Innovation is a misfit in many corporations. CEOs want to be more innovative, but high costs and high uncertainty tend to make them cautious. Corporate innovation teams lose the battle for resources and attention to slower-growing, more profitable operating businesses. Corporations periodically try to fix this problem by developing processes, methods, and tools to support innovation. This has led to the phenomenon of the innovation theatre; high levels of activity that translate into little change in innovation outcomes.

The alternative strategy is to hire an entrepreneur from outside the corporation to lead the charge. In the popular imagination, entrepreneurs are synonymous with innovation. The famed, if not always admired, leaders of Amazon, Google, and Tesla have truly rocked our world. It is therefore logical for CEOs to look outside their organizations to lead new ventures. However, this may not be the most effective strategy; in fact, most successful corporate innovation projects are led by long-time managers from inside the firm. The challenge is to find them and allow them to succeed.

Most successful corporate innovation projects are led by long-time managers from inside the firm. The challenge is to find them and allow them to succeed

In my work, I have looked at the career trajectories and innovation projects of dozens of successful and unsuccessful corporate innovators. I have found that meeting the challenge of finding entrepreneurial talent inside an existing corporation means setting aside some of the biases in how we define and evaluate leadership in corporations. Corporate Explorers, as I like to call them, are systematically disadvantaged by talent management processes and leadership competency models that are premised on what it takes to develop leaders for an operational business.

Disruptive technologies, like AI, machine learning, and a host of other digital innovations create opportunities beyond the core business that can generate the sort of growth CEOs want to achieve. It is one thing to reduce marketing costs by applying ChatGPT or improve operational efficiency with digital twins, but these technologies have much greater potential. Converting these opportunities is the real game - one that will require leaders with the capability to incubate and scale new businesses. These are leaders with an entrepreneurial, not operational, skill set.

If we are going to be serious about developing these exploratory leaders, we need to be able to: (1) accept that insiders are a source of entrepreneurial talent, (2) appreciate what differentiates these leaders versus managers of an operational business, and external entrepreneurs, and (3) reimagine talent management for the purpose.

Two-thirds of executives appointed from outside the company to lead innovation projects leave their jobs within three years.
Insider or Outsider?

When GE’s former CEO Jeff Immelt initiated the company’s digital transformation in 2013, he followed a familiar pattern of finding a skilled executive from outside the company to lead his new “Predix” business. Bill Ruh was hired in from Cisco Systems, where he had had a very successful career, particularly leading the transition from being a telecoms equipment company to one that sells IT services. Ruh had everything on his side. He had the explicit backing of the CEO and board of directors and a public commitment to making GE a “top 10 software company.” However, five years later, both Immelt and Ruh left the company, and the strategy was cancelled.

Although there are many reasons for the failures at GE, Ruh’s fate does represent a repeating pattern. In our research, two-thirds of executives appointed from outside the company to lead innovation projects leave their jobs within three years. In contrast, when we examine innovation projects that succeed, they are in many cases led by experienced insiders, often with more than 10 years of tenure in the company.

These Corporate Explorers can be found in multiple industries and across the globe, for example:

• LexisNexis – Jim Peck went within 10 years from being a middle manager in its news and legal information business to the CEO of a new multi-billion-dollar big data unit.

• UNIQA Insurance – Krisztian Kurtisz went from managing a relatively small Hungarian business to creating a new digital-only business, transforming the company’s value proposition and operating model across countries.

• AGC – Hideyuki Kurata has built a new contract pharmaceutical research and development business. Ventures such as these started in 2015; they now account for 25% of the company’s profits.

• Deloitte – Balaji Bondili developed “Deloitte Pixel” which reinvented the professional services labour model by using crowdsourced talent to work alongside employed consultants, with a billion-dollar impact for the company.

• Atlanta Opera – Tomer Zvulun reinvented opera in the middle of the COVID pandemic, making it possible to perform when all other opera houses were closed.

These are real, contemporary examples of innovation successes that should make CEOs trust that they can find innovators from within their management ranks. The challenge is to recognize them.

What is Different about Corporate Explorers?

Larger, more established firms tend to have some sort of formalized talent management process for assessing the potential of key managers and deciding how to progress their careers. BCG says that a leadership team should spend 30-40 days per year on talent management. Most of this time is focused on how to develop people for leadership within the existing core business the large P&L, sales, operational, and functional jobs in the company. These are complex responsibilities, and most companies struggle to have enough candidates for the positions they need to fill.

The challenge is that the profile of the leader of a small, unproven venture is entirely different from that of the manager of a stable, mature operating one. Operational managers are effective at managing large numbers of people toward goals within areas in which the parameters of performance are known and understood. There are processes, key performance indicators, and metrics, that they can monitor to detect variance to plan and adapt accordingly.

Explorers have few of these operational guideposts. They are operating in a new market without a performance track record or deep knowledge of customer behaviour. They need to manage high uncertainty to actively eliminate these risks before advocating that the business invest in the new venture. This is not a mini-general management role; it is a completely different skill set.

