Interacting with the CEO of a large company and pitching them an innovative idea to build something new can be an intimidating thing to do. While there’s plenty of information about people pitching new startups, no one ever really hears about product manager Sally going into a pitch meeting and winning over everyone in management at Acme Corporation with her new idea.
Chad Dickerson, former CEO of Etsy, and Bradley Horowitz, Vice President of Product Management at Google, know first-hand the importance of innovating in a large company and that’s why they are teaching a class called BigCo Studio at Cornell Tech about innovation within a big company.
On Wednesday, May 1, 2019, Bloomberg Television’s Caroline Hyde discussed the risks, failures and successes behind game-changing innovation with Dickerson and Horowitz as part of the Cornell Tech @ Bloomberg Speaker Series at Bloomberg’s Global Headquarters in New York City.
Dickerson and Horowitz originally met 15 years ago in Yahoo’s now defunct product and idea incubator, Brickhouse. Since their time as executives at Yahoo, and through the network they created, each has held roles as CTO and investor – Dickerson was a CEO and coach, and Horowitz started his career as a founder and is a very active angel investor.
Innovation using the latest technologies is a priority for companies of all sizes. For their class at Cornell Tech, Dickerson and Horowitz joined forces to help students focus on how large companies manage this process and the risks associated with innovating successfully.
The Risk in Innovation
In “The Innovator’s Dilemma,” Clayton Christensen wrote that there are various reasons companies have a difficult time innovating. These include a company’s culture and organizational structure.
“One problem that companies have is they say, ‘I want to innovate, I want to try new things,’ and someone pitches a new thing, and they get shot down immediately,” noted Dickerson.
Being able to deal with common objections to new ideas in large organizations is important. But, in the end, it comes down to risk and the larger aspect of culture. “When you think about risk, there are parts of [a company] that need to operate like a pacemaker, like they’re sort of the heartbeat of the business,” said Horowitz. “Those are places where you don’t want to assume a lot of risk, and then there are other places where it’s absolutely perfectly fine to invest some energy in that.”
Failure is Part of Risk
Starting something new is fun. But, “in addition to starting things, you have to know how to sustain them, to grow them, and sometimes when to stop doing them – when to sort of call it and turn it off,” said Horowitz.
Google had become very practiced and experienced at building products for billions of people that are infinitely scalable, translated into 60 languages and very robust. The trade-off of building for billions was they faced new challenges when only building for millions. Not all products need to be bulletproof though because people are still learning from them, so Google created Area 120 to explore ideas without the tax of scale, while still utilizing the company’s infrastructure, talent, and opportunities. This lets people move fast and make decisions in a very autonomous way, without the same expectation of launching something with the Google brand and its associated fanfare. Without a safe space for innovation like Area 120, products that don’t scale won’t get the deserved attention and will instead have a responsible wind-down that provides users with notice and options to export any personal data.
“Being able to accommodate that failure, harvest whatever lessons you can and move on is very much part of the innovation journey,” said Horowitz.
For example, much of the technology and know-how behind the Google Photos service was dormant within Google+. But it had to be reshaped and reformed before being relaunched as a stand-alone offering. Since then, Google Photos has become the fastest-growing products Google has ever created.
Innovating from Within
Jeff Bezos, founder, CEO and Chairman of Amazon, is often quoted as saying, “One day, Amazon will die.” He has a philosophy called “Day 1” that’s about resetting the company’s clock every day.
“One way to cheat death is if you can start the timer over every day, and that’s the attitude that employees bring to their jobs,” said Horowitz. “That’s one way to stay a startup and not fall victim to some of the big company-itis that can lead to its demise.”
Building a sustainable company that survives requires the company to continue innovating and reaching in order to solve problems. Beyond just thinking about their next product, companies can also do this by thinking about other sectors and industries that can be transformed with new or existing technology.
The Power of Acquisitions
Not innovating fast enough sometimes lets the competition get ahead. As companies compete, things can happen in the life of a company that may be unrelated to that company’s work, but can really affect micro and macro issues, like M&A deals.
Microsoft made a hostile offer to acquire Yahoo in 2007, explained Dickerson. “External forces can really stop a company in its tracks. When I look back at the Yahoo experience, I think the most distracting thing that happened was that Microsoft acquisition offer – having to fend it off. I just remember that, in certain teams, people were stopping their work just to watch the news and waiting to see what was going to happen.”
While M&A can be distracting, it’s also an incredible tool that’s quite misunderstood from the outside. “It’s important to acknowledge that it’s really hard to get it right, and I also think it’s important to acknowledge that analysts will talk for 20 years about whether you got it right or not,” said Horowitz.
Questions like whether a company sold too early, whether they could have realized the same potential as an independent company, or whether this is about developing a new strategy or taking out a competitor are often hard to answer right after a sale. Founders of the acquired company often get what they need only after they leave.
There are many motivations for M&A, including acqui-hires (talent acquisition), intellectual property (IP), technology, infrastructure, customers, demographics, or geographic. Uber, for example, bought a local company like Careem in the Middle East and other geographic leaders around the company as part of their winner-take-all strategy for the ridesharing market. Rather than compete in Singapore, Uber did a deal with Grab in which they took an equity stake in the company.
“There can be many many motivations for why an M&A deal transpires, and what success looks like, but it all has to be viewed through the lens of why did this happen in the first place,” noted Horowitz.
You can watch the entire discussion below: