Episode 14 The Fruit Tree Analogy: Cultivating Business Value at Microsoft Garage – Podcast Transcript
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[00:35] Elijah: My guest today is Ed essay. Ed helps entrepreneurs have test and grow brilliant ideas in the Microsoft Garage. He’s an MIT Grad serial founder and veteran product leader who is passionate about technology, creating great culture and innovation through experimentation. During his engineering career, Ad has researched AI, worked on Microsoft Office, and democratized parallel computing. He has led companywide change management programs and innovation design thinking and Agile Methodologies that have helped over 25,000 employees earn Raving fans for their products. Ad founded the Garage experimental outlet that has delivered over 150 new and exciting projects to market. Ad practices mindfulness to bring his most courageous and caring self to every connection. Every interaction I had with Ad is living proof of this. He champions wise technology because the best products cannot stop Ad intelligence. They need wisdom. Ad lives in Seattle with his two children. To find out more about Ad, please visit Adsay.com to read his articles on innovation, incubation and growth. Welcome to the show, Ed. Let’s start off I just want to simply ask you to start off the podcast today and maybe this is the start to a new tradition, see how it works out. What is innovation?
[02:01] Ed: Oh my gosh, the big “I” word. There are lots of different answers to this and one of the big distinctions I’ve seen in recent years is separating invention from innovation. But I think it’s worth talking about both because invention is the act of like creating something new, typically that solves a problem. I think innovation is maybe taking something new or taking a new approach to something and following it all the way through until a problem is solved. So it’s the entire ecosystem that exists around that creativity. While we’re talking about ecosystem, I’ll share something that I found pretty common. So in my role, I get to meet a lot of people who have innovation in their titles that they are leading some type of innovation effort. At one time I was working with this group of folks that were innovation leaders from all over Canada and they were visiting me where I work in the Microsoft Garage. And I was explaining how the Microsoft Garage works. They kept asking questions and I’m like, that’s different than how I was just explaining it works and they’re not really relevant. And then I came to realize that for some people, they view innovation as if it is a fruit or a verb, as in please create for me an innovation. And that’s usually because the organization that they’re in has said I need for you to create an innovation. So create for me a fruit that I could take to market and sell. Now, other people are asked to create innovation as if it’s a verb or more of a program or I think of it as a tree. So if some are asked to create a fruit that I could take to market and sell, other are asked to create a tree that regularly produces these fruit that we could take to market and sell. Though where I am in the Microsoft Garage, we view innovation more as culture. So it’s more like soil. So it’s soil that trees can grow in that could produce fruit and that we could take to market and sell. And there are a few things I like about this approach. One is that it has a lot of patience built in for it, built into it. When you take the approach that we’re creating a culture of innovation, you’re saying like, hey, look, you’re not under a particular deadline to hit these things. And that actually frees people up to be in different kinds of mentality that allow innovation to take place. It also starts creating an ecosystem so trees can grow, fruit can be created. If projects fail, well, that actually just becomes fertilizer, that improves the soil and improves the culture and there’s like an antifragile effect to it. And the third thing I love about this is it no longer makes a particular person or organization in charge of innovation. It instead takes the approach that everybody is responsible for innovation and innovation of all different kinds. And that is really an amazing spot to be in as a company where you see innovation, not only see it, but are expecting it to happen in every corner. And that allows the best of everybody in the company to shine.
[05:55] Elijah: Thank you. That is an amazing picture you’re using there. How the falling fruit, the falling apple becomes fertilizer, retained insights, knowledge, different behavior change along the way. And that’s a fantastic picture.
[06:18] Ed: And it’s so important because if you think about trying to create organizational ambidexterity, which is to be able to relentlessly execute on known businesses on one hand and then on the other hand, to be able to create entirely new businesses, which is true in a large organization like I’m in. So if you’re trying to do both of these things on one hand and on the other, it is important to on each hand, there are different things that you need to look out for. So for instance, for large organizations, they get really used to relentlessly executing on known business models. You shouldn’t fail at your biggest business models in a company on the things that are keeping the company alive, failure would be a bad thing. Like the entire company, everybody who depends on the company, the stakeholders, the shareholders, the customers, the users, like the people who work in the company. They would all be put out if a big business, like kind of tanks out of the blue. That said, when you’re trying to create new business models, you have to try new things and try wild new things. And failure is only when you’re I sort of look at it like there are two types of wins. When you invest in something that you should, because the markets show you that you should for that definition of should. And when you don’t invest in something when you shouldn’t, those are wins. When you don’t invest in something that you should have invested in, that’s a miss. And when you do invest in something you shouldn’t, that’s waste. So those are the failures in the case of exploring new businesses. But it’s a totally different feeling than on relentlessly executing on new businesses. So you need to have those second kinds of wins. What I’ve heard, folks, a caterpillar called type two wins, which is when you are not investing in the things you should not invest in because there’s no market for it or because the alignment is right, you need to have those. You need to have those failures that you’ve learned through experimentation and learning. And those are the fruits that are dropping down, increasing the soil, because then your culture sees that, hey, there are rewards for making data based decisions and experimental based decisions to not invest in those ideas that weren’t going to go anywhere. And that gets more people to take risks and that allows corporations to innovate more because not everybody is holding back and being safe. So you need to have the fruits falling and creating and supporting that culture.
