Services Innovation Excellence Center A Whole Systems Approach to Intrapreneurship Craig Wirkus Innovation Program Manager June 2016
About Cisco $50 Billion in Revenue 30 Years in Business 75,000 Employees 380 Offices Worldwide 19,000 Patents For 30 years we ve been focused on changing the way the world works, lives, plays and learns. We create solutions built on intelligent networks that solve our customers challenges.
Cisco s five pillar strategy for innovation Build Buy Partner Invest Codevelop Capabilities and culture drive innovation Acquisitions to gain innovation momentum Create innovative solutions through key partnerships Invest in large and small companies to help grow innovation ideas Co-develop with startups to create innovative, disruptive ideas
What will be covered 1. About Services Innovation Excellence Center 2. Incubation team support 3. Innovation Funding Boards
1. About Services Innovation Excellence Center 2. Incubation team support 3. Innovation Funding Boards Embed innovation in our people strategy and create a dedicated team to drive innovation capability
The Services Innovation Excellence Center Our Mission: To help teams to drive business impact through innovation Integrated and Systematic Approach Strategy and Leadership People and Culture Process and Tools Ecosystems
SIEC builds innovation muscle within our businesses: Support Cisco s goal of being the world s #1 IT company by Innovating Everywhere Build Capability Innovation Maturity Framework Innovation Maturity Assessments Employee Innovation Training Innovation Toolkits Enable Ideas Innovation Challenges Innovation Platform & Process Hackathons & Workshops Innovation Community Building Accelerate Results Innovation Funding Boards Incubation Methodologies & Tools Coaching/Mentoring Support Pipeline/Business Value Realization Driving business outcomes for Cisco and our customers. Developing our people to be world-class innovators.
1. About Services Innovation Excellence Center 2. Create intrapreneurs and provide incubation team support 3. Innovation Funding Boards Build Capability Create intrapreneurial mindset through playbooks, coaching and acceleration cycles
What we think an intrapreneurial mindset looks like I'm a founder and my product sucks. There, I said it. My product sucks. Your product sucks. Don't feel bad, the first iphone sucked too. Customers don't care about our products - they care about themselves. Just lead with your vision. Start with customers goals and do whatever it takes to help them get there. - Kevin Dewalt, Serial Entrepreneur and Lean Startup Expert We need mindsets that embrace both discipline and flexibility Like the board game Chutes and Ladders we have to be willing to take setbacks
Incubation Framework Incubation Playbook Self learning playbook articulates incubation practice that best Incubation Workbook Lean start-up, discovery driven planning templates to guide incubation teams from concept to implementation Managing Innovation Projects Self learning innovation project playbook that articulates innovation project management best practices
Innovation Coaching/Mentoring Business Expertise Business Models Customer Insights Business acumen Technical Expertise Technologies Engineering Coding Incubation Expertise Human Centered Design Lean Start-up Discovery Driven Planning
Startup//Cisco Acceleration Cycle Invitations Visionaries + Pre-launch call Launch day Acceleration Ventures Cycle 1 through N Timeline 6-8 weeks before workshop 15 days before workshop 10 days before workshop 6-8 weeks Milestone Participant Selection Define cohorts Define team set up Visionaries survey Ventures selection Teams are formed Pre-work starts Define Roles, set expectations Venture kick off 3-4 days, Off site 4-8 teams, multidisciplinary teams, 3-5 people each Coaching/Mentoring Support culture change Habits stickiness Startup Go/No Go Resources Ideation Tools Suggested reading Coaches & Mentors Toolbox Coaches & Mentors Toolbox
What we ve learned about creating intrapreneurs and supporting incubation teams Instilling intrapreneurial behaviors can t be accomplished without change management and a whole systems approach provide playbooks, coaching and incubation cycle programs Overcoming incubation teams love of their ideas can be facilitated through mindset and rigorous customer centric processes
1. How do we engage our global workforce in innovation? Accelerate Results 2. Create intrapreneurs and provide incubation team support 3. Innovation Funding Boards Select and fund H2/H3 big bet ideas, change the culture from top down, retract support if not playing by your rules
Innovation funding boards defined Definition: A governance process, decisionmaking group and forum for selecting, funding reviewing and guiding early-stage innovation opportunities. Innovation funding boards are often a mechanism to nurture and support higher-risk opportunities that otherwise would be less likely to obtain funding through core business processes.
