements made during the Industrial Age suddenly allowed what we think of as the modern newspaper to be produced.

For the next hundred and forty years, the basic platform for news delivery didn’t change. TV news of course came online, and radio as well. For newspapers though, the game was about perfecting the delivery system, and driving more ads through that system along with news. Very much a game of refinement.

Then, twenty some years ago, the web started coming into play. Slowly, newspapers caught on that they needed to play in this space in order to stay in the game. nytimes.com, washpo.com, others came online, and in the space of a decade all news sources had some online presence.

I’m sure that when they made the jump to the web, the people running those companies thought that this was the one jump they would have to make in their lifetimes. They would be good after that. They could rest.


But what happened instead is that less than a decade later, the world started jumping from the web to mobile. Having just made the leap to the web, and still trying to learn and master that, news companies again had to make another leap.

And again, those that made the leap, those that were still around, probably thought they were good, could rest on the innovation front. We’ve got an app, we’re good – for at least twenty years or so, right?

But where we are now, just a few short years later, is starting to look like a Tower of Babel for news. People in their fifties and older like reading newspapers. People in their forties like reading online. People in their thirties like reading on mobile. People in their twenties like reading in their social stream. People in their teens… ?

A colleague at work was interviewing college students about their news habits. Most of them said they often send pictures of news headlines to friends via SnapChat – even though those friends can’t then read that article. That’s modern-day news consumption.

And now we’re getting wearables, podcasting is taking off (again), spoken news apps are popping up, companies like Blendle are remixing the news, numerous big companies all have projects in the works to create new platforms for bundling the news… And oh yeah, Jeff Bezos owns the Washington Post.

In short, the innovation around news, and the rate of adoption of new ideas, is accelerating, and there’s no reason to think it’s ever going to stop in our lifetimes. If you think otherwise, you’re fooling yourself.

If you’re a news organization, its a good time to be thinking about, and funding, new products. If you’re working for a news organization, its a good time to be working on them. Because this is what the (very near) future is.

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Learning To Tell The Baby From The Bath Water

A month or two ago, Neil Wehrle, head of UX at Betaworks, came in to The Times to talk about the process there.

A story he told during his presentation was about a little product they launched called Firefly. Firefly was an application that people could install on their websites that would allow visitors who were on the site at the same time to interact. Neil showed a video of how it worked. It was cool, but a bit weird. Why would people who just happened to be on a site at the same time really want to interact? The app generated some curiosity and drew a small user base, but never really took off.

But what the folks at Betaworks noticed was that people who had the app on their sites were very curious to know how many people were on their site right now – which was something that Firefly incidentally allowed you to see, since it was enabling those very people to interact. And that was what people wanted to do most with the product.

Acting on that insight, instead of just shutting down Firefly entirely, they threw out the 80% of it that didn’t really appeal to anyone strongly, and doubled down on the 20% that did.

That became Chartbeat, a realtime analytics app for websites, and one of Betaworks’ most successful products.

New product is a windy process. Sometimes you create things that fall flat, but that have nuggets of future successes in them. When you do, you have to be able to throw out the bath water without throwing out the baby as well.

Doing this requires an ability to see success and failure not as a binary set but as a much more nuanced thing, almost more like a map with gradients and hotspots.

It’s an ability that small incubators like Betaworks manage to do well. I think it’s something we at The Times could work on.

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You Need Big Ships, You Need Little Ships

Someone asked me at Q&A I was doing a few weeks ago whether I was worried that the big ship that is the New York Times could turn fast enough in today’s climate of rapid change to stay at the center of things.

I responded that within the Times there is the big ship – let’s call it an aircraft carrier I said, it’s that big – that is going full steam and has a very long turning time. That turning time is affected by roadmaps, strategic priorities, stakeholder buy-in, etc. So it doesn’t turn very quickly. And frankly, you wouldn’t want that ship to be turning too quickly anyway, seeing as it is responsible for the bulk of the company’s digital revenue.

Alongside that big ship though are lots of smaller ships. Speedboats, ideally. They don’t carry the core business on their backs but they can maneuver quickly, try things, fail, backtrack, and in general prod around and find the best paths forward. The big ship can conserve energy and commit when an idea proves out.

There are limits to any metaphor of course and this one is no exception, but it seems to fit what we’re doing here.

The thing is, that model only really works when a) the speedboats really are fast, and b) there’s the right level, and the right kind, of feedback between the big ship and the small boats.

Otherwise you just have yourself a bunch of ships cruising around in the sea, bumping into each other occasionally.

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How Would Paul Graham Do New Products At The New York Times?

I found myself asking that question (how would Paul Graham do new products at the New York Times?) at a lunch on Friday.

Paul Graham, for anyone reading this who doesn’t know, is the founder of YCombinator, the massively successful, massively innovative startup accelerator in Silicon Valley.

Now there is a risk in posing that question, in that YCombinator does not have the same challenges as the Times.  The Times is not a startup, we do not live in the startup ecosystem, and so, some might say, it is dangerous to draw too many comparisons.

Still, I think there are some valuable high-level takeaways you could get from asking and answering that question as an exercise.

So here goes.

I’m guessing Graham would say:

  • Put your eggs in multiple baskets.  Not three.  Certainly not two or one.
  • Don’t spend lots of money on any one idea early on. Find a way to explore the ideas for next to nothing.  All of that extra money won’t actually do you much good early on and will choke off your ability to run more ideas simultaneously.
  • Let teams drive their own ideas forward without the friction of interference from stakeholders or from strict formalities with regards to process.
  • Keep execution simple.  Find the simplest form for trying out ideas early on. Don’t launch multiple-platform products, don’t encourage products to move in different directions at once, just focus on getting one piece at a time right.
  • Get things out in the market quickly, watch, and learn.
  • Give everyone the same resources early on, and see where ideas go.  Some will take off, some will go sideways, some will fail to ignite altogether. In fact, make that assumption totally core to the way you approach new products from the outset.

We were in many ways pretty far from all of those things for the first round of New Products.  That’s not a criticism – as I’ve said before I marvel that a place like The Times was able to pull off the new product process it did over the past year or so, given where we were coming from. But we have an opportunity to do it even better going forward. I hope we all decide to take it.

Lastly: Paul Graham, if you happen to read this, what do you say?

Or if anyone else has any thoughts, would love to hear them too.

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