X-Teams (XTM)

Catalyzing innovation in an established enterprise with a dedicated team.

OVERVIEW - Innovation is difficult but absolutely necessary for companies to maintain viability and a healthy rate of growth in difficult markets. Startups believe they are at least mentally geared for it but the conundrum for larger well established companies can be losing the momentum generated during their early growth days. As they become larger, operational objectives become shorter term and failure to meet them less forgiving. Company priorities shift to execution and process. Deeper investments are made in specific skill sets. The incumbent culture evolves and becomes both less likely and less able to take on the risk of new innovative opportunities.

ANALYSIS - So how does a successful company maintain a sustainable edge in innovation? The basics can be drawn from the substantial amount of research done on the issue. Observations from industry publications focus on the incumbent culture as noted above. It comes down to the difference between delivering against known objectives and taking on the risk of the unknown. An established business has clear documented targets in the form of an annual operating plan (AOP) and equally clear penalties for not meeting those goals. A skilled team is formed with a disciplined approach to meet these targets. Risk becomes something to be eliminated, not tolerated. And with the elimination of risk, so goes a key factor in enabling innovation.

Companies can and do manage to execute against novel growth opportunities but it is not easy. Teams can be pieced together from high potential candidates with a track record of performance in the incumbent culture. Risk taking can be encouraged but promising careers are perceived to be at risk and past performance is no guarantee of future results. Near term performance will continue to dominate the mindset and it will be difficult to maintain a sustained effort when competing with the immediate requirements of AOP. And since the AOP is funding the effort, innovative investments are often the first casualties of budget cuts when things do not go as planned.

PROPOSAL - A specific set of skills is needed under these conditions. The concept of an "X Team" (XTM) is proposed as a professional managed service to embed these skills in the incumbent culture. The team is designed to supplement the expertise and knowledge base of the established business with a profile for taking on the risk of a new market opportunity. The key characteristics are aspects of entrepreneurial experience and creativity. A higher tolerance for risk has been earned through the experience of building a successful business both inside and outside established companies. Diversity is an additional element of that success and includes a network of external resources and a willingness to use them.

The charter for an XTM is experienced and focused bandwidth on demand to improve the potential for new growth platforms. Results are improved by pro-actively addressing known limitations and buffering existing assets from the risk associated with early stage development. Promising careers are preserved and the existing knowledge base is enhanced with critical feedback on the opportunity. An XTM way-of-working prioritizes active engagement of the existing team and aligning the novel aspects of a strategic innovation with prevailing business practices and culture.

So what's in a name? The "X" in XTM has two connotations. "X" as in “cross” sector to bridge the gap between organizational silos, and "X" as in “ex” sector or outside the core business.

1. "X" as in “cross” sector to bridge the gap between organizational silos. Companies invest billions in developing advanced capabilities and resources. The credibility and viability of a New Growth Platform stands to benefit greatly from these assets if enabled to do so. They are often controlled by established departments with little precedence or incentive to interact outside their boundaries. An XTM can facilitate utilization of these assets by reducing the perception of threat and promoting alignment with expedited contribution to growth objectives. As companies get larger, growth plans are likely to include M+A activity. An XTM can enable the full potential of an acquisition by pro-active integration with existing assets, catalyzing the synergistic opportunities used to justify the investment in the first place.

These bright promises do not always live up to expectations. The unrealized potential can be attributed to any number of factors but the most common are;

1. Cannibal - A New Growth Platform may impact an existing product line. Even if the New Growth Platform is deemed strategic for entry into new markets or to stave off a competitive threat, the existing product line can be counted on to fight fiercely for survival. History has shown they can be quite successful to the obvious detriment and ultimate demise of the New Growth Platform.

   
   ◆ An XTM provides safe harbor for fledgling concepts regardless of their potential threat to an incumbent.

2. Orphan - No clear ownership of the New Growth Platform with existing entities. A more common culprit for failed scenarios is a New Growth Platform that does not clearly fit in with an existing business line. Many innovative New Growth Platforms will have this problem. They can be great ideas but lacking the committed support and necessary resources across entities. Without a dedicated champion or a clear contribution to the AOP, it will end up with lower priority and find itself on the path to a slow and painful death.

   
   ◆ An XTM can own fledgling concepts and nurture them to the point where they survive on their own.

