Market Development And The Innovation Process

About the Interview

Instead of creating an innovation culture, businesses need to be functional learning organizations with a methodology to find the truth about whether their product fits in a given market, and create functional learning to accelerate the path to that truth and then find profitability. Few large corporations are still being led by their founders, so finding the stage-relevant person is important. One approach is to have an entrepreneur in residence, someone that’s not really necessarily focused on the core business or even the adjacent technologies but the disruptive one. Entrepreneurism inside of a large company brings more of an owner mindset among employees. We’ve moved out of this age of developed technology into this age of applied technology where it’s never been easier to get a product to market yet it’s never been harder to sell it. Thus, as much emphasis is needed on market development earlier in development phases to figure out what time and money and resources should be spent on by actually solving problems for customers and end-users instead of just building cool tech. Most innovation inside of corporations now tends to be improvements around the status quo. There aren’t enough disruptive big bets and the biggest gap that’s holding most big companies back from the big bets is commercialization. Market development needs to be at the beginning to work on the things that people want, not the things that the company thinks they want. True innovation is in the business model associated with changes. It’s not in the technology itself; it’s what the technology creates. It’s the execution of the innovation that determines success and it has nothing to do with the stage of the company but everything to do with the stage of the product. In this innovation economy, product companies are transforming into service companies. Ten years from now, product companies are going to be service companies with a product because of the data that’s being generated from the products, connected with big data and AI and machine learning.



Andrew GoldnerGrowthX, Founding Partner

About Our Guest

Andrew Goldner

Andrew is a Founding Partner of GrowthX. He has been in the technology sector since 1998, based in New York City, Hong Kong, Singapore, and Palo Alto. Andrew began his career in technology as a lawyer for the early Internet pioneers in Search (Alta Vista and Yahoo), AdTech (DoubleClick), SaaS (Salesforce) and others while practicing law. He left private practice at Skadden Arps to join DoubleClick leading up to the Google acquisition. Andrew then joined Thomson Financial where he co-founded their financial news business leading to the acquisition of Reuters. At Thomson Reuters, Andrew served as Publisher of Reuters News, where he worked on innovation and design-thinking with nearly 3,000 journalists based in 200 countries worldwide. He then became Co-Founder and Managing Director of the company’s legal media business in Asia Pacific and the Middle East. After 6 years in Asia, Andrew returned to the U.S. and returned to helping early-stage companies. Andrew is a Kauffman Fellow, Regional Board Member of Venture for America, and a proud Mentor at Alchemist Accelerator in Palo Alto.

Sean Sheppard

Sean is a Founding Partner of GrowthX. Sean has over 20 years of experience bringing new products to market, including as a five-times sales founder. Sean’s deep expertise has been codified into a proprietary market acceleration program and entrepreneurial sales training curriculum. In addition to helping dozens of startups find product-market fit and predictable revenue models, Sean helps global multinationals to identify new applications for their existing technology portfolio, bring new products to market with profitable business models, and organize and train self-managing early product-stage sales and marketing teams. Sean’s successful corporate advisory track record includes work for Bridgestone, Canon, Faurecia, and Clariant. Sean is a globally recognized sales and marketing thought leader. He was named as One of the Top Sales Influencers You Should Be Following On Social Media, as well as Top 20 Inside Sales Influencers.
Rahim Rahemtulla: Hello, everyone. Welcome here to Silicon Valley Innovation Center. I’m Rahim Rahemtulla, the SVIC Brand Ambassador. I’m very pleased to tell you that today we’re bringing you an interview with Andrew Goldner and Sean Sheppard. They are founding partners at GrowthX. So, Andrew and Sean, pleasure to have you both with us today. You’re going to be giving us a webinar here at SVIC a little later this month – October 25 to be precise – and the themes of that webinar is going to be entrepreneurism, venture capital and how to commercialize innovation. So I want to talk about those in turn a little bit, each area, if I can. So let’s start, I think, with entrepreneurism. What should its role be in a corporate environment? Who’s going to go for that one first? Andrew?

Andrew Goldner: Sean, you want to grab that?

