The War to End all Wars had ended three years earlier, and U.S. Army Brigadier General William “Billy” Mitchell was trying to prove to the U.S. Navy that an airplane could sink a battleship with one bomb. It was a notion that, if proven true, would instantly obsolete vast investments in ideas, careers, organizations, processes, procedures and naval hardware around the world. In fact, the Navy leadership thought Mitchell and his idea absurd at best and dangerous at worst. To resolve the issue, the Navy reluctantly agreed to a demonstration using planes and the captured German battleship Ostfriesland. The result: A plane sank a battleship with one bomb.
Despite the test and the larger difficult truth within, the Navy did – ever so slowly and reluctantly – start to consider the idea that a common biplane, a bomb and some clever siting tools could change what, where, how and why any navy does what it does. They did so because if they did not, others might do so, and that would put the U.S. Navy in a very bad place. It was not the first nor would it be the last time a large organization would resist, even oppose, innovation. In fact, it’s common, which is a hard truth for struggling innovators inside the company – so-called ‘intrapreneurs’ – but a happy truth for entrepreneurs outside company walls.
Harvard Professor Clayton Christensen coined the term “disruptive innovation,” which is the none-too-obvious yet powerful idea that successful companies are drawn into a brutal competition to produce ever more sophisticated answers to their fussiest customers’ most complex problems because, well, that’s what worked before. Yet this well-intentioned but myopic competition sows the seeds of decline as companies abandon or never even consider ideas and innovations that, though seemingly unsophisticated, simple and unprofitable, could up-end and/or create whole new markets.
Most of the reasons for this peculiar condition can be binned within a larger problem that Italian philosopher Niccolò Machiavelli warned of 600 years ago:
“…there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them.”
Successful corporations and the executives leading them are rewarded handsomely for a total dedication to and complete focus on finding and improving what works in the here-and-now. There are countless tools, techniques, consulting firms and even industries dedicated to helping the ambitious ‘optimizing executive’ do just that. In 1995, General Electric commenced its embrace of the then-emerging Total Quality Management movement and initiated its own Six Sigma program within every nook and cranny of the company, which literally translated to producing products with one defect in 3 million produced. It was a wild success financially, as only two years after implementation, GE claimed $700 million in savings.
Yet fine-tuned, process-focused management can get great financial results only so long as what exists in the here-and-now remains fairly constant. Failure to regularly consider doing different things differently for different reasons is robbing once-successful companies of any future at all. One need not look beyond the ravages wrought on the brick-and-mortar retail industry by online shopping. Corporations around the world are feeling this and responding, with the result that entrepreneurs, tech entrepreneurs in particular, are reaping the benefits.
Corporations are investing in entrepreneurs like never before as a means to remotely sense the world around them and are doing so at an accelerating rate. In 2003, there were 181 corporate venture funds. Today, there are 1,500 U.S. corporate venture firms, and nearly half the Fortune 100 have a dedicated venture arm. This growth is not just a U.S. phenomenon, as 60 percent of the corporate venture units are located outside the U.S.
But corporate venturing alone will never completely counter the powerful allure that optimizing the here-and-now has for corporations. There has to be a means of absorbing the ideas and innovations that those investments ultimately yield, and that appears to be a work in progress.
On December 7, 1941, the Japanese Imperial Navy launched an attack of more than 350 planes launched from four brand new aircraft carriers. Though more than 2,500 died in the attack, and 19 U.S. Navy ships were damaged or destroyed, including eight battleships, the U.S. Navy lived to fight another day. The three aircraft carriers of the U.S. Pacific Fleet were out to sea on maneuvers. The Japanese were unable to locate them and were forced to return home with the U.S. carrier fleet intact.