On this week’s episode of Inside Outside Innovation, we sit down with Kaihan Krippendorff. He’s the founder and CEO of Outthinker and author of a new book called Driving Innovation from Within: A Guide for Internal Entrepreneurs. Kaihan and I talk about how companies are embracing internal entrepreneurship and some of the barriers, skills, and motivations needed to foster innovation within your organization.
Inside Outside Innovation is the podcast that brings you the best and the brightest in the world of startups and innovation. I’m your host, Brian Ardinger, founder of InsideOutside.IO, a provider of research, events, and consulting services that help innovators and entrepreneurs build better products, launch new ideas, and compete in a world of change and disruption. Each week, we’ll give you a front row seat for the latest thinking tools, tactics, and trends, in collaborative innovation. Let’s get started.
Interview Transcript
Brian Ardinger: Welcome to another episode of Inside Outside Innovation. I’m your host, Brian Ardinger, and as always, we have another amazing guest. Today with me is Kaihan Krippendorff He is the founder and CEO of Outthinker and best-selling author of a new book called Driving Innovation from Within: A Guide for Internal Entrepreneurs. Welcome Kaihan to the show.
Kaihan Krippendorff: Thank you for having me. Great to be here.
Brian Ardinger: Had a chance to take a look at the book. It’s near and dear to my heart, it’s a lot of stuff that we talk about on the show and we do in real life. I wanted to start by asking, what made you decide that you wanted to write a book about internal innovation?
Kaihan Krippendorff: I have spent most of the last 15 years helping people inside companies generate ideas through methodology, like a ideation, design, creative thinking methodology, and often when you generate an idea from inside, that goes nowhere, right? Once the bureaucracy and all that stuff, then a couple of my clients started actually driving these innovations through, and so I said, Hey, you know, is this an abnormality or can it be done? I started researching it and I found that actually the majority of society’s most transformative innovations were conceived of by employees innovating from within. And so that just captured my attention. I want to understand that if that’s really an important task.
Brian Ardinger: What makes innovation so hard for corporations to get a grasp on and why do you not hear more success stories coming out of it?
Kaihan Krippendorff: The second question is really the big one. That is difficult, but being an entrepreneur is difficult, right? The failure rate tie is a lot of work and eating ramen noodles and all of that, so it’s not that it’s easier and it’s just difficult in both cases. But I think that the reason that we don’t hear as many stories of internal innovators is that it’s not an easy story to tell. It’s not the person who went to college gets an idea and goes to the West coast and goes into a garage. We love that Elon Musk, love that Bill Gates, love that Michael Dell story. Its that hero’s journey that we like to tell and the story, the internal innovators, its more complicated.
Brian Ardinger: It makes sense also from the standpoint of it’s not typical for corporations to necessarily want to air their dirty laundry or the 10 times that it didn’t work before the time that it did work. I think there’s probably a little risk from that perspective. Let’s talk a little bit about the logistics. In a big corporation, oftentimes you’re working on your existing business model, and that. And all your resources, all your people, all your metrics and that are driven around maximizing and making that existing business model go. What’s some of the key things that you’ve learned about how you can actually innovate within the company, change that mindset or move things forward differently?
Kaihan Krippendorff: There are a whole bunch of things like summarize into seven, but if I were to summarize them all, the one thing, it is to think of yourself. If you’re innovating from within as pushing a B to B to C innovation. In other words, seeing your company as a customer and not being frustrated when your customer rejects your innovation, but just as you would as an entrepreneur, you know that customer centricity that you talk about that customer centric design. See the business as a customer? Try to understand what is it about this innovation that they are not thrilled about and then re-engineer the innovation.
Brian Ardinger: Do you see B to C types of companies being more innovative because they have maybe more of that direct customer feedback and focus, I suppose, compared to B to B companies out there. Is this happening across different industries and that.
Kaihan Krippendorff: Definitely it’s happening across industries. I looked at 367 companies that have appeared on most innovative lists in the last five years. And I looked at which one of these innovators are really outperforming their competition. And I found that there are only 13 that do. Yeah. Most of them are actually B to B companies, MasterCard, Alibaba. Amazon is a B to C company, but they’re very much a B to B company like on a platform. So definitely your point of having that customer centric view, having the voice of the customer there and really ensuring that employees are in touch with the customer and market. That is it. A very important factor.
Brian Ardinger: You’ve been in this space for a while. You’ve both consulting and working directly with corporations in this. What has changed over the years that’s made it easier or more willing for companies to take an innovative approach to changing the way they do business?
Kaihan Krippendorff: Two things. One is removing from a focus on competition. In the 1980s you have Michael Porter. We shifted towards a focus on the customer with Amazon and all the client-customer orientation that they inspire. I think were shifting now towards a focus on the employee, and increasingly we see successful companies saying, really the employees are customers. What we are is a platform that helps create great work for employees.