Sean Sheppard: Yeah, I’ll do my best. It’s an interesting question. There’s a conversation about interpreneurship – with an “I” – that is often bandied about inside of organizations as a way of creating entrepreneurial mindset, entrepreneurial thinking and coming up with new and innovative ideas and ways of doing business. And I think it’s important to create that kind of mindset in an organization. The role itself should be to help a company think about creating, investing and developing things that would otherwise put them out of business, if that makes sense.

And, as an entrepreneur in residence, for example, in the venture capital world, we look at it as we take really smart, capable accomplished entrepreneurs and we essentially fund them to go out and find the next great problem to solve. And I think that is the easiest way to define what the role of an entrepreneur in residence, say, in a corporate setting, would be: it’s someone that’s not really necessarily focused on the core business or even the adjacent technologies but the disruptive one, because those are really the three key areas of innovation inside of a corporation.

Andrew Goldner: Yeah.

Sean Sheppard: You have continuous innovation associated with the core business. You’ve got adjacencies, things that are very closely tied that might be a part of an ecosystem. And then you’ve got the things that are truly disruptive. And so, as an entrepreneur in residence, you need to think about how you can, let’s just say, identify, prioritize and then test and validate hypotheses around those three areas and then identify which ones you want to go after. First, how big those markets are and, hopefully, acquire the resources internally to go out and test against that.

Andrew Goldner: I agree with everything that Sean just said, what I would add is that what entrepreneurism inside of a large company allows is to bring in more of an owner mindset among employees. As a company moves beyond a small circle of owners and those that were close and know the owners and the employee base enlarges and it literally is institutionalized, there’s incentive structures in place around compensation, but what’s really also important to accomplish the things that Sean just outlined is to incentivize and attract and retain people that bring that early company stage employee mindset to everything that they do.

Rahim Rahemtulla: So that’s about, you want to bring in people, but you don’t necessarily want this entrepreneur in residence to be part of the founding team? Is it better to bring someone in?

Andrew Goldner: Well, if you’re talking about large corporations, the reality is that very few of them are still being led by their founders. Now, I think, CEO-Founders is a trend that makes a lot of sense. The reality is that very, very few people in this world are Fred Smith, someone who can be extraordinarily effective as a founder as well as a global multinational CEO with the company that he founded.

Stage relevance is something that we talk quite a bit about at the stage in which we operate as a venture capital fund, the so-called early-stage which, frankly, I would define all the way up until kind of Series C and D is really still early stage. Each stage of that early stage is very different than the next. A C is very different than A, is very different than B, but as you get beyond and large and certainly public, yes, there are still challenges that can be inherent to the size, but less so, and so, finding the stage-relevant person is important.

And so, I took your question to mean a large multinational that has gone far beyond the founding team. How do you bring that mindset? And more importantly, as Sean can detail, the framework in order to inhabit that mindset and disrupt yourself and not just build and buy innovation but bring it to market and put it to the hand of customers.

Rahim Rahemtulla: Yeah. And so you need to build this innovation culture inside your organization. So, this is about bringing that founding spirit into the big company? Not losing that as you grow?

Andrew Goldner: I think that’s part of it but I would pass the baton over to Sean to talk about the how, what we think is missing among innovation and entrepreneurism inside of both big companies and countries.

Rahim Rahemtulla: Yeah, sure.

Sean Sheppard: Yeah, you kind of hit a bugaboo there, Rahim, with me around the term “innovation culture”. As a practical matter, changing any or transforming any culture is super hard and even if you announce it upfront that you’re going to do it, you’re just going to be met with nothing but great resistance because people just don’t necessarily attune into adapting the change.

So we take a much more practical and pragmatic approach which is, instead of creating an innovation culture, we try to encourage creating functional learning organizations. And by organization, I mean the people that are actually doing the innovating and then learning and executing against that innovation to determine whether or not it’s commercializable or not and whether or not product markets exist for that particular innovation, if you will. And that starts with the three, I would say, pillars of our commercialization framework and this applies regardless of whether or not you’re a startup, you are a country or a company, an investor, a customer or an entrepreneur or those who want to work with and for them.

