14 Conference Report #techonomy14

Preemptive Innovation

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  • From left, Michael Chui, Bill Gross, Deborah Hopkins, Guy Wollaert

  • Deborah Hopkins (left) and Guy Wollaert

  • Michael Chui (left) and Bill Gross

Panelists

Bill Gross
Founder and CEO, Idealab

Deborah Hopkins
Chief Innovation Officer, Citi

Guy Wollaert
SVP, Chief Technical and Innovation Officer, The Coca-Cola Company

Moderator

Michael Chui
Partner, McKinsey Global Institute, McKinsey & Company


Chui: We’re going to talk a little bit about preemptive innovation. As we were thinking about this, we were trying to figure out what the opposite of preemptive innovation—I guess it’s reactive innovation. But I’m joined by a terrific panel of folks who are practitioners of innovation at different types of companies, different companies. I want to talk a little bit about them—as David made a comment about, or introduced us, particularly about how to create innovation at scale, because it is a terrific challenge at some of the largest companies in the world.

But with that, why don’t we start with you, Bill. As a practitioner over many years of funding innovation, being a catalyst for innovation, etcetera, what do you see as the essential elements, and particularly how has that changed? Because I think a lot of us would say, “I kind of get innovation, I know how to do that,” but how have things changed over the years, that you’ve been doing it?

Gross: Well, I’ve been starting companies all my life, ever since I was 12 years old, when I sold candy bars at the bus stop in junior high school, and I don’t think that much has changed, actually. I’d say some of the ingredients are passion, for sure. It’s so crucial for innovative leaders to be passionate about what they’re working on—only way to carry through the tough times; execution, for sure; adaptability; perseverance. The newest thing that I’ve discovered, I think matters more than I ever believed before, is timing, and how luck applies to timing, having the right innovation at the right time, having the world be ready for what you’re doing. When I look back at companies I’ve made in the last 20 years, look at our successes and failures, timing had a lot more to do with the success than I ever believed. I always thought the idea was everything. I actually think matters a lot more.

Chui: How do you get the timing right, then?

Gross: It’s very, very hard. You have to look—sometimes you only can get it right after the fact, so it’s the luck of the draw, but I think it’s looking very carefully at the marketplace to see if they really are ready for what you have for them. And it is very tough to judge, but there are signals that you can look at—maybe we’ll get into later in the discussion—from experiences that I’ve had, to try and figure out if the timing is right.

Chui: Great. Well, so Debbie and Guy, as representatives, or at least as members of large institutions, some of the largest and most well-known institutions in the world leading innovation—innovation is, some people would say, very hard, because, again, when you’re talking about billions of revenue as your base business, something that otherwise would be successful for an entrepreneur, a life-changing event for an entrepreneur, is barely a rounding error for a company like either of yours. Can you talk a little bit about how you think about innovation at scale, when that might be one of the challenges?

Hopkins: Yeah, I think what has been very interesting—and I’m going to borrow a phrase from our good friend, David Kidder, who I think is out in the audience here, but he always talks about big companies are really great about thinking about going from big to bigger. So unfortunately, that often kind of means incremental innovation, but the reality is the skills of going from new to big aren’t so honed, and they’re becoming increasingly more important as we’re watching a very different world for where growth is going to come from. It used to be a lot of our models, you know, incremental innovation was enough because of the size, but now with the really blurring of lines between industry and the really great disruption—and I think about that optimistically, by the way—that’s happening, growth is going to come from very different places, so we have to be honing those skills.

And we started—I’ve been at this six years, which I don’t think I’ve ever done anything for six years in a row in my life, so it’s kind of interesting. But we started building things ourselves, so really being off a separate group, creating new businesses for the company. And while that was amazing, we did face organ rejection when we tried to bring them forward. But more importantly, we hit the scale button and recognized increasingly what we’re spending our time doing is really building new skills and new ways of working. And it’s completely different. So we talk about discovery versus innovation, and the skills of discovery are antithetical to the skills of kind of business execution. So what I find, and I’m guessing Guy will say similar, is that this is cultural revolution that you’re leading, and really helping people think about exploring ideas and very quickly getting to customer validation of ideas, instead of these multi-year billion-dollar investments. And systems aren’t set up that way, so you’re really trying to help people in some ways adopt a lot of the great tools entrepreneurs have used to be successful, but in a large organization.