Starbucks, for example, they view their primary customer as the employee that’s working in the store. And so there is this paradigm shift and that’s driven in part by the pace of change. It’s accelerating and by the time new signals make it up to the top of the hierarchy a decision is made and it gets pushed back down, it takes too long. Companies are really recognizing that the key to surviving this fast paced, agile, digital world is to push innovation outward to employees and liberate them to innovate.
Brian Ardinger: We’ve seen this rise of startups and the rise of brand-new companies that are using some of the same methodologies now that are now being deployed and used within organizations. What are some of the core differences between startups and corporates and how they’re using these methodologies?
Kaihan Krippendorff: Did you see a lot of these agile and business model canvasing methodologies being adopted inside large corporations, and these are strategic tools and concepts that corporations have been slower to adapt. For example, if you use the business model canvas, which many entrepreneurs are well familiar with, but I’ve found that executives in established companies are less familiar with. You can use that to not only design the business model around your innovation, but to look at and isolate where you’re going to face business bottle conflict with your current business model.
You have also Agile teams that are those methodologies being adopted by established companies and even companies breaking down their large hierarchical, siloed organizations into more of a network of independent teams. Just those three which are really propagated by entrepreneurial-ism, Agile teaming, and design thinking around business models. You see larger corporations starting to embrace them and they adapt them a little bit for internal use.
Brian Ardinger: Talk about some of the case studies you address in the book or some of the folks that are doing it well.
Kaihan Krippendorff: One company that’s really interesting that’s doing it well is a Chinese company called Haier or Haier, that is the largest producer of appliances. They bought GE appliances. What they’ve done is they’ve taken a hierarchal organization, they’ve broken it down into 4,000 what they call microenterprises, and each micro enterprise has own CEO and that CEO can be voted out by the people that work in that micro enterprise. And even their support functions, even finance, and IT and HR. They become micro enterprises that are seeking to sell their services into the company.
Brian Ardinger: It’s the extreme example like where they’ve literally deduced their business down to like microenterprises and each particular group is making particular decisions based on the economics of the market for that particular business unit. If a company doesn’t want to go that extreme, so to speak. Are there other examples out? There are companies that are adapting these particular models to their existing business model, existing business structure?
Kaihan Krippendorff: If you look at what the correlates are of organizational factors and high or low levels of internal entrepreneurship, there’s actually a lot known. There’s a whole area of entrepreneurial intensity and optional orientation, and we actually know a lot. You take all those things and they’re really four different factors. There’s leadership, there’s talent, there’s organizational structures and culture. And in each of those, there are certain things that we know, like you mentioned, that customer orientation and market orientation. You want to have a culture that encourages that, you want talent that has that, and you want organizational structure to support that.
There’s the approach to risk. MasterCard is a great example. MasterCard begins as an association of. Thanks. It then becomes a fairly staid financial services company, and then it transforms itself into a technology company that views themselves as a technology company and they started implementing interesting kind of cultural norms like for example, at MasterCard, they say. We’re a force for good. And what they mean is we’re driving for a world beyond cash. That’s our business rationale. But by the way, a world beyond cash is a better world because you know, a world beyond cash…Let’s say a drug dealer won’t be able to sell drugs to your child without that being traceable. A world beyond cash creates accountability and transparency.
And they start also changing the physical space of their interior. They start hiring people who have the right attributes to the internal innovators that combine that creative thinking and proactivity of an entrepreneur with people who understand how to manage internal politics of getting intrinsic value of innovators. Across all four dimensions they do, but the bundle of things that they put in place to really start increasing their level of internal innovation.
Brian Ardinger: I’m curious to get your opinions around the concept of can this corporate innovation, does it have to be delivered top down, bottom up, a combination of that or what works kind of best?
Kaihan Krippendorff: When I started working on this book, my mission was to say, Hey, don’t wait for your leader to start making the changes that you know we need. You should already start driving innovation from inside and actually there’s a lot that you can do bottom up. For it to be really systemic, it needs to be leadership. Leadership that really prioritize innovation recognizes that the pace of change makes it such that the traditional decision-making structures are too slow and are willing to turn those other leverage points, the right talent, the right culture, the right structures. It’s definitely both bottom up and top down, but if we’re to really be sustainable, I think leadership really needs to take it seriously.
Brian Ardinger: If you’re in one of those organizations that are not as forward thinking, or you as an employee want to juice some innovation within it, what are some of those low hanging fruits or what are some of the skillsets that a person should be building so that they can start making that innovation journey possible?
Kaihan Krippendorff: It starts with activating your intent to innovate and getting excited about it. And what I found is that almost always gets successful internal innovators. They look for a certain type of problem that meets three criteria. One, there’s a market need. The other is it’s something that they’re passionate about. But the third lens is it’s something that their company cares about, that they understand what their company’s strategy is. And that is a big gap.
