Institutionalising Innovation!
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Institutionalising Innovation!
Innovation is the DNA of progress - is it in danger of getting over institutionalised?
We live in an increasingly institutional world. As the planet expands towards 10 billion people we run the danger of not only crashing the round blob that we live on, but we are also in danger of trying to wrap this massive consumer base into an ‘infinitely scalable’ corporate machine. The institutionalisation of everything might end up destroying innovation itself. And the DNA of success might become a function of scale, process and systems and not customer delight, future innovations and progress.
Richard’s Branson’s early Virgin Group designed new ventures to split like atoms because he believed that the optimal venture team should not be larger than 100 employees in order to remain fast and flexible (have you tried contacting a large bank/retailer/hotel/utility/broadband/local government/Virgin company recently….. Oh, wait… just a sec……
A number of different theories seem to prove that the larger the institution gets the less it is able to innovate. Indeed, the success of corporate style incubators as engines of future growth is littered with failure.
And tech companies don't seem to have it any better. Microsoft shuttered its industrial metaverse team only four months after forming it. About 100 employees have been let go from the now-defunct 'Industrial Metaverse Core' division. Perhaps half the problem was in the name. ‘Industrial’ doesn't exactly inspire new frontiers!
Institutional innovation in certain instances is proving to be an enterprise oxymoron. You know, like Barclays for touchy feely leadership.
Disney announced that as a part of its global restructuring it will shut down its hot new innovation team working on Disney Metaverse solutions. This has meant laying off around 50 employees and cancelling an entire future model - presumably because they could not figure out how to make it work. Either that or no one wants the name Meta in their products these days…. I wonder why?
“True innovators cannot be institutionalised!”
You see, true innovators cannot be institutionalised. Or at least not until after they've sold their company! In fact most of them believe that working in a corporation is the ultimate in slow death. That or waiting for the DPD delivery van. Many of these hot shots left corporate life to create something new - something truly disruptive.
And yet today, their wild new idea will have a predictable path. It develops from seed to venture, and at the point at which it looks like it could be worth a great deal of money one day, they get enveloped in the talons of money. And most of that money is institutional - a wolf in sheep’s clothing.
The innovator can get duped into thinking that the money will be patient and nurture and support the healthy development of their innovation. But most investors do not think this way. They just want to move the business through its hurly-burly tick box stages of packaged cash - from Seed round to Series A to Series B and then at high velocity to an exit - or off a cliff (check FTX).
The faster your venture hurtles from seed to exit the better (for who?). Down a rapidly moving conveyor belt of returns.
As a result the entrepreneurs can easily burn their venture out in the now institutionalised, packaged venture capital fuelled company building process. Spend big or go bust. It's like venture for Chelsea football club a la Todd Boehly. Bulls and China shops spring gingerly to mind. And the more they inject you with cash the more you need it. Like a taste of crack on Main Street.
There is a danger that the larger venture capital outfits, with a near monopoly on money, insist the venture they back grow in their institutional style with their institutional money - focused almost exclusively on getting them rich and ‘in control’ - ahead of the entrepreneur.
“These institutionalised stages of growth defined as Seed to Series A and B were designed for the investors - not the entrepreneur.”
These institutionalised stages of growth defined as Seed to Series B were designed for the investors - not the entrepreneur. Investors like to bang things into boxes, like Amazon. But true innovation, you know, the really disruptive stuff like the mainframe or the PC, the microprocessor or the network, the sim card or the cyptocurrency, cannot be put in a box. And their leaders are bound to be maverick and not institutionalised box tickers. That’s why they innovate!
The early days of Silicon Valley worked because these huge new disruptive innovations and their maverick leaders and system thinkers got married up with a new entrepreneurial type of venture finance developing on the West Coast at the time - a long, long way away from the institutional money in New York. Innovative financiers met innovative technologists. They had nothing to lose in the dust bowls of Northern California so together they united (unlike Chelsea) to hatch bold new ideas that could change the world. Not just developing new tech gadgets or widgets or niche little apps. They wanted to further the development of computing itself. Go bang that in your box!
Perhaps the early masters of innovation were too successful. They ended up developing giant corporations that today, arguably, stifle newer innovation. Indeed, these early ventures have now become institutions themselves (just not the Bankman-Fried kind of institutionalised). From Intel to Apple to Google to Meta. And the money that supported them in the early days got more and more rules.
Many of these now institutional ventures close the circle by spouting out corporate enshitified theories on ‘innovation’ just like a ChatGPT read-out:
“Innovation can be defined as the process of developing new ideas, products, or services that add value to society. It involves combining creativity, knowledge, and expertise to come up with new solutions to existing problems or to meet unmet needs.
Innovation works by identifying a need or problem and then brainstorming potential solutions. This can involve researching existing solutions and identifying ways to improve upon them, or coming up with completely new ideas. Once potential solutions have been identified, they are tested and refined through a process of experimentation and feedback.
The process of innovation can involve many different individuals and organizations, including researchers, engineers, designers, marketers, and business leaders. Collaboration and communication are key components of successful innovation, as ideas and feedback must be shared and incorporated throughout the process.
Innovation can also be fueled by factors such as new technologies, changes in market demands, and evolving social or environmental issues. The most successful innovators are often those who are able to anticipate and respond quickly to these changes, staying ahead of the curve and leading the way in their respective fields.”
*From ChatGPT
“And yet innovation is not an AI prompted quote.”
And yet innovation is not an AI prompted quote. It is something quite different. But, it may be that AI systems like ChatGPT can support innovation in a less obvious way.
AI could enable the next technological innovation to tackle its biggest cash-guzzling issue - communicating with and acquiring the early adopting customers. Indeed AI can automate the production of content for content marketing, imagery for advertising and micro-blogging for social media communications and community building.
If smart technologically driven founders can automate out the need for capital to scale by using advanced new systems to acquire then support customers; if they can do generative AI driven tasks themselves, then they will be free to innovate like in the early days of Silicon Valley - and will not need anything like the level of capital required for the massive institutionalised venture capital organisations to make their cookie-cutter’d buck while pursuing their systematised corporate funding model.
AI can produce all the draft legal documentation you will need to get from Seed to Series A pretty much for free, just requiring a cost effective review from your legal buddy. It will also produce your product videos and early ads. AI done right means you need fewer people to make a bigger difference. Perhaps the small, close-knit venture team that Branson dreamed of a few decades ago is just around the corner. More SAS than infantry building. Just leaving out the killing part.
Indeed, it may be that the real power of AI systems will be for founders to reboot the very process of innovation and venture scaling providing them with far more freedom and with a greater level of control back into their hands. It seems that the world's oldest corporate incubator is banking the new house on it. Maybe the traditional venture capital community should take note. The innovation times they are a changing.
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