Just before the holidays I spent a day with the head of innovation at a world-class service company. He had a problem that might sound familiar to those of you at large organizations:
“We’ve handed off [Project X] to be scaled-up by Operations, and it’s a disaster. It was working fine, but they’re basically taking it apart and rebuilding it as they see fit. The pilot accounts are calling me saying, ‘What gives?’”
I’ve been a full-time service innovator for 16 years, and the transition to scale-up is still one of the most challenging aspects of innovation.
As we look for answers for this challenge, perhaps baseball and startups have something to teach us: Protect your promising ventures through a tiered system of risk capital and operating rules.
For startups, outside capital comes from several tiers of investors, each with less tolerance for risk as you move down the development curve: Angel, Seed, VC (A-Round and B-round), Private Equity (Mezzanine and Growth). It’s a pretty nuanced system, and startups know what makes their venture investable at each level.
It’s like baseball, where the best high school players can go to college, or several levels of minor leagues, before they are called up to “the show” (major league baseball). The lower levels are known as “the farm system,” where promising but rough-edged young players can polish their skills.
In most large corporations, new ventures can find only two types of capital sources: Seed Investors (the corporate sponsors) and Growth Investors (the business units). It’s a mistake to treat them as the same.
You might ask, why don’t corporations create bridge funding tiers similar to those that serve startups – and baseball players – to mitigate the abruptness of this transition? I think that sounds like a terrific idea. We’re working on just that challenge with a couple of blue-chip firms.
How have you transitioned your projects from inspirational to operational? Stay tuned, 2014 may be the year we whittle this challenge down to size.
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