As mentioned earlier, my mandate from Jeff Weiner was "How do we create the next Flickr at Yahoo!?", and my response, "In your dreams!" But then I started thinking, and researching, and talking to people, and looking at best practices at other companies.

Having worked at startups for my entire career, I had never worked at a company larger than 100-150 people. On a normal day, we would walk around patting ourselves on the back for how brilliant we were, how innovative, how fast we could ship, how much attention we paid to our customers, how WE were the rock stars and the people at those big companies? slow, dull, stupid wankers! But then I started working at a 10,000 person company and began to realize we weren't all that after all, the real Peter Framptons were the ones innovating at big companies. You build something brilliant while simultaneously serving literally billions of customers? Party on, you TRULY rock.

Now I've found there is no innovation deficit at big companies. Smart people with great, groundbreaking ideas are wandering their halls. But it's the classic Innovator's Dilemma: you need to keep the lights on for 500 million customers. Serving those customers and taking huge risks aren't two things that generally go well together. It's not the lack of ideas or products. It's all about the *process*. And whoever can master the *process* can get those ideas and products built, shipped, and in front of customers where they can succeed or fail on their own merits -- there lies success. It's exactly why everyone is so nuts about Toyota. Toyota mastered process.

As I've said in a bunch of talks I've done lately, big companies are no longer competing only with big companies anymore. They're competing more and more often with two kids in a garage. Embracing risk, and the concomitant failure, is an essential part of this. So much like with VCs, you should expect to invest in, say 10 products, 8 of which will fail, one of which will be a moderate success, and one of which will be a game-changing success. 90% failure, 10% success, and you are batting like Barry Bonds.

I was just talking to Paul Kedrosky who writes, advises and invests in new products, and who has had a lot of experience in these matters. And he and I agree: most companies who build in house R&D labs or incubators, or whatever you want to call them fail, and the reason is they are either too hands on, or too hands off. My research led me to the same conclusions. Either they're commanded to "innovate now, on this product, for this demographic" (which Paul likened to being ordered to 'have an erection, now!') -- or they're too loosey-goosey, and running around making stuff that no one needs or wants (our joke at Interval Research was "hey! come check out my animated tattoo project!".) David Hornik wrote a great post about this too.

There's also the tendency for big companies not to let products stand or fall on their own merits, to point the firehose of their already substantial traffic at them and not allow them to stay alive without life support. This too is crucial.

We'll talk more about Brickhouse soon, of course, and how it's going to work. And I can pull out some of my research, and some companies that I think are doing it right, and some companies that are doing it wrong. Organization and process innovation are fascinating, and I'm happy to have had the opportunity to work on these things at my job.

LINK | 3:06 PM | TB

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