[09:24] Elijah: I really like how you have your own language to this problem. I really like that. So the second question I would like to ask you and maybe everybody else from now on is how to measure innovation. How should we measure innovation and whatever that means. Again, what does that mean for you? I don’t want to prompt too much. That’s the easy one.
[09:56] Ed: Yeah. How to measure how should we measure I realized I was using the word should. That’s one of those words you always have to be careful with because it could be triggering to a lot of people. And so I know I have to be careful with it. So let’s define should. And I think it comes to what is the definition of should that you have? It is about maximizing for something that’s what should is about, right? Is about trying to maximize for something. So what is it you’re trying to maximize for? And I’ll think how we met, at least how we met more deeply, I think we’ve met before at a Lean Startup conference, but I think we did not we never met at one of the Lean start.
[10:46] Elijah: No, because I didn’t go there. I didn’t go there. And I think we spoke about I.
[10:52] Ed: Think we didn’t go to the Vegas one?
[10:54] Elijah: No.
[10:55] Ed: And you didn’t go to the PFA one in San Francisco?
[10:57] Elijah: I wish. I’m the biggest disciple, but I didn’t go.
[11:02] Ed: Were you one of the faculty?
[11:07] Elijah: No, we just met recently, virtually.
[11:22] Ed: Then we met at the Innovation Accounting Workshop, which, by the way, I’ve been trying to figure out the innovation accounting thing for a while. And I remember I met Tristan. I came up. I’m like, how does innovation accounting work? Because Eric put it in the Lean Startup and almost didn’t cover anything in it. So I was trying to figure this out, and I met James Birchler, who is one of the VP of Engineering at Imv View, one of Eric Reese’s first startups. And I was like, how does innovation accounting work? And he’s talking a little bit. He’s like, you got to talk to Eric. Okay. So he introduced me to Eric and I meet Eric over brunch. And I ask him. He’s like, wow, nobody wants to talk about that. He’s like, Everybody wants to talk about build, measure, learn, and AB test. He’s like because those are like the quote-on-quote sexy parts of the Lean started, but nobody wants to talk about innovation accounting. And then I found Tristan and I started asking him about it, and he didn’t have an answer. And then I guess he went off working on it for a while. A lot of people went off working on it. And then he comes back with a course and an answer. I’m like, I’ve got to take it. And you’re on it and you’ve been thinking about it? Yes, and I know there’s like, the innovation colony approach for someone. So anyway, what to measure?
[12:48] Elijah: Can I budget in for a second there?
[12:50] Ed: Yeah.
[12:51] Elijah: I have this theory that Eric had some sort of hunch. I know it’s there. Let’s figure it out together. Rather how we put it into action at scale. Yeah.
[13:05] Ed: I’m going to say, do you know the book Lean Analytics? Yeah, it’s like part of the Lean series. So I love it. I like how it breaks it down into five phases, and then you have a different metric that matters at each phase. And I really like some of the stuff from Dave Benetti. Some of it, I think is a lot too it’s too complicated to for me to evangelize in the corporate environment in which I need to evangelize it.
[13:38] Elijah: Which is not saying how to use that at scale.
[13:43] Ed: Super intelligent. But it needs to be, like needs to be quickly growable by people.
[13:51] Elijah: Yeah, we need to have him on a podcast here. I think it’s important because he’s doing great work, for sure.
[13:59] Ed: So I’ll say, like, there’s one thing he talks about with the WOM PROM score. Like the Wamprom score is key, which is word of mouth over promotional activity. Word of mouth is WAM your promotional investments and so on. The number of people who come in from word of mouth divided by the number of people who came in from promotional activity. He’s like, that’s your one prom score. And with options theory, he shows that basically when that’s between 0.4 and 0.6, it’s time to scale. So I like to think about that with like.
[14:34] Elijah: I don’t know, it’s probably true for lots of products and services for lots, but then again, some don’t have virality built in. If that score isn’t high, then you have a blocker rate. As genius as it is. But I think you have to look at the particular business model and take that.
[14:55] Ed: Yeah, it’s pretty important for like, you almost need to have a consumer business or be able to create some proxy of a consumer business in how you structure. You need to be able to have something that can grow one by one, person to person. Because selling enterprise business, like enterprise business, my parents know the person who sold or who created the socks for Disney, and he made his fortune selling socks for Disney. He didn’t need to do all that stuff. All he had to do was get one customer Disney and to get a contract with them and then just make socks. And then Disney did all the selling and the channel stuff anyway.
[15:51] Elijah: It’s a good one, for sure. For the right product, it’s a good one.
[15:54] Ed: But this gets to like, what you should measure. And it’s like, well, you measure what makes most sense for your business, and you need to figure out where whatever your strategy is or product or whatever that or your service or whatever it happens to be, like, what is it trying to do? That’s the bottom line. And this is like one of the sort of genius things I loved about your course is you spend a lot of time kind of having a soul search and really understand how what we did applied to the business. And so I came into this from the perspective of, here I am, I work at an internal innovation program, and I was just trying to learn your method so I can teach it to other people and compare it against the other methods that I have. And you and Tristan had me bring in something I’m working on that I wanted to grow so that I could experience it firsthand. So I’m like, oh, one thing that I do at work, one of the things that I make, how could I think about kind of the innovation accounting for that and growth hacking that? And that’s when I realized that’s not what I need to model. I need to model my boss’s business. And then I view every activity I do for my manager as a strategy to grow his business. And once I did it from that perspective, how do I grow the business for the people I’m most thinking about helping? And maybe it’s for my maybe it’s for customers, or maybe it’s for your shareholders in my case, because I’m in a corporation that’s hierarchical. It was for my manager. I’m like, okay. For the whole business area he oversees, all my parts are strategies for growing his stuff. What are the metrics I hear him talking about the most? So I anchored creating a funnel in, like, the metrics he created the most. And I thought about, how do I oh, some of these he only talks about sometimes, but not others. And he has most of the team working on this. And for me, he talks about this number, and for other people, he talks about this number. So I’m like, well, how do they all chain together and what are all the things I’m doing and how do they loop back on each other and so on. I’m like, that is what I needed to do. I needed to model it from the point of view of my manager. And all of my work, all of my products and so on were about the overall strategy of accruing to the metrics. I already heard him talking to other people about, nice.
[18:44] Elijah: Did you do some further customer discovery with your manager afterwards during the process, or did you feel confident because you heard it so much that you had it right? Or were you able to further try to stress test what happened?
[19:06] Ed: Yeah, I did test it with him, and I brought it to him. I’m like, I think this is the model of the garage. I’ve heard you say you care about this number, and I’ve heard you talk about this metric, like, all the time. You’ve been talking about this metric since the beginning. He’s like, yes. And this is another metric you talk to me about all the time, right? He’s like, yeah. And then this one we talk about a lot. I think that is the Bridging metric between them. He’s like, okay, I see it. And then I’m like, now, if I create a funnel and he’s like, well, you’re missing that part. I’m like, oh, no, that part is a conversion metric. And then I drew all the arrows. And he’s like, okay. Yeah, that’s right. I’m like, okay, if you think that’s right. Basically, I’m just drawing it out with a stylus I was doing on a white PowerPoint slide, but basically, like, whiteboarding out for him. And then once he agreed to it, I’m like, yeah, okay, here’s a spreadsheet, and here are all the models, and here are all the numbers, and here’s where I got this number from and this number from, and this number from. And here’s how it all pulls in. He’s like, oh, okay. And then he was, like, really fascinated by and he says, well, what if or he said, people have been talking about adding this thing to our product and investing here. I said, well, if we do that, look at the numbers, and I show them. Go up. See? No effect on the bottom line, we’ve only made the top line go up. The reason is because we have a bottleneck here. So investing, are you able to part of the funnel instead of at other parts of the funnel aren’t actually going to change the two new metrics you care about. They only change the old metric that we cared about for the previous five years.
[21:00] Elijah: The first thing that we need to point out, I think, should highlight again, you didn’t bring the spreadsheet first. You threw it up conceptually and see if you could agree on the high level concept of it. And then you showed the spreadsheet and then you worked on it together, in a sense. Are you able to tell us a bit, like, more about that funnel, what is not the bottleneck and what is the bottleneck? Maybe? Can we say that more specifically?
[21:34] Ed: Yeah, I’ll get into it.
[21:37] Elijah: I just kind of put a listen to them. I want to ask inappropriate questions here.
[21:41] Ed: Yeah, because I’m talking very company.
[21:44] Elijah: Yeah, that’s fine. And fair enough, I don’t want to ask questions that should be asked because it’s still your maybe a company secret or something. But can we be more specific?
[21:57] Ed: I think I could talk about it. I’m just thinking through how do I talk about it without what comes into.
[22:07] Elijah: The funnel, if that helps. What is on top of the funnel?
[22:11] Ed: Yeah, so the top metric of the.
[22:12] Elijah: Fun, I mean, I’ve got a bit of an idea because we haven’t been too far away from it, although I want to say that Tristan obviously was the person helping you. So what goes into the funnel on top? And where is maybe one bottleneck where you thought maybe where you thought the bottleneck is, or maybe your manager thought the bottleneck was okay, maybe leave it at that.
[22:36] Ed: Yeah, absolutely. So top of our funnel metric we worked on for years was number of registered hackers. So we run the world’s largest hackathon in terms of having the most hackers, but also in terms of having the most projects. But in order to get to the world’s largest hackathon, you get it by focusing on that number, like having as many people as we can. So registered hackers is the thing we’ve spent the most time working on, and we spend a lot of strategies to get it there. So that is the top of our funnel, number of registered hackers. And then I know that my manager also cares a lot about business value. And I heard him talk about we know business value could come from the hackathon. And so I put business value as the bottom of the fun. So we know registered hackers at the top, business value at the bottom. So how do we get from registered hackers to business value? Now, where I focus in the garage is I mainly focus on helping projects after the hackathon move forward in the company. And we’ve learned over time that that requires sponsorship. So it needs somebody in the company to lend their authority to help make the project real. And we found that sponsorship comes in a few different flavors, that a few different roles that all need to be present. But I’ll just say this, after all this time thinking about in slicing and dicing it, I realized my middle metric is sponsored projects. So registered hackers is kind of acquisition. For us, sponsored projects is activation.
[24:22] Elijah: Activation.
[24:23] Ed: And our proxy for revenue is business value. And when I looked at it, I was like, well, there are other types of business of things that can accrue to business value. We can have cultural value accrues, we could have increased organizational capabilities through learning and training and so on. These are other things that could accrue. But for me, where I’m mainly focused and I sometimes draw in the other things because I know other parts of the garage are focused on those. But for mine, when I shared it with my manager, registered hackers at the top, sponsored projects in the middle, and business value at the bottom. Nice. One of the things that Eric Reese always talked about is, I remember when I was talking with him about innovation accounting, he’s like, you don’t know exactly how to measure the last things. You have to measure the first things and then at each step of the way you figure out how to measure the next thing. Once you have the thing before, that really cemented you get more clear on what the next thing you need to measure is. So that said, number of registered hackers, we know how to do it, number of sponsored projects, I know how to measure that as well. It’s hard to get a clear answer something, but I know how to measure it. Realize that there needed to be an intermediate metric, which is how do we go from registered hackers to number of projects that they’ve created and then how do we go from projects to sponsored projects? And so needed to figure out, well, what are those translations? We have projects, we have projects that have actually submitted a video, which is our way of saying that they pitch it and then from going to there to figure out if they got sponsored. And then I looked at it as if a project is sponsored. Some executive has made a decision that this is worth at least a certain amount of money to the company, otherwise they wouldn’t have invested their time and effort and resources and so on and moving it forward. So I put just a baseline number. Let’s assume that it is worth at minimum this and the sky is the limit. It could be anything for the company. So I’m like, let’s just for now in our models make it a proxy that it will be just that number. I just put just a million dollars. Let’s assume every sponsored project is worth at least $1 million to the company, which I think is extremely conservative to put that on. Now, all I have to do now is figure out how do we maximize the number of sponsored projects? And I can see how that flows through our system. And that’s where our bottleneck is on helping projects get sponsored. And so no matter how many new projects or how many new registered hackers we add to the top of the funnel, if we are not investing more resources in doing the activities that we know increase the number of sponsored projects, it doesn’t matter. Everything else is throw away. If we care about that bottom line of the middle line of sponsored projects and the bottom line of business value.
[27:52] Elijah: And therefore you need to have the better you can pick what project has a good chance to get sponsored and what doesn’t. That’s probably very important.
[28:02] Ed: Well, it helps us, right, so then we could pick projects based on what we think are likely to get sponsorship. That said, you could probably already start seeing a little bit of the failed logic here. If we’re only selecting projects likely to get sponsorship, and we’re only measuring every project as the same amount of value, like, we might be missing some of the big ones for the easy ones, but realizing that we have that bias and that the system has that bias, we just have to factor that into our decision making with principles. So with principles it’s like we still go after the biggest things that can make the most impact. We’ll figure out how to measure the business value later, but let’s not over optimize for sponsored projects, let’s still go after ones that we think are going to have the biggest business value and we’d figure out how to model that later. And we did, right? Like we figured out it didn’t take too long once we built that model to do it later because you gave us a great system there and that we could use.
[29:18] Elijah: So it already had an impact on that number.
[29:21] Ed: Monte Carlo. Yeah. And by the way, this led to me getting a new title.
[29:28] Elijah: Yes.
[29:29] Ed: So I went from being the director of Entrepreneurship at Microsoft to now I’m the director of business value at the Garage.
[29:38] Elijah: Yeah. That’s amazing. That’s an amazing outcome. That’s super pleasing. Yeah. At what point do your sponsors want to see numbers? Like do they want to see financial calculations before the sponsorship or not? Or is it a mix or is it something I shouldn’t ask.
[30:03] Ed: Honestly? It depends on the sponsor. Lots of sponsors make decisions in different ways, which it has its pros and cons. But sponsors should play to their strengths. The reason they often got to promote it to high positions is because they have a good system for making decisions. And though I do think there is opportunity for systematizing how decisions are made, though what I’ve seen is it’s a combination of three things. How decisions are made, the merit of the project based on what we’ve learned fits in through experimentation. So merit second thing is alignment. Alignment to the company matters a ton. The company’s strategy and so on. Like a project that has a ton of merit and can make a lot of money, but if it doesn’t align to the company’s vision, mission, strengths, and so on is something not to invest in by the company. And then the third thing is harder to describe, but I’ll put it this way. It is based on the judgment of the executive, right? Like those are the three things you have to come in with the merit, you have to come in with the alignment, and you have to come in with some judgment call that the executives make. And a big part of figuring that and a big part of that is figuring out how they make decisions. This is one of the big differences between Vps and VCs vice presidents and venture capitalists. VCs usually have a very clearly known, well defined investment thesis that you could play to Vps. They don’t call it an investment thesis. Right? You have to figure out how their decisions are made. And they’re not modeling their decision making process based on other Vps because there’s not like a specific industry here. There’s not like this accountability, LPs and so on. It’s instead their own process. And you have to figure that out, like where their funding comes from, who advises them, how information flows in and out of them. And then a lot of this they end up documenting in a charter for their business. And so the charter ends up being a much more richly defined version of an investment thesis. But their executives are trying to solve a problem for the business. And just like I was saying, I needed to insert myself into model how my manager sees things and think about what I’m doing as strategies. From my manager’s point of view, every good VP is doing the same thing for their manager’s point of view or from the company’s point of view. So they’re trying to figure out how the CEO models the business and everything that they’re doing is part of the strategy from the CEO’s point of view.
