Giff Constable proposes an "Innovation Studio" model for large companies to pursue disruptive innovation. The key elements are: - Autonomous teams pursuing bold ideas with product ownership and accountability - A "startup CEO" leading each team to drive execution - A board to represent shareholders and advise teams - Sandboxing teams with autonomy but strategic constraints set by the parent company - Metrics track both financial success of ideas and achievement of long-term strategic goals for the studio The goal is to balance autonomy for teams with integration into the parent company to successfully develop disruptive ideas.

1. Innovation Studio
A New Method for Disruptive Innovation
Giff Constable, CEO of Neo Innovation
May 28, 2015

2. Portfolio
Team
Autonomy
Structure
@giffco

3. Who am I?
• CEO of Neo (neo.com)
• 20 years in startup ecosystem as founder,
builder or advisor
• Author used in entrepreneur programs at
Harvard, MIT, Berkeley, NIH/NSF, etc
• Spent the last 3 years focused on enterprise
innovation
@giffco

4. Analog > Digital
Image: https://www.flickr.com/photos/guysie/6095265888 @giffco

5. Image: https://www.flickr.com/photos/62693815@N03/6277209256
@giffco

6. Image: https://www.flickr.com/photos/downhilldom1984/6089311342
@giffco

7. Image: https://www.flickr.com/photos/aturkus/255736904
@giffco

8. Image: http://www.yhbm.com/
@giffco

10. Sustaining Disruptive
@giffco

11. Previous Attempts
Image: The Alto personal computer in 1973. (PARC/Xerox) @giffco

12. R&D labs
Incubators
Startup accelerators
Crowdsourcing
Shark tanks
IP Licensing
@giffco

13. Find lessons in the
startup ecosystem
Image: https://www.flickr.com/photos/sadsnaps/3731785398 @giffco

14. Portfolio
Team
Autonomy
Structure
@giffco

15. VC Results (’04-’13)
42.0%&
22.8%&
25.3%&
5.9%&
2.5%&
1.1%& 0.4%&
0.0%&
5.0%&
10.0%&
15.0%&
20.0%&
25.0%&
30.0%&
35.0%&
40.0%&
45.0%&
Fail& <=1x& 135x& 5310x& 10320x& 20350x& 50x+&
Source: Seth Levine, Correlation Ventures data, “Fail” category estimated
http://www.sethlevine.com/wp/2014/08/venture-outcomes-are-even-more-skewed-than-you-think
21,640 financings
@giffco

16. 5 Shots on Goal
2"
1" 1"
0" 0" 0" 0"
Fail" <=1x" 1,5x" 5,10x" 10,20x" 20,50x" 50x+"
@giffco
Source: Seth Levine, Correlation Ventures data, “Fail” category estimated
http://www.sethlevine.com/wp/2014/08/venture-outcomes-are-even-more-skewed-than-you-think

17. 20 Shots on Goal
8"
5" 5"
1" 1"
0" 0"
Fail" <=1x" 1-5x" 5-10x" 10-20x" 20-50x" 50x+"
@giffco
Source: Seth Levine, Correlation Ventures data, “Fail” category estimated
http://www.sethlevine.com/wp/2014/08/venture-outcomes-are-even-more-skewed-than-you-think

18. 50 Shots on Goal
21#
11#
13#
3#
1# 1#
0#
Fail# <=1x# 1-5x# 5-10x# 10-20x# 20-50x# 50x+#
@giffco
Source: Seth Levine, Correlation Ventures data, “Fail” category estimated
http://www.sethlevine.com/wp/2014/08/venture-outcomes-are-even-more-skewed-than-you-think

19. innovation
team
everything
else in the
world
Image: https://www.flickr.com/photos/wwworks/8026343276

20. This used to be
prohibitively
expensive
@giffco

21. Open source software
Cloud infrastructure
Cheaper prototyping
Cheaper initial distribution
Lean startup methods
@giffco

22. Done right, enterprise
can be more capital
efficient than VC

23. Example: Aprizi and
7 business models
@giffco

24. Portfolio
Team
Autonomy
Structure
@giffco

25. What do they look
like?
Image: https://www.flickr.com/photos/kwl/4700247712 @giffco

27. • Risk Tolerance
• Resilience
• Chaos
• Generalist
• Creative
• Action
• Experience
@giffco

