Building a culture of innovation – Part 2

Learning to be more agile

Learning to be more agile - Perspectives on Leadership and Innovation

In this episode, Tom Pedersen and Steve Monaghan discuss the critical factors necessary for corporations to progress, innovate, and adapt to external forces of change. Steve shares his perspective based on his corporate experience, and emphasizes the need for a different approach. He highlights the importance of starting small, learning from failures, and quickly exiting unsuccessful ventures—a mindset he believes is lacking in many organizations. Steve suggests reevaluating approval processes, adopting agile practices, and rethinking financial strategies to mitigate risk and encourage experimentation. Drawing examples from successful companies like Tesla and Apple, which emerged from failures and embraced innovation, they emphasize the significance of capitalizing on failures and swiftly incorporating the lessons learned into the organization’s growth and development.

Key Takeaways

  1. Corporations should focus on starting small, learning from failures, and exiting fast to move forward, innovate, and embrace external changes.
  2. Approval processes and financial strategies need to be reevaluated to encourage risk-taking and agility in decision-making.
  3. Incorporating agile practices beyond operations and software development can drive innovation and adaptation.
  4. Learning from failures and capitalizing on the lessons gained is essential for growth and development within organizations.
  5. Companies that refuse to take small risks and embrace change may fall behind and miss out on opportunities for innovation.

The Conversation

Tom: What would be critical for larger Japanese corporations if they want to move forward, move quicker, and be more innovative and embrace these forces of change from outside? From your perspective, having now lived in Japan for a while and worked for a Japanese corporation on several projects, what do you think is a great way forward?

Steve: Start small, learn, and exit fast. Those are three characteristics that you don’t see here, unfortunately. I worked for another corporation somewhere else in the world where the management was so paranoid, they didn’t want to start anything that had any risk associated. They wanted a riskless project; which doesn’t exist, and they spent more money waiting for that to happen than to actually execute just the first steps of it and exit, which would have cost far less.

In other words, it became acceptable to have a bigger loss through inaction than it was to take a small loss to move forward. And I think that there’s an urgency not just in Japan, but everywhere to rethink how you take approval. We’ve heard of things like Agile, and you hear the mantra, “We have to be agile.” Well, we’re agile in operations and in software development and all these sorts of things, and that’s increasing around the world. But what we haven’t changed is our finance and our recognition of risk.

Instead of having a budget that you commit to at the beginning of the year and have to spend by the end, how do you make sure that: I’ve stage-gated this much investment, this is what’s at risk. If we lose now, it’s finite. And as per real options theory, if it fails, you kill it and if it works, you can look at how you reuse it and how you go to the next step. Unless you’re taking that step forward, you’ll never have that learning or discovery, and there’s a certain value in just having that experience and giving it a go.

So many startups are known for pivoting, so many corporations. If you look at some of the greatest innovations around the world, many have started out of failure. Tesla was a failure, and now it’s the most valuable car company in the world. And it was literally a failed startup.

Tom: Tesla was built on on the bones of NUMMI. It was built on the foundations of a failed joint venture between Toyota and GM. That’s the bones of it, right?

Steve: Absolutely. So what’s interesting to me is I remember we had Elon Musk come to speak at a Start Me Up Hong Kong event. I was running a kids accelerator there. He had come and was presenting before the kids, and when he was being interviewed he said, “You know what’s it like being an entrepreneur?” And I’ll never forget the quote. It’s just embedded in my brain. I live it every day. He said, “It’s like eating glass and staring at the abyss.”

So if you remember, Tesla almost crumbled. Tesla almost died with production hell, if you recall that. Then Space X blew up twice and if it blew up the third time it was dead, right? Now–I’m not sure if you saw the latest launch–what happened when it blew up? Everyone was clapping and cheering because they realized they had learned a lot and made progress, and they were prepared for that outcome.

Too many organizations aren’t prepared for the failure outcome and to look at what they can take away from it. Elon Musk has his successes and failures and whether you love him or hate him, you’ve got to admire the way that he approaches failure and risk. And the ability to keep driving forward even in the grimmest of times. And companies need to do that. We see it happened with many past companies, including ones I’ve worked for like Compaq, that aren’t with us today, because they refused to take those very small first steps to really changing the status quo.

Tom: I had a similar thought. Many years ago when Steve Jobs left Apple and went to Next computer.

Steve: Another almost massive failure: Next. And Apple was right against the wall right when he came back having driven it there himself.

Tom: I remember there was a magazine at the time in Japan called Computing Japan, and somebody asked me for a quote. I said, “Apple’s rotten to the core.” And now I look back on that, what I should have been doing is investing in Apple at the time, because I didn’t realize that, in the case of Steve Jobs, again somebody with positives and negatives, he was driven in the same way that Elon Musk is driven to do something that’s quite different about innovation.

Having many starts and many failures within an organization, capitalizing on those failures and learning their way forward. Those are large, iconic, disruptive types of companies. But I also see that they were against the ropes, too. And they were built on a foundation of failures, actually. And innovation in any organization is probably built upon that foundation of risk taking and accepting failures and learning very quickly what they can from those failures and taking it forward.

About the podcast

“Perspectives on Leadership and Innovation” is a podcast hosted by Tom Pedersen, Founder and CEO of BentoBox Innovation.

With special guest Steve Monaghan, General Partner, KK FinMirai.