There are three key differences between the core business leader and the innovation leader.

Innovation leaders are explorers.

Businesses at different stages of maturity require different approaches. A mature, relatively stable franchise needs someone able to dig into the operational levers of performance to squeeze out a few additional points of margin, even as they delight customers with on-time delivery and quality. A new business is all about instability, trying different approaches, pivoting quickly, and staying focused on the long term. This requires a bias for exploration, a drive to understand what is changing in the world, rather than how to make things predictable. That is why I call them Corporate Explorers.

Peter Robertson at Nyenrode University in the Netherlands has demonstrated how a bias toward exploration or stability is hardwired into us as a product of evolution. That means that Corporate Explorers tend to be regarded as misfits inside organizations that have a strong bias toward delivering predictable results. They may be good corporate citizens, perhaps even trusted performers, but they do not fit the mould when it comes to big business unit leadership roles. They are regarded as a little wild or unconventional. It is exactly these characteristics that make them good at managing the uncertainty inherent in an immature, developing venture.

A new business is all about instability, trying different approaches, pivoting quickly, and staying focused on the long term. This requires a bias for exploration.

Corporate Explorers are curious about unsolved customer problems.

The most common “origin story” for a corporate venture is a Corporate Explorer who observes something in the world that they feel the rest of the business is missing. At UNIQA, Krisztian Kurtisz believed traditional insurers were ignoring younger, urban-dwelling consumers who were digital natives who had not developed the habit of signing up for insurance policies in the traditional way. At Deloitte, Balaji Bondili had tired of the consulting grind on the road every day and wondered why firms like his could not adapt their labour models to attract a wider pool of expertise in domains such as machine learning and artificial intelligence. This curiosity turned into a quest to solve the problem and build a new business.

This characteristic is also found in entrepreneurs. Amy Wilkinson in her book The “Creator’s Code” says entrepreneurs are “gap closers.” They see something in the world that does not work right and that inspires them toward constructing a solution. She explains how Jack Ma was a teacher in a provincial Chinese high school when he spotted a gap in e-commerce. Ma noticed that small and medium-sized Chinese companies had no route to market online, so he created Alibaba, a company now valued at over $200 billion.

Corporate Explorers are similar. They have the explorer’s insight about the gap in the market. The project to develop this insight into a new business offering becomes a personal quest. However, their motivation often comes from a sense of personal frustration. Kurtisz was frustrated with the slow speed of digital adoption in the insurance industry as well as the high costs and poor service it imposed on consumers. Bondili believed consulting could do better work for clients and give its team members a better lifestyle.

Corporate Explorers set a high ambition.

Corporate Explorers set a level of ambition equal to the opportunity or threat of disruption, rather than to what is most achievable. Tomer Zvulun, General Director of The Atlanta Opera, exemplified this characteristic in his response to the coronavirus pandemic. In March 2020, as the scale of the pandemic emerged, Zvulun cancelled the entire season. All other opera companies in America and around the world did the same, accepting that live performances would not return until public gatherings were permitted.

Zvulun saw it as his duty to bring hope to his audiences and the local artistic community. Within a month, he had committed the company to the ambition of reimagining opera in a way that would allow them to perform. This would mean keeping all participants safe yet retaining the ability to emotionally inspire audiences and create a commercially viable business model.

He adopted an agile innovation methodology to rally his team to solve the myriad problems involved in staging live operas in the middle of a global pandemic. He was told repeatedly by his team and many experts that what he wanted to be achieved could not be done. However, by October 2020, the Molly Blank Big Tent Series launched, with thousands of Atlantans treated to performances of live opera in a custom open-sided tent on a college baseball field. This made The Atlanta Opera the only opera company in the country, and one of only a few worldwide, to perform live and safely during this period. Zvulun’s vision was realized because of his passionate commitment to ambition and dogged determination that inspired others to overcome the barriers.

How are Corporate Explorers Different from Entrepreneurs?

These three characteristics exploratory, curiosity, and ambition are significant in explaining the difference between leading innovation and leading core business operations. However, they are roughly similar traits to those that we see in entrepreneurs like Musk, Jeff Bezos, and others. We cannot understand the essence of the Corporate Explorer without also appreciating the differences between them and the founders of start-up ventures. The key differences are humility and social influence.

Corporate Explorers demonstrate humility

Multiple studies have demonstrated a link between entrepreneurship and narcissism. That means that they lack empathy toward others, yet have a great need to be admired, coupled with a strong sense of self-importance, even entitlement. This is somewhat intuitive given the self-belief required to sustain an idea through many rounds of investor rejection. One unpublished study of Silicon Valley start-up founders suggests that narcissism is the only one of the “big five” psychology traits that distinguish successful from unsuccessful entrepreneurs.