[33:32] Elijah: Yeah, nice. Yeah, thanks for succinctly putting that together for the listeners again and for me. I had that conversation yesterday. You got to find out what your manager’s goals are if you want to make an impact here. Right now, it’s going to be very hard otherwise.
[33:57] Ed: I think that’s one of the figure out your manager’s goals. A lot of people figure that out with their manager. It’s a little bit harder with a sponsor because you often don’t know, right? So a lot of people make the mistake.
[34:12] Elijah: They might not want to open up about it either if you just say.
[34:14] Ed: Hey, they might not, or. They might not have the time, or I think a lot of people will open up more about it than you think.
[34:24] Elijah: Yeah, a lot of sponsors will, but.
[34:26] Ed: Not a lot of people come in at a 30 minutes meeting with an executive and start asking them questions.
[34:34] Elijah: Yeah, flip it around. That’s a good one. Yeah, you should, right? Yeah, try it out.
[34:38] Ed: And that’s what works well, is like, I read this book that had this great concept, it’s called Dips the Pitch, and it’s about having a persuasive conversation, but I call it a compelling conversation for other reasons. It’s like figuring out from your manager’s point of view, or the potential sponsor’s point of view, what is their charter, what do they care about, what are they trying to solve? And then figuring out how do you help their strategies? What can you do to help their charter? And those are the people who are successful at getting supported, the people who come in and show somebody else how they support their strategies. I know salespeople are pretty good at that these days compared to, like, the old sales style, which is you talk about all the benefits of what you have to offer instead of understanding, here’s what you have to offer, and you ask a lot of questions, and so on. And then, so when you understand that, say, here’s how my product, here’s how my idea can help you.
[35:45] Elijah: And I find it quite interesting. So when I talk to innovation leads or people who work in innovation, like, hands on as well, and I say, look, it’s like basically doing customer development. You’re just not you’re just doing it internally. You’re doing it with the sponsors. You’re doing it just like you just do what you already know. Just find comfort in that, that you know how to do it right. You can make it as systematic or as unsophisticated as you like. But at the end of the day, you go out and you collect information and you try to decrease your uncertainty. You try to empathize, if you like, see it from their perspective and what are their goals, and see where you fit in and how you can make a difference.
[36:28] Ed: Sponsor development.
[36:30] Elijah: Sponsor development. Title of the podcast now. It’s good to figure it out. Yeah, it’s interesting. It’s also the should. I just thought a bit earlier in the conversation, how does it happen? How should it happen? I guess circling a bit way back to the beginning of the yeah, think.
[36:51] Ed: Of the word should. What do you mean by that?
[36:54] Elijah: What is your ideal scenario?
[36:57] Ed: Or is it what is most effective? Right.
[37:02] Elijah: Well, we shouldn’t sacrifice the moral to maximize, let’s say, profit, if that’s what it is.
[37:11] Ed: Yeah, sure. From the point of view of ethics.
[37:15] Elijah: I guess you’re right. At the end of the day, usually it’s about increasing profitability. But.
[37:26] Ed: Here’S the thing with should. I think the word comes off as like, judgmental, right? Like you’re judging something, whereas what we want to try to get you is more evaluation. And you need to define the word should more crisply. So you could take a more analytical, evaluative process to it.
[37:49] Elijah: Yeah. But isn’t that the question just from your point of view to the best of your abilities today, Ed? What would be the best system that you could think of rather to measure innovation? And I guess in a different context for answering this question, we usually break it down by people’s capabilities, measuring projects or the funnel. So to say what you’ve done, and then you can go further, sort of further up in the hierarchy. That’s how I make it more tangible when we talk about the topic.
[38:28] Ed: Yeah.
[38:30] Elijah: And then how should you do it? And you’re right, I think just pretending to know everything, being cocky about it, it’s not that easy. 1 may say it’s one of the biggest challenges, maybe that large corporations face today. How do we better measure innovation in order to manage it at scale? Like, as you say, how do we have that trigger?
[38:51] Ed: There you go. So you have just defined a should. How do we better do it in order to manage it at scale? Like, okay, that is more useful than a should.
[39:03] Elijah: And it’s just mine, right? Yeah. And it’s just mine. Obviously. It’s very mine. You may want to call it bias or desire or what I think is reasonable. I think it goes back to the tree. Just having one successful project is great, well done. But for an organization, for shareholders, for people impacted by a non for profit organization, for citizens impacted by what governments do, it doesn’t mean that much or not as much as having a reliable tree or engine or system that can more reliably produce value, whatever it is. And it could be the reduction of carbon emissions, if that’s the strategy.
