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Being A Corporate Entrepreneur, with Alexander Osterwalder

This post originally appeared in Forbes.

Alexander Osterwalder is one of the founders of modern entrepreneurship. The creator of the Business Model Canvas is a renowned business strategy practitioner, academic and bestselling author of Business Model Generation, Value Proposition Design and a forthcoming book, The Invincible Company. We sat down before his October 23 corporate innovation talk at the Columbia Startup Lab, to discuss how to be a successful innovator.

Yvette Miller: Innovative thinkers want room to make an impact and grow. What kind of company should they be searching for? In other words, how do you know an organization is not just open to innovation, but truly dedicated to innovation?

Alexander Osterwalder: At this point, every company has their incubators, their accelerators or other programs that they use to signal that they are into innovation, but a lot of that is innovation theater. The money might be there, the activities might be there, but there’s no real power behind it.

 The first piece of evidence that a company is actually dedicated to innovation is that you can experiment and fail within that company. If you can’t fail, innovation can’t happen. If an organization has established KPIs (Key Performance Indicators) that prevent failure, no one in the organization is going to take a risk because no one wants to kill his or her career.

The second piece of evidence is how much time the CEO spends on innovation. Any CEO that isn’t spending one to two days per week on innovation doesn’t care about innovation. This means the CEO is not just spending time on products that are making money today and not just customers who are paying the bills today, but really spending face time with his or her innovation teams and going out to talk to potential customers and scouting technologies to understand where the world is going. The CEO always defines the long-term direction, so if the person defining the long-term direction doesn’t understand where the world is going, how are your innovation teams going to stand a chance?

You can see how CEOs approach innovation from things like the news and from shareholder letters. You can see, for example, who is under pressure from activist investors or if a company is being forced to produce short-term results.

It’s not just a topic for large companies—these are two things that startups need to keep in mind as well, because the time spent between idea, scaling and reinvention is compressing. Business models are expiring faster than ever before, so that even a young company that is just starting to scale can quickly wipe out if they’re not willing to spend some time experimenting and if the CEO is not involved in innovation.

 Miller: What are some examples of companies getting it right?

Osterwalder: I don’t think it’s a surprise that some of today’s best companies are led by entrepreneurs. And I think that’s the big challenge for many companies, that employees are either not acting like entrepreneurs in organizations or senior leadership is not creating an environment where entrepreneurs can thrive. The people exist, the people are there—it’s never a people problem. It’s a problem of the right space, KPIs, cultures and processes.

Every company should have two parts: one dedicated to exploring new ideas (and open to failure) and one dedicated to execution on a business plan. Companies are very good at managing business plans and product delivery, but the problem is that they forget how to explore options for reinvention. It’s not that one is better than the other—you need both.

Amazon is probably the only company that does this dual “explore” and “exploit” at a large scale. You have a CEO—Jeff Bezos—who has publicly declared that Amazon is the best organization in which to fail. They’re proud of their failures! How many CEOs do you know who are proud of their failures?

Failure is not the goal, of course, but inevitably, when you experiment, you will have failures. So, if you don’t give space to failure, you won’t find the valuable innovations, either.

Very few companies actually build up this ecosystem. Many CEOs are afraid to do this because they don’t know how to sell this to Wall Street, but they should. CEOs who are reacting to activist investors end up cost-cutting themselves to death, because the first thing to go is often the investment in innovation and long-term growth.

Kodak, for example, was very good at executing their business model, but paid the price for not focusing enough on innovation. Fuji Film, on the other hand, they were obsessed with diversifying, even branching off into cosmetics, which paid off. At first you might think, why would a film company go into cosmetics? It turns out that the technology and skills involved in managing the aging of film was applicable to aging in skincare.

Miller: Do you have any advice for innovators who want to advocate for their ideas in companies? Is there a way to create a shift from within?

Osterwalder: If you want to go into innovation, there are two paths. One is to be an entrepreneur working in a startup or founding a startup. But another emerging option is a corporate entrepreneur, and it’s a path that in the next five to 10 years we will see more of. It’s already becoming a reality.

However, who makes the decisions in a company? Decisions happen at the senior leadership level.

If you want to really push for innovation, you have to check how much wiggle room the senior-level decision makers in your organization have. In many companies, senior leaders are under pressure from activist investors and probably don’t have enough wiggle room to commit to innovation.

If you have people in the senior leadership team—CTO, COO, CMO—who are interested in innovation, there’s hope. But only if you have a structure where innovation reports to the very top.

Are there people who can overcome obstacles to innovation? Yes. They behave like entrepreneurs. But it’s super tough if senior leadership isn’t open to it.

Miller: You mentioned that corporate entrepreneurship is an emerging career opportunity, one that will grow in the next five to 10 years. What sort of skill set is involved in being a corporate entrepreneur, or “intrapreneur”?

Osterwalder: The skill set of an intrapreneur is very similar to that of an entrepreneur. The ability to see patterns, in the market and in general, is very important. Also important is the ability to navigate in levels of abstraction—being able to at once understand the technology of a product on a very granular level, to think strategically about the direction of the organization and to be able to execute on your vision.

However, the corporate entrepreneur additionally needs a very strong ability to navigate the system within the organization. It’s very much a diplomatic role.

One thing that’s clear is that business management and corporate entrepreneurship are very different roles, so corporate entrepreneurship is something we have to cultivate a lot more.

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