28. Business
Design Engineering
@giffco

29. Execution, not just
ideation
@giffco

30. Can you get them?
(hint, it’s not about equity)
@giffco

31. Mission
Mastery
Autonomy
tip: read Drive, by Dan Pink
@giffco

32. Portfolio
Team
Autonomy
Structure
@giffco

33. Product ownership
is essential
(this does not have to mean equity)
@giffco

34. Autonomy comes
with accountability
@giffco

35. You need a team
captain
Image: Star Trek, Paramount @giffco

36. What does a “startup CEO”
do?
• Whatever it takes to make it successful
• They own vision, hiring, funding
• They are often product manager #1 and sales
person #1
• They keep the pace up, and make the hard
calls
@giffco

37. What do they look like in an
enterprise context?
• Product and strategic vision
• Founder-market fit
• Has been through the fire ideally as a founder (even
if startup didn’t succeed)
• Forceful enough to overcome big challenges
• Charismatic enough to keep a team motivated and
focused even through tough times
• Humble enough to build bridges to other parts of the
business
@giffco

38. Good startups also
have a board
@giffco

39. Ideally not this
Image: The Hudsucker Proxy, Warner Bros. Pictures @giffco

40. What does a “startup board”
do?
• Represents the shareholders’ interests
• Hires/fires the CEO
• Approve major investments, financings, or the
sale of the business
• Advise on strategy and assist the team
• NOT manage the business
the key point for enterprise
@giffco

41. Autonomy is not
isolation
@giffcoImage: https://www.flickr.com/photos/scragz/2715873958

42. Portfolio
Team
Autonomy
Structure
@giffco

43. Big companies have
unique challenges
Image: Monsters Inc, Pixar
@giffco

44. This requires the
right structure
@giffco

45. Image: Pixar

46. Parent
Company
Studio
@giffco

47. Parent
Company
Studio
@giffco

48. Parent
Company
Studio
IDEA
IDEA
IDEA
@giffco

49. Parent
Company
Studio
IDEA
IDEA
IDEA
Point 1: execution, not just ideation!
@giffco
Point 2: some of the team must stay with the idea!

50. Parent
Company
Studio
Team 1
CEO
Designer
Developer
(tbd)
Team 2
CEO
Designer
Developer
(tbd)
Board
GM
Product Lead
Shared
Branding
Content Strategy
BD
SME
CEO
Entrepreneurial Expert
Domain Expert
GM
Advisory Board @giffco

51. Parent
Company
Studio
Team 1
CEO
Designer
Developer
(tbd)
Team 2
CEO
Designer
Developer
(tbd)
Board
GM
Product Lead
Shared
Branding
Content Strategy
BD
SME
Advisory Board
How far to
sandbox?
@giffco

52. Sandboxing
• In most cases, reporting to CEO is
imperative
• Can structure it inside the organization
(but no matrix reporting)
• Can create a wholly-owned subsidiary
(equity flexibility and external capital
resources)
@giffco

53. Sandbox doesn’t
mean secrecy
(use transparency to build bridges)
@giffco

54. Strategic
Constraints
(company vision)
(strategic thesis)
@giffco

55. Two Levels of
Metrics
@giffco

56. Studio Level
External Headlines by 10 years Out
Better Medicine Through Better Learning
Target: 50% of practitioners using our products see better patient
outcomes because of the service ("you've made me better at my job").
We Create the Go-To Learning System for Medicine
Target: 25% of healthcare professionals in the USA are using our
new products and services.
Speeding Adoption of Medical Advances
Target: We noticeably speed not just dissemination of information
but adoption of important new breakthroughs.
Internal Headline
Innovation Studio Pays Its Own Way
Target: Products from the studio all have the potential to be break-
even by year 3.
@giffco

57. Dangerous Metrics
• Number of ideas
• Time / resources per idea
• Near-term Revenue
• Near-term Profit
@giffco

58. Idea Level Metrics
@giffco

59. What does success
look like?
Image: Back to The Future, Universal Pictures
@giffco

60. 5 Years Out
• Across the portfolio, have 1 or 2 ideas that show
signs of making a material difference to market
cap
• Another 2-4 ideas are financially strong
• Healthy bridges with the rest of the company
• Recurring capability to push the envelope and
translate that into real business
• Inspiration on speed, transparency, and fresh
thinking
@giffco

61. Failure Points to Solve
• Growth capital for the ideas that deserve it
• Hand-offs
• Quarterly EPS pressures
• Success theater
• and…
@giffco

62. Portfolio
Team
Autonomy
Structure
@giffco

63. Questions?
@giffco
giff@neo.com
neo.com
giffconstable.com