It starts with the truth. The purpose of our framework is to find the truth, the truth about whether or not your product or application or technology fits in a given market and a certain way and, if not, what to do about it. The second is to create that functional learning to accelerate the path to that truth. And that can begin, as I said, with one or two people. You can have an entrepreneur in residence and a sponsor inside of an organization get together and start rapidly iterating on the feedback that you get from the market on that given innovation, and not at scale. You do the things that don’t scale early so you can scale later, but this is very entrepreneurial in its approach. And then the third thing is what we call “finding profitability”. Can you determine whether or not there’s a business model and a way to monetize that innovation? And what does that look like? How big is that opportunity beyond your early customers? So it’s finding the truth, creating functional learning and then getting to profitability. And it’s as much about the mindset and the approach that you take to do that.

As Andrew said, most innovations fail. Most startups fail. Most initiatives by countries fail. And the reason, once again, is typically market-related. In fact, we have the data that shows that in the startup world, 80% of the reasons that startups fail have to do with markets and behaviors of the people who are running them. In corporate innovation, that number is even higher – it’s more than 90% according to Nielsen’s research – because they have an even more complex channel, so they’re not just trying to find external product market fit, they’re trying to find internal market fit. You need sponsors, you need stakeholders to support what you’re doing because it’s not part of the core business. You need to organize and hold people accountable and dedicate them and focus them specifically on that learning and how you measure that learning.

But you have to believe that learning leads to revenue and if you do believe that and the organization is behind it, you’re going to find your truth. And hopefully you’re going to do it in a way that prevents you from putting good money after bad into areas where you’re trying to build products that don’t solve real problems and you can focus on the applications of the products and technology that actually do solve real problems. If you don’t have that mindset and people don’t buy into the fact that learning leads to revenue, then more often than not it’s going to fail and that’s often what we find happens in large organization.

Andrew Goldner: Yeah. We have a bit of a bee in our bonnet around that “culture” word because in large corporations, when we’re brought in to help, what we’re typically handed is a very expensive, large PowerPoint deck that a consulting firm has prepared around the strategy of innovation and the culture of innovation and years and millions of dollars have passed by without any foot forward towards commercialization.

And so that’s where we get deeply involved and that’s what we think is missing more than anything else. There is startup scouting and that’s happening and that’s important. We do spend a considerable amount of time teaching best practices for the deployment of corporate venture capital and sovereign wealth investing. And where we find the biggest gap to be addressed that’s holding most big companies back from the big bets they’re looking to make is the commercialization.

Most innovation or so-called innovation inside of corporations globally now tends to be improvements around the status quo. There aren’t enough disruptive big bets and, as Sean talks about, disrupting themselves, big bets. And it’s not because the conversation isn’t kicking inside the corporation – it’s they’re missing the how.

Rahim Rahemtulla: And is the how part of this idea that, I guess, grew out of Eric Ries’ Lean Startup methodology, this is how you do it? I mean, for a startup, his idea was you make a minimally viable product, you take it to market as quickly as you can and you get some feedback and you keep iterating and prototyping until you hit that sweet spot. Is that the same in corporations? I think, Sean, you sort of alluded to this earlier.

Sean Sheppard: It’s an element of it, but really, once again, even Eric’s philosophy and Steve Blank – who was his teacher before him – it still has a product focus to it. What’s happened in the last 20+ years or 30 years since those ideas started to really formulate is that we’ve moved out of this age of developed technology where everything was about the science and the developers of that science, the technical founders and the technology development and the research & development or product development into this age of applied technology where it’s never been easier to get a product to market yet it’s never been harder to sell it because all the infrastructure exists today.

So, as a result, we need to place as much emphasis, if not more, on market development earlier in the technology and research and product development phases so that we can figure out what we should be spending our time and money and resources on by actually solving your problems for customers and end-users instead of just building cool tech. And it’s an unbelievable mindset that we see inside these large corporations, that they’re really focused inwards, they’re focused on their own products, their own self-interests and their own way of doing things. And when you teach them to flip that mindset to market-first, product-second, problem over product, problem-solution fit, so to speak, then they can get there faster.

But Lean is sort of a part of it but there’s a whole lot more that goes into it and it’s a market development framework that we created that’s specifically designed to get to that truth quickly, create functional learning and find profitability within that framework, if that makes sense.