Innovation funding boards are used as a mechanism to accelerate bigger bets Market Innovation Horizons Model Exploration into new markets Adjacent growth Today s business Horizon 1 (Core) Today s solutions Horizon 2 (Adjacent) Tech/ product extensions Technology/Solution Horizon 3 (Transformative) New tech/ solutions It is easy to SAY that you will invest in H2/H3 but difficult to actually do it without cordoning off money for it H2/H3 represent a smaller part of the portfolio but require extra attention Organizational antibodies will try to reject high risk H2/H3 an innovation funding board can prevent that Use seed funding and customer validated learnings to quickly evolve or kill to free up resources
Innovation funding links strategy and execution Innovation Strategy In Support of Business Strategy Portfolio Management: Prioritization and Optimization Innovation Funding Pipeline Governance & Resource Planning Innovation funding links portfolio strategy/management with the pipeline and project implementation. An innovation funding board is one of multiple governance models for allocating funding to innovation projects. The organization will need to decide if the innovation funding board will be stand-alone as a separate decision-making forum, or potentially as a meeting and process as part of a larger portfolio management and funding governance group. Innovation Funding: Are existing funding mechanisms in place? Are H2/H3 innovations being effectively supported? If no Innovation Process & Team Structure Concep t Desig n Devel op Launc h Consider an Innovation Funding Board
Lessons from other companies Several key themes emerged from this research: 1. Developing disciplined process (w/ detailed frameworks and coaching) and guidance for both leadership and team behaviors is key. 2. The use and structure of innovation funding boards evolves over time, driven both by strategic needs and the maturity of the organization.. 3. Innovation funding boards and investment boards are related, but not the same.
Lessons from venture capital Venture capital firms, and corporate venture capital groups, including our own at Cisco, use a funding and governance model for their portfolios that share these attributes: Investment is diversified among a select variety of approaches, given the dynamic nature of these markets and technologies Funding is provided via tranches, with milestones developed for assessing progress toward goals Especially for earlier stage, higher-risk investments, valuations are more directional (vs. detailed NPV analyses) Selecting opportunities is based on the team and the market potential (the problem, the addressable market) vs. the specific solution proposed; almost always, there are significant pivots in that journey Innovation funding boards can be effective in promoting more entrepreneurial behaviors within our organizations, driving early-stage experimentation and learning in support of big ideas. Like venture capitalists, investments can be diversified through smaller bets on a wider number of ideas that are more quickly de-risked (or killed).
Innovation Funding Board (IFB) process introduction This process is uniquely designed to fund and govern early stage innovation projects within Cisco. Key characteristics include: Build Intentionally not a linear, prescriptive process it is aimed at balancing the creative tension of discipline and agility Encourages rapid iterations of designed experiments by teams, using build/test/learn cycles adapted from lean startup methods The process drives accountability and empowerment for exploration through limited tranches of funding Unlike phase-gates, the IFB process does not pre-define milestones teams return based on funding status & learning progress Ensures early and ongoing focus on customer needs and engagement (avoids the natural bias to build solutions prematurely) Ideas Learn Rapid Evaluation Incubation Board provides tranches of funding as concept progresses Test Innovation Funding Board Process Pivot, Persevere or Kill at any point. Implementation
Innovation Funding Board (IFB) process overview IFB screens initial idea submissions IFB provides funding tranches as warranted IFB approves project for full implementation Strategic priorities Rapid Evaluation Incubation IMPLEMENT Customer insights Co-creation opportunities Idea generation Initial funding and stress test Iterative funding and experiments Pivot, Persevere or Kill at any point. De-risked and ready to implement DEVELOPMENT Via standard processes H2/H3 ideas and opportunities from a variety of sources Rapid turnaround stress test by teams to strive for early kill ( Stop work on good ideas to make room for great ideas ) Teams conduct iterative experiments to define and validate opportunities. Return to IFB when: Funding tranche expended, objectives achieved and/or decision point reached Recommend: Pivot, Persevere, or Kill Transition to standard governance processes
