Robert C. Wolcott is co-founder and executive director of the KIN, a network of leaders dedicated to driving sustainable innovation, and a Clinical Professor of Innovation and Entrepreneurship at the Kellogg School of Management, Northwestern University. He is also a managing partner at Clareo, a growth strategy consultancy serving senior executives at global corporations such as Exelon, Castrol, Johnson Controls, Owens Corning and others.
Wolcott, the co-author of Grow From Within: Mastering Corporate Entrepreneurship and Innovation (McGraw-Hill, 2010), currently serves on the global digital advisory board for ZF, a $40 billion German automotive supplier and is an active angel investor in nearly 20 companies including Indiegogo and Lumni, among others.
He recently spoke to The Innovator about how corporates can best confront digital transformation challenges.
Q: How radically is business being changed by technology?
RW: The digital transformation of the automotive industry shows just how deep the changes will be. An entire industry is being redrawn — not just how the products are produced but even the underlying value propositions and the roles of human beings.
Q: How can businesses best cope with change on so many fronts?
RW: It is all about balance of the short term versus long term. You have to have a bunch of people taking care of the shorter term in order to keep your core business healthy. At the same time a company must have peripheral vision and foresight: a vision that is broad enough to enable sufficient exploration and opportunity but specific enough to give everybody an idea of what might be important. If it is too specific you end up like Xerox did with Xerox PARC (its R&D center) with Xerox saying ‘we are a copier company… why are those idiots in Palo Alto working on computers?’ But if your vision is too broad and you release all the constraints a company can flail around and accomplish little of value. You need to have balance between definition and freedom.
Q: How key is bringing innovation in from the outside?
RW: I think most large companies now recognize there is a value to engaging with startups but how to do that effectively can be elusive. It is not something that just happens. It takes a lot of effort. You need to ask where are the places where I should be seeking new opportunities and technologies and business models and engage with startups and discover the future? Even more important, what am I trying to accomplish, and how can we all win by engaging?
Q: What advice do you have about how to best work with startups?
RW: The common answers are hackathons or shark tank-style pitch days attended by senior company executives who get inspired, depressed or both, and then not much happens. What Howard Tullman, CEO of 1871 (by many accounts the top startup incubator in the US) here in Chicago, calls an “entrepreneurial petting zoo”. What we find — and 1871 is great at doing this — is that in order to set up successful interfaces established enterprises and startups need to start with the business objectives. It is not about saying we want higher revenues and lower costs — everyone wants that — but what are the business objectives, the problems we are trying to solve , what do our customers want and what are the challenges we need to overcome? Once these things are well defined it becomes clearer which technologies to search for and track. However, don’t become too prescriptive or you’re likely to miss opportunities and threats you didn’t anticipate. The big threats and opportunities do not come from direct competitors. They come from the periphery. That does not mean that all of them come from small new startups. It could be a Google or an Amazon. When Amazon announced it’s plan to acquire Whole Foods, the rest of the grocery sector’s value dropped 5% to 10%. Your competition could be a new blockchain startup or it could also be a large player coming from other market spaces. It’s essential to have peripheral vision as well as vision for what kind of company you want be in the future.
Q: Middle management has to fulfill their objectives for the existing business and help the company make their quarter. How do you incentivize employees to work for a different future?
RW: I don’t think any big company has nailed that yet. There is a lot of experimentation in terms of approaches and I think companies will get better at it over the next decade. Some, like 3M or Google, allow employees to set aside a percentage of their work time to work on new things. I love the concept but it turns out to be difficult in practice. You need individuals dedicated to the current business but you also need people to figure out business relevant products that live beyond the next year or more. Provide them with tools and coaching to support innovation focused on relevant business objectives. Through that process you will identity the employees that love doing that kind of work — that thrive on uncertainty and value being engaged in that kind of activity as opposed to the day to day business. It is a waste of time to try and make everybody great at innovating. Instead, help people find where they best thrive — present performance or creating the future. The best organizations have homes for both.
Q: What is the most important thing top executives should do to prepare for digital transformation?
RW: A company’s most limited resource is the attention of its best people. Any billion dollar enterprise that says, ‘we can’t afford to spend the time and money on the future because we need to stay focused’ is headed for trouble. That argument is powerful in the short term because the short term financial performance will be better but you will miss fundamental market shifts — and eventually you won’t have a company. Customer demands will change so you must invest in the future beyond what your company does today. Mark Karasek, the chief technology officer of the Chamberlain Group, a billion dollar consumer durables company, once told me ‘If we have a project that is truly strategic I know we have not staffed it properly until it hurts.’ If a project is essential for the future of your company then you must have the best people on the project — which means they won’t be focused on the near-term business challenges. If you put B-players on strategic projects, you’ll will get what you pay for. If you are a billion dollar plus enterprise and you can’t dedicate some great people and at least $5 million or $10 million to build a portfolio of options on the future you need to get another job.