Mentor Capital

Just as white blood cells see foreign substances in the bloodstream as a threat and cluster to destroy them, so institutional ‘white cells' in the organisation almost inevitably attempt to obliterate new ideas.

It's a major, but largely unrecognised problem for almost every organisation trying to develop successful e-business strategies, says Eric Marcus, president, eBusiness Center of Excellence, The Concours Group.

Most organisations have hundreds of good ideas, Marcus says. The trouble is, most of those ideas threaten someone or other's turf. Whether seen as a threat to power, status or resources, new concepts typically excite an immune system-like response that can easily end up engulfing and destroying them. So leaving development of a new idea to the existing business is a good way to condemn it to death.

Marcus has even coined a new term to describe the notion. If phagocytosis is the process by which white blood cells attack or try to consume a foreign substance, the word phagonovoideasis might well be used to describe a process that tries to eat or engulf new ideas.

"Imagine that somebody in your organisation comes up with a new idea. That idea inevitably challenges the turf of somebody in the organisation - it threatens to take away power, it threatens to take away resources, it can be all the way down to it threatens to take away their parking place or their seat at the executive lunch table. Phagonovoideasis sets in, and it causes the institutional white cells in the organisation to fiercely attack the new idea and destroy it."

In large organisations phagono-voideasis happens quite frequently - indeed many of the best ideas that companies come up with are destroyed in this way. And its deadliness resides not just in its ability to kill off new ideas. It also creates an environment in which people don't want to come up with new ideas any more.

"So we can't take something that's new, that has the potential of cannibalising our existing business, and leave it inside the existing business, because the threatened existing business will destroy it," Marcus says.

The best way to protect new ideas from all-out attack is to create a discrete nurturing environment in which new ideas assessed as potentially viable can be swaddled and supported until they can breathe and function on their own. By setting up a dedicated e-business incubator - even if physically it's just a discrete floor in one of the organisation's buildings - the organisation can encourage innovation, prioritise projects and mentor ideas through the process. Marcus calls that process "mentor capital".

Rewarding Innovation

The Concours Group was born in the US out of the ashes of CSC's old think tank, the Index Research and Advisory Group, scrapped about three and a half years ago as CSC moved more heavily into outsourcing. Even today, almost 30 per cent of the organisation's 200 staff are ex-CSC employees.

The company says it offers a unique blend of management consulting, executive education and research focusing on the intersection of business management and information technology, principally to large branded companies in the US, Europe and now Australia.

And it is winning a lot of friends with the e-business incubator concept. Cargill, the largest privately held company in the world, with estimated turnover of anywhere between $US80 to $US100 billion, nurtured its Rooster.com spin-off - a comprehensive Web-based marketplace for farm retailers, cooperatives and manufacturers - in an incubator inspired by The Concours Group.

Rooster.com makes it easier for farmers to do business on the Internet, acting as a two-way virtual electronic mall for the agricultural industry 24 hours a day, seven days a week. Here, farmers can market their crops and buy fertiliser, crop protection products, other farm supplies and equipment. Launched earlier this year, it is already phenomenally successful.

"We're seeing the large companies really starting to show strong interest in the e-business incubator concept," Marcus says. "We're seeing traditional banks, insurance companies and manufacturers looking to incubate ideas that range from dotcom companies to new business processes to industry portals."

Marcus introduced the e-business incubator concept to leading Australian organisations in Melbourne and Sydney at the company's Australian launch in June in a seminar titled "Mentor Capital: Moving from Concepts to Successful e-Business Launches".

At the heart of the concept is the notion that the best ideas often come from those people within the organisation who are closest to the customer. It's easy to stifle their ideas. Accepting, evaluating and nurturing them is a different matter altogether. That's where senior management should come into its own.

"I strongly believe innovation is a bottom-up process, but change is a top-down process," Marcus says. "So you need to get senior management committed to the change, yet you need to have the people closest to the customer innovating, coming up with ideas."

And those ideas should be rewarded, but not necessarily through bonuses or other incentives. One of the best ways of rewarding innovators is to give them the opportunity to watch their ideas take on a life of their own. That means giving innovators a chance to nurture the idea through the incubator.

Selection Board

Candidates for the incubator should be determined by a Venture Selection Board, Marcus says, comprising a group of executives typically including the chief financial officer, the chief information officer, the chief technology officer, the head of marketing and the head of strategy. The Venture Selection Board then sets up a format for the composition of an idea.

"Maybe it's one or two pages at the most that the innovator comes up with. And the innovator submits the plan to the Venture Selection Board, and the Venture Selection Board looks at it, possibly allows presentations and that sort of thing, and then selects the best plans to be taken to the next step."

Once an idea wins entrée into the e-business incubator the development team is given its first charter: to develop a comprehensive business plan, usually within 30 to 45 days. The plan has to be strong enough to stand a good chance of winning funding from an outside venture capitalist, whether or not that's how the idea will eventually be financed.

"It needs to be that good, it needs to be that thought-through," Marcus says. "The reality is it is going to go back to the Venture Selection Board to review. Now they might decide that in fact they do want to fund outside, or they may decide they want to fund inside. They may decide to spin out or they might decide to create a joint venture with another firm. There's lots of possibilities, but you want to force a discipline on the team to develop that quality of plan."

Helping the development team should be the incubator's Shared Services Group, either an outside consulting firm or an internal consulting group. The Shared Services Group needs expertise in market research, business plan development, partnering with third parties, negotiation, human resources, technology development, and other entrepreneurial skills that you won't otherwise necessarily find in the organisation.

It's up to the Shared Services Group to support all the other groups currently working in the incubator. Equally importantly, they need to recognise synergies between the different ventures under incubation.