[39:58] Ed: I think that’s a big key. A big key to the whole thing is just unpacking the word should. How should we do it? Well, to what end? And you said to scale innovation or handle it at scale. But there might be other goals in order to empower everybody in your company to innovate. Or it might be to focus innovation on one part of the company, or to solve the next big challenge that we have in the company, or to double down on the current challenges or on the current businesses that we have.
[40:40] Elijah: In order to help those grow garage program. Yeah, that you model your program. So how do we do that?
[40:48] Ed: The biggest insight for me, model it from the point of view of my manager or the business and how my stuff is strategies in the bigger picture, I’m like, Whoa.
[41:03] Elijah: Yeah. Funny. It makes me wonder if you should touch on the first. The Innovation accounting program starts with a storyboarding module, and it’s a funny one. Like, people don’t think that would be first. They think of, like, starting with numbers or feeling very confident at the module because, like, oh, I know how to do storyboarding, or, I know how to do customer journey mapping. I’ve done it for years. And then it becomes kind of challenging often for people. And once they threw with it, many then appreciate it a lot. And, like, we had a BA who couldn’t get over how valuable that thing was.
[41:54] Ed: It’s obvious to me that any storyboard or user journey is a funnel because people could drop out at any point, and you’re losing people. Like, I know that because I’ve been in this business for a while. It’s not as obvious for everyone. The one thing I think was sort of missing in the course is, like, we did that thing and then the funnel thing on different weeks, just following videos. But there wasn’t a connection in the videos. It didn’t say, like, hey, start with your storyboard and make your funnel and shape it to this. Or, oh, now that you have your funnel, now compare it to your storyboard. It was just sort of like, from scratch, your funneling. It’s like, Hold on, why don’t you have me bring the storyboard in?
[42:42] Elijah: Okay, so I’m just so biased. It’s hard for me. I’m really trying to understand that. Maybe let me one step back, and then I’m trying to understand this just for the listeners. It’s not always a funnel. And then it gets really hard because sometimes you’re selling to one person or it’s more about a process improvement and things like that. But I want to stop myself. Not talking too much about this module now, but let’s go definitely with assuming it’s a funnel. It’s a B to C approach. That’s sort of the easiest way maybe to make people understand what we’ve been talking about right now. Because you and I have been through this a few times. You took the program, you’ve been part of the program. Just trying to make sure we’re not losing people completely. So Storyboarding tries to ask participants to really understand what the customer behaviors look like. What are the inputs and outputs of what you want to model in the future. If it’s a funnel, let’s say it’s an app or something, like, how do people discover your app? How many download it? How do many people actually then install it and all the subsequent behaviors afterwards? In this example, what we do next is we’re actually not jumping straight to a spreadsheet. What we’re doing next is we we do a visual business model, we call it. So in the example of a funnel, that’s literally a triangle, and we say, you know, 1000 people come in the first month. Like, according to your storyboard, that’s just one person doing it. Now let’s imagine 1000 people doing it. For the sake of argument, 1000 people come in in what time period. That’s also very important to figure out at that point. Let’s say monthly. For Twitter, it may be daily. Whatever you want to measure and you want to model, but let’s say monthly. It’s quite typical. And then how many people then actually come to your website, then download it and so on, and you have these, and that’s how the funnel goes down. And then we take the numbers that we have. Usually there are no cost in it, but at least the upper funnel. And then we transform that into the basic business model before the Monte Carlo part to totally jump the gun right now. Sorry. For everybody who feels thoroughly lost already. I don’t know. And we could even cut it. But now I’m trying to understand you’re saying between after so now you’ve done the storyboard, and then it felt disconnected from the next part. Yeah.
[45:39] Ed: Just the way the course was delivered. As this set of videos that I followed, I went through the storyboarding stuff, and then the next week, it was like visually doing the funnel.
[45:55] Elijah: Yeah.
[45:57] Ed: But there were no steps in the visually doing the funnel where I was asked to refer back to the storyboard I had created. It was like, got you. The way the material was delivered. To me, they were both standalone things.
[46:17] Elijah: That’s correct.
[46:18] Ed: And think transition could help. There could be smoother.
[46:24] Elijah: That’s correct. Well done. Yeah. Thank you. Yeah, that’s true. Nice. Thank you.
[46:34] Ed: You’re welcome.
[46:35] Elijah: There we go. We need feedback, guys. We’re not going to improve on we’re not going to improve on.
[46:45] Ed: That was something that I’ve learned. The transitions thing is something that I learned a few years ago. I learned it in writing, and then I started learning it in speaking, and then almost everywhere, it’s like transitions matter so much. Being very explicit about the transition happening, even as a parent, the kids playing with blocks. You want to get them to eat, right? How do we transition them from blocks to eating?
[47:19] Elijah: Nice one. Yeah. I’m not good at that at home. Maybe when I’m thinking about it, preparing. Preparing. And I think I’m bad at I’m not necessarily preparing enough. Are you an engineer? No.
[47:38] Ed: Okay. Because I think transitions are hard for engineers, especially people who code, because, jeez, if you code, like a curly brace is a transition. That’s all you need. You don’t need all this set up done.