Rahim Rahemtulla: Okay. So basically you come and you want to help companies find these markets. If you can, how do you know what problems to solve? How do you know something is genuinely a problem and that it’s something that people are actually going to pay for if you can solve that problem?

Sean Sheppard: Well, so the first thing is that we have a mindset that we don’t know yet and we have a methodology that is designed to ask all the appropriate questions in the proper order and then go out and find the answers and determine which of those answers are repeatable and predictable and scalable and which ones need to be continually iterated on until they are and/or pivot based on what we learn or kill it based on what we learn. And do it, yes, certainly in a very lean and cost-effective manner by accelerating it.

And, again, this was all borne out of us being successful entrepreneurs turned investors who were tired of watching our companies fail from the market-behavioral reasons as opposed to the product reasons. And then, that turned into a successful accelerator program and an academy to develop the people to work in stage-relevant roles in those companies and then that turned into corporations approaching us who were working with our company and saying, “Your startups are behaving differently. We like what we see. Can you teach us the same thing?”

And that’s when we started to try and apply our market development framework to big companies. But it’s all about the execution of the innovation, not the innovation itself that determines whether or not you’re going to be successful largely, for the most part.

Rahim Rahemtulla: So can most innovations find a market?

Sean Sheppard: No.

Andrew Goldner: It’s not about finding a market; it’s about finding the truth. You have to have a growth mindset, you have to be willing to work to be less wrong tomorrow than you are today and embrace feedback and ambiguity and know that your outcome efficiently is truth. That truth may be market fit, but it may be a pivot that you need to take to get there.

Sean Sheppard: People operate on their vision as if the vision is a reality.

Rahim Rahemtulla: Yeah.

Sean Sheppard: And they behave in a way where they start to apply resources and may assume as if this is already at scale, when in fact it’s nowhere near that. And, as a result, they either continue, they elongate the learning curve, it’s more expensive, and they eventually find out where it fits in the market and how to monetize it, how to commercialize it, how to build a sustainable, scalable revenue streak from it. Or what most often happens is they shelve it, they kill it. The moment it starts to look like it’s going sideways, people start going back into their shells and focus back on the core business and then there’s no real dedication to it. And that’s one of the largest problems.

Rahim Rahemtulla: And this ambiguity, the fact that things may not work out how you want to and so on, in the corporate environment, that doesn’t necessarily sit well. Is that the idea?

Andrew Goldner: You have to remember that as these corporations got larger, they necessarily needed to move from non-linear to linear. They necessarily needed people and processes and frameworks that were designed to create growth from mature products and/or into mature markets. And so, logically, with that talent and those frameworks and those behaviors and those key-performing indicators and other incentive structures, that’s the same process that they naturally take when looking to do something disruptive or innovative. And what happens is that literally stifles or entirely suffocates the innovation while also sacrificing the core business. And, therefore, it gets shelved, it gets viewed as a waste of time, people end up leaving the company in their own accord and it’s because they took the mature people, process, frameworks and incentives and apply them to early-stage innovation. And that’s a common mistake that gets made.

There’s such a rush right now to work with Silicon Valley because they think that these early-company stage startups are the answer. But it has nothing to do with the stage of your company; it has everything to do with the stage of your product.

Rahim Rahemtulla: So you could work with a company that’s not necessarily in early stage or a startup. If you find the company that has the right idea, the right product, they could be a more mature company but it could still be the right move.

Andrew Goldner: We do everyday, currently, work for several large global multinationals doing just that. It’s not bringing that culture and “move fast and break things” mentality of a startup; it’s an experience and an expertise that has been developed over time and codified by Sean into a proprietary framework that is a step-by-step process to follow in order to bring a new product to a market or a product into a new market that has nothing to do with the stage of your company.

Rahim Rahemtulla: I think that’s interesting. These big corporations, which are large now and have mature processes, mature people, at some stage they were doing these things that you describe now. And, in some sense, at some stage, maybe far in the past, they did bring in new products to a new market or maybe to a market that didn’t even exist at the time. So they do in some sense, somewhere, know how to do this. Is it just that the game has changed now? The rules have changed? Technology has changed? Or do these things just get lost in the ether somewhere as companies grow?