Like for example, there’s one woman who has become a good friend of mine, a former client of mine at TIA. Her name is Heather Davis, and I won’t go through the whole story, but she runs a huge fund that owns lots of agricultural real estate. They’re having trouble finding workers for their farms. The largest private owner of farmland in the United States and she goes, just like a good entrepreneur.
The answer is not in your office. She goes to one of these apple orchids that they own, and she recognizes the kind of work that’s done there is the perfect kind of work that is for people with autism, because her son has autism. And she creates this program called fruits of employment that helps people with autism get work on farms. They don’t just get a job, they get a driver’s license and they get their own money and they become independent.
What you see, is it something she’s passionate about because she cares about autism. It is something that the market needs and she knows that it’s something that needs a strategic priority or dilemma of the company. I would say understand what the market needs. Only innovate where you’re going to be passionate, because you would want that passion to drive you through. But really spend the time to understand what your company’s strategy is so that you innovate in the spaces that generate ideas that they are most likely to embrace. And then you throw in what we talked about, throw in the design thinking, throw in the teaming, throw in the business model design, and those things will help you get the idea, get traction on the idea.
Brian Ardinger: In your book, you talk a little bit about some of the differences between an outside entrepreneurial versus an internal entrepreneur. Obviously, some of the skills are the same as far as adaptability, curiosity, proactive, going to action and that, what are some of the things that make an internal entrepreneur different than maybe an external startup?
Kaihan Krippendorff: It’s interesting. One big one is political acumen. That successful internal innovators, they view the political challenge as part of the problem-solving process. It’s not, Oh, I wish I didn’t have to work through the politics, but I have to, and I can learn to do that. It is more of an interesting additional problem to solve, that they enjoy the political part of it.
The other element is that it’s unlikely as an internal innovator that you are going to become a billionaire from your innovation. The corporation is going to primarily financially benefit. And so, some internal innovators that are frustrated, they say, Oh, I can be making lots of money if I were an entrepreneur, but the ones that are enjoying it and doing it repeatedly. They get intrinsic value for innovating and appreciate that they can impact the world at a scale that would be difficult to achieve if they were doing it as entrepreneur. They also don’t have to eat ramen noodles every day and they kind of get a paycheck. Those are a couple of differences.
Brian Ardinger: What are some of the ways that you can either both measure as well as reward this type of innovation within a company.
Kaihan Krippendorff: Well, there are measures as a CEO, you want to start measuring your level of internal entrepreneurial intensity. There are tools that you could use to measure and track overall. The way I think to encourage it is since you don’t have these financial awards, you can give a business plan competition and give a prize. A lot of our clients like this idea, Michael Schrage, his concept of the 5-5-5 experiment, five people, $5,000 five weeks, so you can do those kinds of things.
I think a big thing is telling the stories. Tell the stories of successful internal innovations. Celebrate them. Because so often by the time the idea gets out into the market. No one knows who was the person that took that baton and started the relay race that led to that. That pushed the first domino. It becomes, Oh, GE launched this, or Amazon launched this, or Jeff Bezos did this. We need to start telling the stories of that internal innovator. You know, the guy that 10 years into Ikea’s founding suggested that they try the flat pack box.
Brian Ardinger: I love that idea because it helps provide context for employees from the standpoint of what is innovation. Oftentimes, I think innovation doesn’t happen because it’s like, well, we can’t create the new Uber within our own company, or they think that it has to be 100% disruptive innovation in itself, the creation of value. Whether that’s an H1, within the core type of innovation, which is more accessible and understood by everybody, and everybody can be an innovator within their organization if they just look for problems and ways to solve those problems within the marketplace.
Kaihan Krippendorff: For me, innovation is, it’s different, it’s adopted and it’s valuable, and you can generate a lot of value in each one.
Brian Ardinger: And then telling those stories helps define that as well as provide a path for role models, I suppose, for folks to execute on that.
Kaihan Krippendorff: Yeah, because I think as humans, we know what to do by the stories that we hear. We fulfill on stories that..my wife’s a Hispanic Latina from the South, she’s a very successful high-level executive now, but she didn’t grow up here in stories of Latin women becoming big time. And that’s a problem. And I think it’s a similar problem that we don’t tell enough stories about internal employee innovators.
Brian Ardinger: I appreciate you telling some stories here and I encourage people to take a look at the book. If folks want to find out more about yourself or about the book, what’s the best way to do that?
Kaihan Krippendorff: You either go to Amazon – Driving Innovation from Within, or my website is Kaihan.net – K-A-I-H-A-N dot net.
Brian Ardinger: Thank you very much for being on the Inside Outside Innovation. Look forward to continuing the conversation and thanks for sharing your insights.
Kaihan Krippendorff: Thank you.
Brian Ardinger: That’s it for another episode of Inside Outside Innovation. If you want to learn more about our team, our content, our services, check out InsideOutside.io or follow us on Twitter @theIOpodcast or @Ardinger. Until next time, go out and innovate.
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