[47:57] Elijah: Get over your emotions. And there’s a symbol.
[48:02] Ed: Exactly. But for people, it needs to be like, oh, wait, where’s the segue?
[48:07] Elijah: Yeah. What do you mean? You’re displaying. We’re going in the counter. We’re leaving. This should have been clear. Yeah, it was clear to me for three days. Oh, I should have told you.
[48:15] Ed: Yeah, maybe.
[48:18] Elijah: I do that all the time, and it hits me in the face all the time. But I’m also quite good with changing on the spot. I’m just very far on the extreme. I can just change a plan just like that, no problem. I know for some people it’s really hard. Obviously, like, more structure and enjoy that more. Being able to plan and find that safety where I’m like, I literally could have changed countries in the past, wasn’t a big deal. Yeah, let’s move on. Let’s move on. Talking about transitions, I had the idea of asking these three questions, and the initial idea was like, I just asked you three questions at the beginning of the podcast, and then maybe we do something else. But they may end up making up the entire podcast as a base. So let’s see, how long have we been recording now? Roughly doesn’t show me that time, but it’s becoming a weak transition. Oh, yeah. Look, when do you have to stop or would like to stop? Because we’re already over the I have about time.
[49:38] Ed: I will need to stop in 22 minutes.
[49:41] Elijah: Yeah, perfect. So let’s aim for maybe 15 or so and then we can have to run. Is that okay? Yeah, what else? All right, I’ve got designing a very smooth transition right now. Coming to the third question I would like to ask you today is what is the biggest blocker to innovation in large organizations?
[50:13] Ed: The biggest blocker to innovation in large organizations? I think it like the obvious answer is it depends on the organization, but that doesn’t say anything. I think it depends on it in a series of phases. So I think organizations go through different phases into how well they are able to handle innovation and adopt innovation. Let me set it up with change management guru John Cotter. Have you heard of him? His main work was a paper called Leading Change, and then that was his first book, Leading Change. He’s popularized, like, the term of the burning platform and other things like that. A few years back, he wrote a new book based on some research he did called Accelerate that talks about how essentially you could accelerate innovation within organizations. And he spells out this really cool structure that I like that most organizations begin as like a network. So there’s usually one, two, three people. Maybe they’re in a coffee shop or in a garage, hence the metaphor of the garage or a dorm room, whatever it happens to be. And they all kind of get to know each other. And as you’re adding more and more people onto the company, sort of everybody knows each other in the organization, or almost everybody does. And it’s almost informal how communication happens into that. And so it’s just like networked. And at some point and actually, while you’re networked, let’s think of a two by two where you have leadership by management. So when you’re networked, you often have a lot of leadership, but maybe not as much management. And at some point you become holding to stakeholders or shareholders or something where you need to have leadership and management. So what a company often does, or an organization often does at this point, is they add in a system for management and that often describes how people interact with each other. And often a hierarchy is what comes into place. So these people who were previously disconnected and networked are now put into a hierarchy. And so now you can have leadership and management. You’re like, hey, this is great because leadership with no management, you could be fast, adaptive and innovative. But you’re usually kind of chaotic. And then leadership plus management, management brings it. You’re like, well run, which means you’re like timely and orderly and predictable and all that stuff while still with leadership, fast, adaptive and innovative. Now what ends up happening over time is as that organization can grow and grow and grow, the hierarchy becomes the dominant form of organization and the network drops out. So you have the hierarchy. As the network drops out, you lose fast, adaptive and innovative. People end up being siloed and so on. And so as you lose the leadership that you got from a network, you say the well run, like predictable and safe and secure and all that stuff from having management. But you lose fast, adaptive and innovative from the leadership you had from the network. And so what a lot of companies do at this time is they try to reverse it. They try to either augment the hierarchy in order to get back to having leadership. Like maybe you’ve put in tiger teams or you put in like an innovation like group of the company. Like here’s the, here are the people in the company who are allowed to innovate. Another thing that they do is try to buy ideas either through M A or through bringing consulting. And then a third thing they try to do is something called strategic planning, which is actually an oxymoron. There’s a great Harvard Business Review article about that. Strategies are often about taking risks and taking bets about things you don’t know about in the future that you’re making like a prediction about how things are going to plan out. Whereas planning is about let’s do something that’s repeatable that we know works and so on. And so strategic planning is an oxymoron. None of these things work. What does work and so what does work is bringing back the network. And that this is what gets to the biggest blocker of innovation in a company, which is a hierarchy without leadership, without leadership that can spontaneously occur anywhere within the company that are aligned to big opportunities that the company faces.
[55:46] Elijah: And how does that work? How do you make that happen?
[55:49] Ed: How do you make it happen? You have to bring the network back. And what John Cotter found is that companies that are able to bring the network back to over 10% of the company’s population, they get enough leadership back in their company to stay fast, adaptive and innovative at the same time as being well run. So one of the biggest blockers to innovation in the company is everything that has happened at the company that limits the network. That’s the main strategy we employ at the garage. And the main reason for the garage is to empower everybody in the company, wherever you are at every corner in the company to be innovative. And that’s why I talk about the soil. So you have to invest in this soil and this culture. And by the Way, if you go over this whole show, I’ve gained all the hints to what you have to do.