Opportunities are evaluated on a recurring basis to measure the quality of both the idea and the process Rapid Evaluation Incubation Initial funding and stress test Iterative funding and experiments Pivot, Persevere or Kill at any point. De-risked and ready to implement Implementation Readiness: Customer/Problem Market Assessment Business Model (9 measures in total) Innovation Process Health: # Customer interviews # Experiments # Pivots (8 predictive metrics) Teams report on validation progress and de-risking of the opportunity Teams report on process metrics & living into behaviors (Further defined on following pages) Opportunity Scoring: Strategy Alignment Customer/Market Financial Opportunity Risk (Market/Tech) 0 3 7 10 0 3 7 10 0 3 7 10 IFB scores opportunity at each review using 0 consistent 3 7 10 criteria 0 3 7 10 0 3 7 10
Implementation readiness* should be tracked by teams as a progress measure against key milestones Implementation readiness (IR) is a key metric that provides a consistent and fact-based approach for measuring progress against predefined milestones. These milestones track important deliverables that move the team toward a validated business opportunity one that has been sufficiently de-risked and should be ready for full development. For each IFB review, team updates IR Index to provide: ü visible progress for teams ü consistent deliverables while enabling flexibility in approach ü IFB to compare readiness across projects Rapid Evaluation Initial funding and stress test Incubation Iterative funding and experiments Recommended status to exit Rapid Evaluation Phase: IR2 Discovery-driven business plan (initial) IR1 Opportunity charter accepted Pivot, Persevere or Kill at any point. Recommended status to exit Incubation Phase: IR9 Product/market fit validated (optional) IR8 Business plan accepted IR7 Business model defined IR6 Problem/solution validated IR5 Solution concept defined (w/ assumptions) IR4 Customer/problem validated IR3 Market assessment (initial) De-risked and ready to implement * Adapted from Steve Blank Investment Readiness (IRL) Index which itself is derived from NASA Technical Readiness Index
Innovation process health should be tracked by teams as a measure of the quality of the work process Compare two scenarios: Team A : This team proposes a compelling business plan with highly attractive financials for a very creative solution. Over multiple funding tranches, they ve deviated little from their initial vision and their customer interactions have been limited. Team B : This team has a solid business plan and financials (while not as attractive as Team A ). Team B has changed direction multiple times, not only with their proposed solution, also their target customer. There are still key unknowns, but their new direction appears solid and based on frequent customer input. Team B 2/3-3/4 3/5-5/1 5/2-7/7 Remarks Customer engagements Mentor/stakeholder engagements Hypotheses developed Solution assumptions validated (of total identified) Experiments conducted MVP s created Pivots 12 7 8 4 6 5 6 4 6 3/12 3/13 10/21 12 12 21 0 1 3 1 2 2 First tests with MVP conducted this period Added 2 internal marketing mentors Solution validated via MVP MVP s included concierge of service Pivoted to more focused offering Which one sounds more investable? If we only looked at the financials, it would be Team A. But Team B demonstrates more robust customer and market engagement and iterations. That s why we should consider not only financials, but innovation process health as well. It s important for teams to track for their own benefit, and provides the IFB with a measure of the quality of the workprocess.
The business plan is created and refined over time (with increasing fidelity) as the opportunity is developed Overview: Innovation venture teams create and refine the business opportunity definition, beginning with a simple charter document and progressing to a detailed business plan for full implementation commitment. Rapid Evaluation Initial funding and stress test Incubation Iterative funding and experiments Pivot, Persevere or Kill at any point. De-risked and ready to implement Outputs: Opportunity Charter Initial Discovery-driven Business Plan Interim Discovery-driven Business Plans Completed Business Plan Brief proposal by team for IFB Rapid Evaluation funding: Description of opportunity Target customer and problem being solved Brief description of solution Size of prize rough estimate of market (or savings) Ask : Rapid evaluation funding Initial high-level plan sufficient for Incubation funding tranche: Business opportunity Potential customer/problem Brief description of solution Financial estimate using reverse-income statement Experimental plan Ask : Funding/resources At each review cycle and request for next funding tranche: Updated business opportunity Customer/problem (validated) Solution concept refined Increasing fidelity of financials and business case Experimental plan, IR index and health metrics updates Ask : Funding/resources Complete business plan for implementation commitment: Detailed business opportunity Customer/problem (validated) Solution concept (validated) Detailed financials Business model defined Ask : Funding/resources for detailed development
