In the late 1800’s, the United States was the dominant presence in the whaling industry. At $10mm — more than $20 billion in today’s dollars — it was the fifth largest sector of the US economy. Whales provided a source of energy (oil for lamps) and the basis of a number of luxuries (perfumes, umbrellas, etc.). Centered in Massachusetts, the industry was a major driver of employment and productivity.
The US’s dominance in whaling was largely due to innovation — larger/faster ships, better harpoons, improved winch technology for hoisting sails, and better compensation. The latter two innovations were especially interesting. The winch technology reduced the manpower needed on ship. Less sailors led to more profits and productivity. And the industry’s compensation model was one of the first true innovations in pay. Instead of an hourly or daily wage, the sailors were paid a percentage of what they brought back to shore. A true alignment of interests, driving higher productivity.
Small manufacturing operations can produce complex products without a prohibitively large capital investment
Local Motors manufacturing plant on the outskirts of Phoenix, AZ
Local Motors was founded in 2007 by John “Jay” Rogers, an Ivy league-educated ex-Marine who wanted to marry his lifelong interest in vehicles with new economic models. The result: Local Motors, a company that, after eight years in business, now produces a series of vehicles built locally in a handful of facilities, but designed by a global community of enthusiasts.
We’ve exchanged command and control for coax and manipulate
You thought things were political before?
The irony of fostering autonomous and self-organizing teams is that it eventually negates the need for traditional management. This is a common pattern observed during re-orgs and “transformations”. Being savvy career-wise, management tries to adapt and in the process becomes even more spooky and political. It’s like parents transitioning from command and control to helicopter parenting. In some cases it is downright Orwellian.
Dubbed the Greatest Show & Tell on Earth, last weekend’s World Maker Faire drew tens of thousands to Queens, New York, to play with everything from DIY robots to puppets made from trash. Behind all the play, though, is something much bigger — a movement with the power to build the critical-thinking skills that companies and President Obama call key to the future economy.
Yet the maker movement has yet to make big waves in corporate America. And this is a missed opportunity. While technology firms, government, and education embrace making as the future, other industries can reap rewards by inspiring employees to both think of solutions and make them happen.
Barefoot miners clamber down tunnels so we can have cheap batteries. Apple, like everyone who else who makes devices that depend on rechargeable batteries, needs cobalt. 60 percent of the world’s cobalt comes from Congo — from places like Kolwezi, in southern Congo, which features in an in-depth (and beautifully designed) Washington Post report on the cobalt supply chain. Cobalt here is mined by hand, almost always by impoverished people working in inhuman conditions — an “informal army” of barefoot “artisanal miners,” a euphemistic label for the subsistence-level work. Children wash the raw cobalt (in the same water their communities use to bathe and water their crops) and then it’s shipped off to China, where it gets put into lithium-ion batteries. Those batteries power phones, laptops, and now electric autos. The supply chain is complex and involves lots of handoffs from one company to another, which makes accountability hard. Many of the companies the Post contacted acknowledge that they need to set and enforce higher standards. The tough part is insuring that such demands actually translate to better conditions for the Congo miners at the other end of the chain.
Blue Apron’s warehouse woes. Like many startups, Blue Apron, the meal-kit delivery service, has scaled up fast, building warehouses and hiring workers to meet demand. Along the way, it also faced fines for an unusually large number of health and safety violations. That’s according to an investigation in Buzzfeed that focuses on Blue Apron’s facility in Richmond, Calif. Blue Apron created a lot of jobs in Richmond, and the hardscrabble city badly needed them. But the company “was unprepared to properly manage and care for those workers,” and the “chaotic, stressful environment” in its refrigerated warehouse made work an ordeal. The problems peaked one day in Aug. 2015 with two separate threats of violence and the conclusion of a tough review by workplace safety regulators. Since then, things have improved to some degree. But for Blue Apron, as for so many other companies seeking to transfer the efficiencies of the digital realm into the physical world, the Facebook mantra of “move fast and break things” turns out to be lousy advice. Food prep is difficult and potentially dangerous work. Blue Apron and its peers owe it to their workers and customers to find a better balance between scale and humanity.
Deborah Hopkins, Chief Innovation Officer of Citi and founder and CEO of Citi Ventures
Deborah Hopkins has operated at the highest levels of corporate America for decades, holding senior roles at GM, Lucent, and Boeing, where she served as CFO. She is now Chief Innovation Officer of Citi and founder and CEO of Citi Ventures, a five-year old firm that has a unique approach to investing and an equally unique role in helping its 200-year-old parent company learn how to innovate in today’s startup-drenched landscape.
Many corporate venture firms maintain an arms-length distance from corporate headquarters, but not Citi Ventures. Not only does it focus its investments on startups that add value to Citi’s core business, but it is also responsible for driving new business practices into the company, through a network of growth boards, innovation labs, and the soft power of deep relationships nurtured over decades.
“If you aren’t genuinely pained by the risk involved in your strategic choices, it’s not much of a strategy.” — Reed Hastings
Enterprise software companies are facing unprecedented market pressure. With the emergence of cloud, digital, machine learning, and analytics (to name a few), the traditional business models, cash flows, and unit economics are under pressure. The results can be seen in some public stock prices (HDP, TDC, IMPV, etc.), and nearly everyone’s financials (flat to declining revenues in traditional spaces).
For the last four years, NewCo Festivals have sprung up in innovation hubs all over the world, literally opening the doors of thousands of fast-growing, disruptive companies. Along the way, we’ve observed some common characteristics of these innovative businesses. Foremost is the centrality of purpose. Purpose beyond extraction of profit, or maximization of shareholder value, unlocks many benefits for nimble, fast growing businesses. Purpose helps attract talent, accelerates key partnerships, and fosters truly innovative ideas.
Pop the hood on a NewCo, and you will inevitably find a purpose-fueled engine. These can be as broad as Google’s “Organize the world’s information,” or as precise as Best Bees’ “Expand bee populations.” As my colleague In “Does your Company Know Why It Exists,” John Battelle wrote that a corporate mission should speak to solving a real problem, and ultimately, making the world a better place. A good corporate mission situates a profit generating market opportunity within a nobler cause.
HostCo office art from NewCo Oakland
And missions can’t just be slogans. They must inspire engagement in their communities of employees, investors, and customers alike. NewCos walk the talk, and align their operations so as to accomplish their stated mission. When they do, the results are extraordinary.
Large, established companies are trying on various programs to foster new innovations in an attempt to find the best way to change course for their big ships.
These established companies are struggling to keep up with fast-paced, venture-backed startups that are changing customer expectations — and often causing business model disruption for traditional businesses. To combat this ever-growing threat, corporations are stepping up their investments in innovation, and deploying a variety of strategies, outlined below.