[56:56] Elijah: That’s the mushroom. Maybe you need a mushroom analogy for that one. That invisible network and then these huge mushrooms and then you have a little product popping up.
[57:08] Ed: Yeah, the mycelia right.
[57:12] Elijah: That’s it. It could be a home out. Like this is like apparently some of the largest organisms and you can barely actually see them.
[57:27] Ed: That’s usually what is the biggest blocker is that the company is not set up in a way to enable the networking to happen that align to big opportunities and then have ways to move them forward. Okay, so there are a few different parts here. Usually all three of them are missing. In phase one. When you first ask this question, I talked about there were going to be some phases. So in phase One, usually you’re missing all of them. You’re missing the network, you’re missing the alignment to the big opportunity and you are missing a pathway to move it forward. Once a big opportunity exists in phase two, you’ve brought in a network and you’ve sort of empowered everybody to work toward a big opportunity. But you’re usually missing pathways forward. So you’re in a more ad hoc state as an organization and there are several reasons why you’re missing these things. Like, for instance, you could be missing these things because your leadership are problem solvers instead of solution seekers. And that leads to having a non invented here mindset. So leaders in the hierarchy don’t look outside of their silo for different ideas, but if you’re instead able to switch leaders into from problem solving to solution seeking, then they’re happy if the solution comes from anywhere and that opens them up to listing the network and so on. Now, what’s needed in phase two, which is one of the big hindrances to innovation in phase two, is not having known pathways for your innovators, not having ways that if the Hierarchy is one operating system for your organization and the network is another, not having an interface for people operating in the network to bring ideas into the Hierarchy. So you have to create known pathways for that and known ways for those to be successful.
[59:41] Elijah: Nice.
[59:42] Ed: And what are the main blockers in three is probably shortage of funding and investing. And it’s usually companies over invest or.
[59:56] Elijah: Underinvest at that phase, like over investing in one project in particular and not spreading enough and having, like, somebody likes.
[01:00:07] Ed: An idea and they’re like, hey, let’s put 100 people on it or 200 people on it. And then other projects, you don’t give them anything, right? And instead of maybe a wiser approach is you give everybody an equal amount and then you have stage gates to where they’re earning the path forward based on, like, a market knows best mentality, instead of a manager knows best mentality.
[01:00:38] Elijah: Nice. That was a great answer.
[01:00:43] Ed: But I liked it.
[01:00:45] Elijah: Yeah. I also like the three phases. So the question is tricky, as you point out right away, and I do appreciate that going forward sorry, just hijacking this for myself. I could ask what is the biggest bucket to innovation in your organization? I’m just wondering, do you want to leave it broader or not give people I’m just going to reflect on that. But what you provided right now is the phases organizations go through based on that research. So is that what John Cotter talks about? Is that his take on organizational maturity or is that from somewhere else?
[01:01:40] Ed: I did a mashup of John Cotter and of John Cotter’s accelerate and Jeffrey Moore’s zone to win. I took a little bit from it without explaining his whole model. I took a little bit from the startup wave by Eric Reese. I brought in some of the phases from that and then I brought in some of my own experience.
[01:02:01] Elijah: Yeah, perfect. Thanks for explaining that. Yeah, funny. Yeah. I sometimes think, like, who do we work with? And we put kind of organizations into different phases when it comes to their innovation journey. And I can this is this is good for me right now to further understand that sometimes in the beginning there’s all that hype and very little structure, and then there’s often a crash and then there’s like, how can we do this again a little bit more systematic? And that’s usually where we sit best and have the best experiences. Yeah, cool. Thank you, Ed. That was an amazing podcast.
[01:02:54] Ed: You’re welcome, Ali. I really enjoyed yes, great questions and you have so much to add in from what you’ve seen.
[01:03:03] Elijah: It’s fun. I appreciate that. Thank you. All right, thank you. As always, we will be linking all the resources and the Show Notes that we’ve spoken about. We’ll be linking ads. We must have to do this better. As always, you will find all the resources to this podcast, everything we mentioned in the Show Notes. You’ll be able to get in touch with Ad with all the links to, I guess, Twitter and LinkedIn and his website, also the Show Notes. So please reach out to Ed and we wish you a great day and wherever you are in the world and hope you learned something from this episode. Thank you, Ed.
[01:04:01] Ed: Thank you.
[01:04:03] Elijah: Very cool. On the last episode. What are you drawing on then? Is it just that’s just, like, low tech as it gets. You just have a whiteboard.
[01:04:24] Ed: I’ve got higher tech solutions. Like, my screen is actually angled and on a special stand, and I could draw on it and do all that. But when my kid was my now seven year old was in kindergarten, he was like, my office mate sitting right over there. And the teachers just gave him these little boards. And that’s how the students like, instead of going up to the board, the students would write on it and then hold it up for the teacher. And I’m like, oh, I’ll do the same thing on virtual. So it’s like, oh, I’ll do, like, a Venn diagram, and sometimes I’ll just be next to it. But I also have a different camera facing. I whiteboard and I could go over.
[01:05:06] Elijah: There, but a good one. Yeah.