Opportunity scoring is conducted by IFB members in conjunction with venture team reviews Overview: IFB members use a scoring sheet similar to this to evaluate new innovation opportunities and re-score opportunities at each formal review. Scoring helps IFB members to assess and prioritize across opportunities, as well as to highlight differences among the IFB; these differences should then be discussed. How it Works: Scoring is done during and immediately after innovation venture team presentations. Each IFB member scores separately, results are tabulated real-time, and summarized results are discussed: Scoring should be based on: ü Business plan (pre-read) ü Innovation venture team s presentation and Q&A session ü Implementation readiness metrics/update ü Process health metrics/update COMMENTS CRITERIA WG SCORE(1-10) T Strategic Alignment: 25% 6.5 Supports business and innovation priorities 7 Fit with core competencies 6 Customer/Market Attractiveness: 25% 6.3 Large addressable market with unmet needs 8 Key market for Cisco Provides unique value to customers 6 Provides sustainable competitive advantage 5 Financial Attractiveness: 25% 6 Attractive revenue potential 8 Attractive time to revenue 4 Slow market build Risk: 25% 5.6 Low market risk 6 Low technical risk 4 No proof of concept? Low execution risk (resources et al) 7 Total Weighted Score: 100% 6.1
Process considerations Below are some design principles that were considered in developing the overall framework. Keep them in mind as your organization s innovation leadership group customizes and implements this framework within your business: Remove guesswork: Remove as much guesswork as possible for both decision makers and innovation teams, while recognizing we are dealing with imperfect information. Overcome organizational biases: Use the process and forums to protect against the natural bias toward short term, lowest risk choices. Simply being conscious and aware of this tendency will help in managing it. Learn to be passionately detached. Be passionate about your idea, but objective in assessing direction and viability and not simply in love with your own idea. Patti Streeper, VP Innovation Hallmark Cards Instill entrepreneurial rigor: This process will help to instill rigor around managing a diverse set of small bets, and help to de-risk ideas as they progress toward larger funding requests. And teams learn the discipline of validating customer needs and problem definition, before jumping into solutions. Variety of projects: Design for robust, disciplined governance of variety of project types. The focus is on innovation funding, but H2/H3 projects might be very diverse and difficult to compare.
Culture/mindset considerations The Innovation Funding Board process isn t just a forum to govern innovation investments. It s an opportunity for executive leadership and innovation teams to practice new behaviors which can instill a stronger entrepreneurial culture within Cisco one that embraces experimentation and encourages smart risk-taking: Business focused: Use the process to encourage teams to build fundable business opportunities vs. simply pitching innovative products or solutions. In early stage concepts, the initial solution concept will be wrong, but should be aimed at large, attractive markets. We need to pay attention to our culture. I want Cisco to be viewed as having the most innovative workforce experience in tech and in the corporate world. Chuck Robbins, CEO Cisco OK to fail: Demonstrate to the organization that smart risk-taking is encouraged, and that killing projects can be celebrated because it demonstrates learning and frees up resources to work on even better opportunities. OK to pivot: A major pivot by a startup is heralded as brilliant. A pivot in direction by a corporate innovation team is too often viewed as unfocused. This process encourages pivots through rapid experiments and learning cycles. Challenge assumptions: Breakthroughs often come from challenging long-held assumptions about the business and market; be open to these and don t allow your own assumptions to stand in the way let the experiments prove or disprove them. Accountability: Encourage teams to be accountable to self-assess opportunities at early stages (before even proposing to the board) The board is not simply a pitch panel, but rather a forum for funding, guiding and empowering teams to learn and grow.
What we ve learned about innovation funding boards Don t attempt to have H2/H3 funding compete with RTB Starting with incubation team processes, behaviors and what they communicate to the IFB s can move boards in the right direction After boards get used to the vernacular and customer validation focus they can adopt opportunity scoring that reflects the new approaches you won t need to convince them!
Summary Use a whole systems approach to intrapreneurship Instilling intrapreneurial behaviors can t be accomplished without change management and a whole systems approach provide playbooks, coaching and incubation cycle programs Overcoming incubation teams love of their ideas can be facilitated through mindset coaching and rigorous customer centric processes Use Innovation Funding Boards to create the top down pressure for incubation teams to make the intrapreneurial changes or they lose support and funding! Remember, it s a journey