Corporate Explorers on the other hand need to demonstrate humility if they are to win support inside the organization. When I was doing the research for the book Corporate Explorer: How Corporations Beat Start-ups at the Innovation Game, I interviewed both the innovators who had led successful corporate ventures and the executives who had sponsored them. What was remarkable was how the Corporate Explorers let others take credit for what they had achieved. It did not matter whether this reflected reality; what was important was that they built support by making these leaders feel they had a stake in the success of the venture. It helped them be perceived as trying to realize an opportunity to solve a valuable customer problem, rather than pushing a particular product or technology.

Humility is vital to helping the Corporate Explorer navigate the choppy waters of winning and sustaining senior leadership support. It makes it possible for the new venture to be coded as a shared goal, rather than a pre-determined agenda to aggrandize the individual advocating the innovation.

Corporate Explorers build social influence.

The toughest task for the Corporate Explorer is to align the organization around the new venture. New ventures often start with strong support, riding the wave of the latest technology or business model trend. However, until the venture has tangible evidence that it is going to work, it is an unproven cost to the business, and support ebbs away as the slow, steady work of validating the venture with experiments starts.

Almost by definition, new ventures face internal organizational resistance as they challenge the assumptions about how traditional business is done. Consulting companies pride themselves on recruiting and developing the best consultants in the industry. When Bondili proposed hiring them on a project basis via a third-party platform it sounded like heresy. Kurtisz broke the rules of insurance by offering monthly subscriptions and guaranteeing the payment of claims without verifying them first. Zvulun took opera into a tent and put singers inside plastic cubicles to allow them to sing without a mask.

It takes a high level of social influence to overcome these barriers. It requires strong relationships with others in the organization and people who will speak up for the venture when it is discussed at internal meetings. Corporate Explorers cultivate support from these allies and advocates. They are not solo performers, but people who identify with the company’s culture and purpose. This is where external hires are at a big disadvantage. They come in to challenge the fundamentals of how business is done, as Bill Ruh did at GE Digital but have no social influence in the organization. This makes it very hard to overcome the resistance to change that exists in any successful, incumbent organization.

Finding Corporate Explorers is not the same as appointing a new “head of innovation” or R&D leader. You need to create opportunities for Corporate Explorers to step forward and make a case for the problem that they believe the company should invest in solving for a customer group.

How do we find Corporate Explorers?

These five characteristics exploratory orientation, curiosity, ambition, humility, and social influence are what differentiate successful Corporate Explorers. Knowing these can help you recognize potential innovators, even when they do not fit the standard definition of a general manager or other senior leader in an organization.

Here is where you need to challenge a traditional talent management assumption that people are given new roles. Most Corporate Explorers create the opportunity themselves. There was no leadership position advertised at UNIQA for digital value propositions, for crowd-sourced talent models at Deloitte, or for big data risk analytics business at LexisNexis. These three Corporate Explorers built the opportunity themselves, with the help and support of a cast of allies and advocates.

That means finding Corporate Explorers is not the same as appointing a new “head of innovation” or R&D leader. You need to create opportunities for Corporate Explorers to step forward and make a case for the problem that they believe the company should invest in solving for a customer group. There are several options for how to do this.

• Provide a License to Explore – there is a great disconnect in many organizations between CEOs who are frustrated at getting too few proposals for how to build new businesses and managers who believe the corporation is risk-averse and unwilling to back innovators. Corporate Explorers need to believe that they have a license to explore. CEOs can signal this in how they talk about the company’s strategy. At Analog Devices, the $90 billion market cap technology company, CEO Vincent Roche announced his strategy as being to “move up-the-stack” and serve more complex customer problems. He invited his managers and engineers to propose how they would do this. This has created multiple new growth engines for the company, including its software-defined radio franchise that has powered the adoption of 5G mobile networks around the world.

• Create a formal process – Companies like Robert Bosch GmbH and Siemens Factory Automation invite teams in R&D to propose new ventures and bring them into a formal “Validation Engine.” This is a step-by-step approach to validating the customer problem that the team believes they can solve by engaging in up to 100 interviews with potential users and buyers. The process is so rigorous that over 90% of teams voluntarily conclude that their idea will not fly. The few that succeed have real evidence that they address a problem that customers will pay to solve.

• Use informal processes like executive education – A rigorous validation engine model can be resource-intensive. Another way is using executive education programs to enable high-potential managers to develop new concepts. For example, Federico Spagnoli, CEO of Prudential’s “Total Wellness Solutions” business, first developed his concept on a business school strategic innovation program. The structure of the program enabled him to formulate his thinking and get senior executive attention which provided his initial seed funding.

Leveraging the innovation potential of Corporate Explorers rests on the premise of helping them to “step forward” rather than making top-down appointments. This is a challenge to traditional human resource practices, but it is essential to capture the difference between finding high-potential explorers and high-potential operators.

Start-ups will always have an edge when it comes to attention and glory. They get to give their new companies funky names, announce funding rounds, and get new listings on stock exchanges. However, beneath this froth, there will be Corporate Explorers working more quietly, who can build new value propositions for existing corporations. Those corporations that can identify and encourage their entrepreneurial talent to emerge will put themselves in a stronger position relative to both competitors and start-ups.