Avoid the Deadly Temptations that Derail Innovators

Avoid the Deadly Temptations that Derail Innovators

by Rosabeth Moss Kanter  |   9:00 AM July 11, 2013

Any promising new initiative — a stand-alone business venture or an innovation in an established organization — hits roadblocks and unexpected obstacles. Recently I’ve advised entrepreneurs and innovators about a different, seemingly better, dilemma: pop-up opportunities that look like short cuts to success. Too often, these turn out to be deadly temptations.

Consider these cases (with names disguised to protect confidentiality):

Bill’s venture capital-backed business concept was to operate a new revenue-producing service for large U.S. professional organizations. In its first year, the venture landed two almost-committed pilot sites and a prospect pipeline for a multi-billion-dollar market. But almost at the same time, Bill was offered a lucrative deal to build a similar service for an English-speaking country outside the U.S. Feeling that the money was good and the chance to show credibility to U.S. customers even better, Bill took the deal, brushing aside numerous challenging differences and departures from his model. Then he was offered an even bigger international site in a developing country eager for American know-how, in partnership with a U.S. organization that could also be a customer. His financial backers urged him to take it — it would mean more revenue, fast. Suddenly Bill was in a different, less appealing business, jeopardizing building the U.S. business.In this story, that giant sucking sound you hear is the draining of time and energy from the core business by tempting almost-related opportunities. The danger comes from possibilities that are close enough to be plausible but take attention away from the building the main business and don’t prove the concept anyway.

Mary’s temptations were slightly different but had similar consequences. She started a non-profit organization with lavish foundation funding and a high-profile board in order to spread an innovation in health care. This was a situation devoutly to be wished for by most social causes, but it proved limiting and almost fatal to Mary’s project. The staff proliferated without clarity of purpose, and the organization became insular, looking inward and feeling they must be at the top of their field. Other groups courted the organization because it could bring funding, not because of a commitment to the innovation. Soon the goal became how to raise money, not how to support and improve the innovation. The organization took some government contracts to provide a somewhat-related but more routine service. Donors became confused about what the organization did. Private funding declined. The venture was in peril.

Ironically, these problems come along with looking like you might succeed. Investors, donors, potential partners, or bosses shower temptations on entrepreneurs who show promise. Joe’s first wildly successful conference, accompanied by highly creative marketing, drew offers to him from investors who wanted to back him to go national, people who wanted to hire him to popularize their work, and companies that wanted him to be a distributor for merchandise sales. Joe was dazzled by the big-name people interested in him. But none of this built Joe’s brand. The graveyard of startups is filled with innovators lured by glamour to let others take over their concept before it was fully developed.

In the western classic The Odyssey, Odysseus put wax in his sailors’ eyes and tied himself to his boat to avoid being tempted by the sirens and lured into lethal rocks. In her new book Sidetracked, my HBS colleague Francesa Gino outlines ways to handle more contemporary distractions. Entrepreneurs who want to avoid the deadly temptations I identify here can take these actions:

Establish principles by which opportunities will be judged. Creating new initiatives benefits from the flexibility to improvise, as I’ve written, but boundaries and direction ensure that efforts add up in a coherent way and can be replicated and scaled. Strategy is what you don’t do, not just what you do, as my HBS colleague Michael Porter has said.

Prove the concept you want to prove. Most people are concrete thinkers who will assume that a project is whatever they first see — why Bill’s strategy for a prototype was very risky. It’s important to build into the first model at least one glimmer of everything you anticipate for the full product, while screening out anything that doesn’t signal future aspirations. For example, if you want corporate partners eventually, get at least one before you start. If you want to reach full potential in the domestic market, hold off on international forays. Sometimes walking away from money is smart strategy if it comes with unrelated requirements.

Control your identity. Put the right words around the project, and stick with them. Observers often reduce innovations to familiar elements, using language they already have, but which might not fit the initiative, leading to offers of distracting opportunities when the core business isn’t understood. One innovation group developed a glossary of terms to be used, and words to be avoided. The same group also declined an investment from a source that would have sent misleading signals about the business the venture was in.

Don’t lean insular. Innovators can lean in so far that they become insular. talking only to those that agree with them or flatter them. Was Kodak’s demise precipitated by being Rochester-centric, where they were top of the heap, rather than mingling more in Silicon Valley where people had different views of the future of photography? Bill, Mary, and Joe were so flattered by money that they didn’t check with outside experts who would have warned them of the dangers ahead.

In short, to get to where you want to go, ignore the deadly temptations that might spring up on an innovation journey. Stay focused on the purpose and the destination.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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