Sean Sheppard: I think it’s a combination of both. What makes an entrepreneur great at something doesn’t necessarily make them great at operating or managing or maintaining or growing. So you could start a company 100 years ago or 30 years ago and the people that built that up to a certain point either, again, age out, pass away or the organization grows to such a degree that that entrepreneurial mindset gets lost. The other component is, yes, we live in this age of applied technology where the market can quickly, fast follow, replicate or duplicate just about anything that you’re doing.

In this innovation economy, we’re transforming product companies into services companies. I literally had a talk this morning with a group about, “Ten years from now, you’re no longer going to be a product company providing services; you’re going to be a service company with a product because the data that’s being generated from the products that you’re creating, now that they are connected with big data and AI and machine learning and then, eventually, because you need to scale securely, we’re throwing it on the blockchain.” Everybody’s head is spinning about what this looks like in their relationship and how it works, but the reality is that the true innovation is in the business model associated with those changes. It’s not in the technology itself, it’s what the technology creates, which is an opportunity to help our customers make better decisions and become more intimate partners within a collaborative ecosystem as opposed in some cold supply chain.

So because of those things, the game has changed. And it’s fine to have a process or technology development or research & development, even product development. All we’re simply saying is that you need to incorporate market development at the beginning of that process so that you’re working on the things that people want, not the things that you think they want. And it’s more than just a process, it is the mindset and the methodology and the approach.

But we do it, like I said, in very small bits. We try to create functional learning out of small groups and teams, show the measured learning, make data-driven decisions in a offline world where, really, most of the data you’re collecting and most of the learning is happening, literally, talking to humans. You’re not measuring heat maps or hot charts or a clickfunnel website per se to test a new product all the time; you actually need to be out interfacing with those customers and those early customers, which you shouldn’t be selling to, you should be recruiting for joint development. You have to have that joint development mindset, that collaborative mindset, and be willing to share and be willing to admit that you don’t know what you don’t know yet and that you’ve got this product and this vision that’s incomplete. But, “I’m trying to understand whether or not it’s of value for you and whether or not we can work together on this and what success might look like and what resources both parties are willing to allocate towards each other and how we’re going to measure that.” If we do that effectively and rapidly, we can get there a heck of a lot faster.

We’ve got corporate clients who have said to us, “We’ve got more done in three months through your framework than we’ve done in the last three years” because it creates that momentum and that measured learning that leads to the next step. And we literally have four milestones associated with this and all series of steps that go into it and then you integrate that into your product development and your technology development process, your innovation stage gate process and you can reduce your innovation cycles, cut your costs to get stuff to market and reduce your failure rates.

Because I said, the average failure rate is north of 90%. Where we’ve seen it done really, really well, they still fail more than they win, but they recognize that they’d like to reduce that rate and reduce time and cost associated with it and they adopt this, incorporate it into their methodology. So we try to stay away from that word “culture” again, which is too lofty and it’s not real.

Rahim Rahemtulla: Thanks, Sean. And, guys, I’m going to have to close it off now, unfortunately, we’re almost out of time, I’m afraid. Andrew, I’m going to give you the last word, then. What do you feel, if we had just to boil it down today, if we want to give people a takeaway, there’s obviously many options here and they want to reduce that failure rate from 90% downwards, where do you think they should focus?

Andrew Goldner: I think, really, it’s everything that Sean just said.

Rahim Rahemtulla: Well, perfect. Thank you very much, Andrew and Sean. I think that idea of learning is a nice one to anyone today. So thank you both very much for being with us. And don’t forget, for our viewers, this is not really the end of Andrew and Sean’s talk because they’re going to be back with us on October 25 10 am PDT, so do mark that in your diary. They’re going to be able to go into much more detail on everything we’ve discussed today. And, also, I want to say, if you can’t wait until the 25th October, at SVIC we do a Leading Digital Transformation Executive Immersion program. It’s happening next week, actually, the next run of the program, October 8-12, and it’s a great idea, a great chance for you to see for yourself, in person, how some of these ideas that we’ve talked about today, how they actually work in practice in Silicon Valley. So our website for details there. But for now, that’s where we will sign off. So thank you very much for joining us and from me and from my guests Andrew Goldner, Sean Sheppard, goodbye for now.

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