The Cloud, the Fence, and the Stretch Factor

by Mark Payne

The Cloud, the Fence, and the Stretch Factor Previously on Innovation Excellence, we shared insights on how to build two-sided innovation solutions that increase the odds of getting an initiative to market in The Hangar, the Coat Hanger, and the 2-Sided Solution.

The cloud was on Time Warner Cable’s radar.

Sitting outside their core business of television, phone, and internet services, cloud computing held the potential for significant new-to-company demand. But cloud computing is not a new-to-the-world business, and with a field of established incumbents, entering into the market was a risky proposition.

With company leaders carefully scrutinizing the risk profiles of any opportunities that push beyond their core business, how did TWC’s innovation team hone in on viable growth opportunities that survived the company gauntlet?

When going beyond close-in improvements to a company’s time-tested products and business models towards more dramatic moves to catalyze steeper growth curves, innovation leaders often get caught in an awkward tug-of-war. Aggressive growth goals, low risk tolerances, resource constraints, and short-term ROI pressures all pull in opposite directions.

At the center of this tug-of-war is the relationship between scale of opportunity and degree of difficulty. At Fahrenheit 212, we call this the stretch factor.

CHALLENGING CONVENTIONAL WISDOM

On the question of scale vs. difficulty, conventional wisdom will tell you that a basic law of innovation physics states that big ideas are by definition much harder, slower, riskier, and more expensive than incremental changes.

Challenging this ubiquitous assumption is a commercial imperative. Companies need to reliably achieve high-impact innovations that don’t break the organization while trying to execute them.

By being obsessed with raising both the scale and hit rate of innovation, we’ve found that the connection between big and hard is not a rigid one. In fact, it’s often entirely a function of the choices we make as innovation leaders and practitioners.

SWINGING FOR THE FENCES

The way to break the “big means hard” trap spans both factors of process and people. Let’s start with the people.

When an innovation team gathers for day one of a big new project and hears the project leader’s rallying cry – this is going to be big guys, we’re swinging for the fences – imaginations are launched into motion.

But without the right constraints, the forces of imagination and ambition can easily send the team’s explorations hurtling past the realm of the doable, into the land of things we know will not be realized in this lifetime.

Spending time in those outer reaches of possibility is important and can be worthwhile, particularly as a vantage point to look back on present reality. But being too fixated on far-off future states has risky side effects. You get detached from the imperatives, capabilities, and realities of the business you’re trying to grow. With distorted perspective, you can find yourself equating big ideas with ideas that are nearly impossible to pull off. Ultimately, “big and impossible” just means impossible. It isn’t big at all.

We want our best innovators swinging for the fences, but first we have to think about what that really means. In baseball, that fence is a known boundary, three to four hundred feet from home plate. Home runs are big, game changing, and relatively rare, but doable within the existing capabilities of a baseball player.

What swinging for the fences really means is: let’s go for the maximum impact possible with the capabilities we already have or know how to get.

PLOTTING DISRUPTION

So what’s the practical framework to help project teams deliver maximum impact with minimal risk? At Fahrenheit 212, we find it helpful to frame innovation challenges through the lens of what we call the two-sided problem: solving for both the consumer problem and the business problem. As is so often the case, these two problems have remarkably little to do with each other, other than one huge thing: neither problem can be solved without also solving the other.

Peter Stern, Time Warner Cable’s executive vice president, describes how his team took a two-sided approach to creating a cloud offer: “Building out our innovation game board, we really used just two filters to get to the opportunities – size of the opportunity, and fit with our assets and capabilities.”

There are two key factors in play on Peter’s innovation game board: disruption of the marketplace and disruption to the company. To understand your idea’s stretch factor, it is critical to evaluate the impact of the idea for consumers against the investment required by the company to make it a reality.

The ability of an innovation to disrupt the marketplace is a good thing. It speaks to the degree to which an idea delivers new value and creates shifts in demand.

On the flip side, the degree to which an idea requires disruption of the company is in nearly every case detrimental to the odds of that innovation making it to the street. These ideas aren’t bad ones; they are just far less likely to ever get acted upon.

Plot these two axes of disruption, and you’ve got a potent framework to help your team shape and filter ideas.

The Cloud, the Fence, and the Stretch Factor

High Company, Low Market: Best viewed as a no-fly zone, entered only when you have to. Valuable innovations that fall in this corner are usually born of a need to future-proof the business. For example, soup companies had to make significant capital investments in changing production lines to put pull-tab tops on soup cans, but they did so out of a belief that it was necessary to stay in line with long-term convenience trends.

High Company, High Market: You want a healthy number of these high-risk/high-reward opportunities in gestation because they keep your eyes on the horizon. But getting there isn’t easy. Success in high-risk/high-reward endeavors pivots heavily on the ability to understand and mitigate the risks. Apple’s successful leaps into retail – both brick-and-mortar and e-commerce – fall in this corner. At the time, there was little in-house expertise to draw on, but the size of the opportunity justified the leap. Steve Jobs once said the only time he ever felt compelled to seek outside advice about an Apple initiative was when he was considering brick-and-mortar retail.

Low Company, Low Market: Here you’ll find the low-hanging fruit. Lower levels of market disruption are absolutely fine when paired up with minimal disruption of the business. Whitening toothpastes, for example, didn’t grow the category by changing the nature or frequency of toothpaste usage. But they were a successful innovation because they fit neatly into existing business systems, creating new value and differentiation.

Low Company, High Market: This coveted piece of real estate is where you want to land as often as you possibly can. The odds of these innovations making it through the company gauntlet and delivering sizeable profitable growth are higher than anywhere else on the plot. That’s why Fahrenheit 212 and Time Warner Cable zeroed in on opportunities in this tasty upper right quadrant for TWC’s entry into cloud computing.

CARVING OUT A PLACE IN THE CLOUD

To break through beyond the competition’s offerings, Fahrenheit 212 started by hunting for new ways to apply known assets and capabilities. TWC had built a solid foundation in providing connectivity and communications to small businesses and had the infrastructure for both data storage and delivery. Because they control not only the servers (as a company like Amazon would), but also the data pipe through which information flows, TWC had the ability to deliver a totally distinctive value proposition: give businesses the equivalent of their own private cloud.

The key to the opportunity was leveraging existing assets like the trusted TWC brand name, infrastructure, and customer relationships to make cloud-based computing a more comprehensible and accessible offering for small businesses.

Stern sums up the outcomes this way: “Cloud computing is the future. We’ve got a big, rapidly growing base of small business customers who are hearing about the benefits of moving to the cloud but need a more turnkey approach. And they’ve got security concerns, where our role in managing the data pipe becomes a big competitive advantage. In my view, we had a competitive right to win here with our capabilities; we just had to flex that capability in the right way. This opened a big growth business for us.”

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Co-Founder and President of the innovation consultancy Fahrenheit 212, Mark Payne has spearheaded innovation efforts that have created over $3Billion in revenue for Fortune 500 companies, entrepreneurial emerging businesses and Private Equity firms. He is the architect of the firm’s unique ‘Money & Magic’ philosophy and a front line innovation practitioner. Find him @markf212