Marcus says Shared Services needs a range of skills not necessarily found even in the largest organisations.

"Lots of people work for a large company and never have to write a business plan for an entrepreneurial venture, so you need people who can do that. You need people who can do market research and understand marketing. How do we write a marketing plan? Under what terms do we partner with another company? Do we make a strategic alliance, do we buy into a portal? What are the best ways of structuring compensation? What kind of technology do we need? How much of it can we buy off the shelf? So the kind of people you need represent a cross-disciplinary group that can provide those core services."

Once the proposal is accepted the business plan swings into action. The group will often start having meetings with key customers, key business partners, or key technology providers in preparation for the launch even while it is writing the detailed action plan for launch.

Marcus says launch of the new e-business should occur not later than day 60 in the process.

Strategy Hacking

There are other weapons in the e-business armoury that should also be brought into play throughout the incubation process.

Marcus has invented several different strategic methodologies for doing business in an increasingly digital world. These include the e-Business Playbook, a scenario-based technique for planning and managing uncertainty, and Strategy Hacking, in which a team of highly skilled e-business experts use digital age practices to conduct a simulation to defeat the organisation's current business strategy and thus expose its vulnerabilities.

He says either or both can be used before or during the incubator process to identify and test new venture possibilities.

The e-Business Playbook concept says that fundamentally strategic planning is dead and has been replaced by strategic thinking.

"That's a lot more than semantics," Marcus says. "Strategic planning basically meant once a year the senior executives got together, usually at some off-site retreat; they put together this beautiful notebook that they then took back to their offices, put on a shelf and dusted off a week or two before the next meeting. It wasn't really something used in the business.

"You can't run an e-business that way. That isn't the way a dotcom operates; you need to think about management in real time, about how you can manage in an environment where everything is changing all the time."

The e-Business Playbook accepts that since the future is less predictable than ever, the organisation has to fully understand the business landscape in which it is operating. It needs to know what its competitors are doing and the competitive profiles, the impact of the Internet and other e-business technology-enabled strategies on the business, and the main drivers in the business today.

Then the organisation uses those drivers to build between three and five scenarios for the competitive future.

"You then develop specific tactics in each of those scenarios to be able to achieve the success factors that you define for your business: whether it is percentage ROI (return on investment) or being number one or number two in each business segment served.

"You now end up with a series of tactics or plays that allow you to do that. You take those and identify the indicators that define when you should stage this play for execution. You also define the indicators of when you should execute the play. And then you monitor those indicators using something we call the digital dashboard to be able to identify when to call the play."

Then there's strategy hacking, modelled on the hackers of old who tried to break into corporate computer systems using telecommunications and their knowledge of operating systems to determine their vulnerabilities.

"Strategy hacking says: I'm going to look at a company's marketing strategies, business strategies, channel strategies, and I'm going to use e-business techniques and strategies to attack that company from three different perspectives."

First, the strategy hacker tries to attack the company from the perspective of a green-field competitor with low-entry costs, starting by building a business plan around that hypothetical green-field competitor. Then he or she repeats the exercise from the perspective of a non-traditional competitor able to leverage a core competency or exploit an alternative avenue to your clients.

Finally, the hacker does another business plan from the perspective of a traditional competitor, which is faster or more nimble than the strategy hacker's own company.

"With those three business plans, I'm going to be able to expose the vulnerabilities that my current strategies have," Marcus says.

"And then I'm going to switch hats, become an employee again, and then develop the counter-attack or the counter measures, which may include brand equity, product or industry knowledge, customer relationships and even proven fulfilment capabilities.

If E-toys had used strategy hacking, Marcus says, it wouldn't be facing a lawsuit now for failing to deliver orders last year.

"E-toys did a great job on almost every single front imaginable, but we've now found that they were selling toys in October and November knowing they couldn't fulfil delivery of the orders by Christmas. And they're now being sued.

"I happen also to be a lawyer. Imagine the plaintiff in such a lawsuit. You can almost salivate. You get to go to the jury andmake the allegation that E-toys knew full well that they couldn't fulfil these orders and that they were going to break these little boys' and girls' hearts on Christmas day. That could treble the damages," he says. -- S BushellConvincing Them You Mean ItHow does an organisation with a history of killing off new ideas - however unconsciously - convince employees it is now deadly serious about nurturing them?

The medium is the message, Marcus says.

"When you put the e-business incubator concept together you go to your employees and say ‘we're going to put together one of these e-business incubation centres and we really want to encourage you to give us your new ideas'.

But if it's an organisation where basically new ideas have been killed off at a rapid rate, this can be a non sequitur. How do you encourage people to actually do it?" Marcus says.

For a start, you need true top-down commitment and sufficient funding to making the e-business incubator work. But you'll probably also have to do something completely out of character to get your employees' attention.

"We had one client who got real excited about the incubator idea," Marcus says. "It was a CEO of a company in the furniture business. And his first statement was: ‘This is great, I'm going to send a memo out to all of our employees'. And my response to him was: ‘How many times have you sent out memos that said everything is going to change? How likely is it that they're going to believe you, assuming they read it at all'?"

Since form inevitably wins whenever it comes into conflict with substance, the trick is to change the form of the message. Acting on Marcus' suggestion, this CEO bought a seatbelt for every employee in the company printed with the words: "Buckle up. Everything is about to change at (the company's name)."

"It was very effective. People looked at this thing and first they thought it was kind of corny. Then they went: Wow, they wouldn't have spent money on this unless they were really going to do something. And number two, this is sure different from what they've done in the past. Maybe they really mean it this time.

"And we've done a number of things like that," Marcus says. "It means you have to think differently about how you transmit the message, as well as actually doing something truly different." -- S Bushell

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