3. Politics - A New Growth Platform can be the source of conflict between two existing entities. A New Growth Platform can represent exciting career potential but may give rise to competing ambitions with internal players. If alliances across silos fail to materialize for whatever reason, the New Growth Platform is unlikely to get the necessary support and will suffer significant delays or outright failure.

   
   ◆ Ownership of a New Growth Platform by an XTM can at least delay these issues until it gets a chance to prove itself out. This should be the preferred outcome.

2. "X" as in “ex” sector or outside the core business. To be successful, you have to be free to try things outside the proven practices and processes so diligently cultivated by the incumbent team. You also have to be free to make mistakes. Mistakes with an XTM are learning experiences and contribute to the overall progress. Mistakes tied too closely to an AOP are going to be viewed as failures. If the culture of the team is linked to an existing business, a New Growth Platform is likely to suffer one of three setbacks when things get difficult.

1. NIH - The incumbent team will possess a considerable amount of domain expertise as a result of building the existing business. They will trust this hard-earned knowledge base to provide them with the perspective and insights needed to make a New Growth Platform work. If the solution is not easily drawn from their existing domain, the verdict will be that it will never work and the New Growth Platform will quickly lose support. They are not likely to consider other options as after all, they -are- the experts on the subject. This is a common problem with many startups.
   
   ◆ An XTM will take full advantage of the existing domain expertise. But without a vested interest in anything other than a successful launch, they have the experience to know that answers can be found elsewhere.

2. Familiarity - When a team runs into problems, and they all do, it will revert to what it is good at, what it knows best and what it has been trained to do. This includes utilizing the resources associated with the current business. Internal efforts tend to be pretty insular and the most convenient path to take for help is to look close by. As good as they might be, this may not be the best approach to solving a problem as it does not amount to much more than recycling the existing knowledge base. This may not result in a quick death for the New Growth Platform, but the end result is still the same.
   
   ◆ The ability to engage external resources is a core attribute of an XTM. They have the experience to quickly move on to other resources if the answer is not readily available with the existing effort.

3. Cancellation - All failures as part of the strategic initiative can result in the project getting cancelled because it was not working as expected. Unfortunately this is a common reaction to any sign of trouble. It is easier to say no if career opportunities are at risk with a troubled project and there is no immediate solution on the horizon. In a well established company, there are many opportunities to say no.
   
   ◆ Cancelling a New Growth Platform is not the solution to growing a business. The New Growth Platform is the sole focus of an X Team. It has no competing interests and is well equipped to persevere through the inevitable challenges and setbacks that come with innovation. This includes the absence of NIH and a track record of cultivating external resources to increase the diversity of the solution set.

   
   This is not to say that a New Growth Platform can't or shouldn’t ever be be cancelled. Shutting one down early can provide significant value by minimizing any further capital expenditure or resource bandwidth that might otherwise be sunk in a conventional plan. An XTM will be responsible for incorporating the lessons learned in support of a future effort.
   

BENEFITS - A well designed XTM can enable and accelerate a New Growth Platform. The benefits for a larger corporation seeking to increase the ROI on the investment in innovation are;

◆ Add expert bandwidth on demand

◆ Maintain focus on AOP without disruption to the core team

◆ Leverage of existing insights and expertise through a risk tolerant team

◆ Preserve promising careers without conflict

◆ Increase the size of the solution set

◆ Efficient execution to confirm potential in advance of major capital investment

◆ Pro-active ownership of M+A integrations

An XTM is not the solution for any innovation. Most companies already do a good job with the incremental innovation required to sustain their core business. It's only when growth starts to slow down that current capabilities start to show their limitations. New markets, products and/or services need to be built on new skills and resources. The makeup of the team is designed to address the unmet needs of the incumbent team. The focus is on the early stages of New Growth Platforms when they are most fragile and susceptible to a premature death. They are selected for the ability to take on unknowns and resolve them in a timely manner. This can be especially necessary when a business or culture change is required to compete, such as transforming from components to systems or from products to services. Once the unknowns have been addressed and the risk better understood, the charter transitions to facilitating a successful transfer to the incumbent business. This is the value delivered by an XTM.

NB The insights related here are the result of direct experience working with large established technology based companies. Improving the effectiveness of innovation has the potential to create greater value and make better use of assets generated by large corporate activities. Evidently this is not a unique idea. Although well down the path of turning this concept into an viable service, a recent casual search turned up a concept out of MIT which references the same label! It appears to be on the academic side with a different focus and structure but serves as an unexpected bit of validation for the approach. Further review is in progress and will be updated here.