Chui: What’s the difference between the words discovery and innovation for you?

Hopkins: I think it’s a big deal for me, because discovery is about wonderment. It’s about wondering what could be and really asking the question, you know, posing a hypothesis effectively, and thinking about it more from that perspective and spending time kind of testing a hypothesis. And I feel it’s a very, very different way of really engaging our people, is kind of going back to that childlike wonderment, because that’s what’s required to look at the world, and kind of what we’re seeing here, and, you know, we are—this industry called banking won’t be called banking in five to 10 years.

Chui: What will it be called?

Hopkins: I don’t know. I think we’re seeing some very, very different, we call them pac-men, walking away with some of our core value chains, right? So it requires a very different kind of cultural norm that takes a lot of work to have people step into that and think about things differently.

Chui: So Guy, product placement. [LAUGHTER] What about your experience? How do you achieve innovation at scale when a lot of people might have heard of your product before?

Wollaert: Yes, so I’m going to go back to the definition of innovation. And it’s interesting, already the dialogue here kind of illustrates that it means different things for different people. And so after going through a lot of conferences, meeting a lot of professors of top-notch universities, Europe and the U.S., it came down to this: the way we think about innovation is something new that creates new value. And then all of sudden you start to think about innovation in a very different way. To your earlier question on scale, the Coca-Cola system, if you include all the bottling companies, which is really the end-to-end company, or system, is a system of $120 billion of revenue. So 1 percent improvement on your cost of goods is about $400 million that goes straight to the bottom line. So incremental innovation, you know, continuous improvement, is of huge value. And so a lot of our innovation continues to be on the core of the business. It’s the same for 1 percent of revenue line increases is over $1 billion.

But that is not enough, as Deborah was saying. That is not enough. You know, you have to complement it with the disruptive innovation, where you don’t even know potentially what you are looking for. You know the spaces vaguely that you are scouting around for, but then you bring in new technologies, new partnerships to go and deliberately disrupt yourself in certain areas across that incredible value chain.

And then there’s kind of the piece in the middle—I mean the new space, the disruptive space will create value, hopefully. [LAUGHTER] But over a much longer timeframe than the incremental innovation. So they complement each other.

The space in the middle would be more an M&A play, where you’re kind of the adjacent innovation. For instance, a great example is we took an equity stake in Keurig Green Mountain recently and Monster recently. So there we either partner, then build it ourselves, and then innovate of that new platform, new partnership.

Chui: So I think people probably can understand how you create incremental innovation in that huge ecosystem you talked about, and you had some examples of that sort of middle between disruptive and incremental. Practically, what are you doing, or how do you think about executing on the disruptive—

Wollaert: Well, the words I use are inside-in, inside-out. and outside-in. And they apply to all three, by the way, incremental or disruptive. But inside-in is internal innovation. you leverage your existing ecosystem of partners, agencies, suppliers, whatever it is, and you have the capabilities in house. You know what you want and you have the capabilities, the technology, the systems and so forth, to drive mostly incremental innovation, I would say.

The inside-out is when you know what you want, but you might not have the technology or the capability, and then you go deliberately to look out for it. You know, you set up an network—and we by they way set up a network all around the world where we plug ourselves in the nerve centers, if you want, of technology, of invention, and then you very simply bring these in. A good example for us would be Freestyle, for instance, which we know that we needed to disrupt, in this case the food service, you know, our business in the food service channel. This is the Freestyle—do people know what that is? Okay, so this is the machine where you basically make up your own choice, and more than 120 different of choices of flavors—always delivering a great refreshing taste, by the way. [LAUGHTER]

Hopkins: Okay, now we’re into product placement.

Wollaert: That is a disruptive solution, but it has embedded technologies that come from the medical industry, for the microdosing, for instance, because it’s super concentrates. And the design, we borrowed design skills from Pininfarina, who designed the Ferraris and the Maseratis. So there you bring in partners that are totally, totally new.

And then there’s the outside-in, where you don’t even know what you’re looking for, but you know you have to be part of what’s happening, whether that is in the digital technology space or, you know, technology in the physical world, both the inert, as well as the living world, and you just need to be there and—serendipity, you know—

Chui: That sounds like discovery.

Gross: Well, I was going to say, for that kind of outside invention I think that you could look to the future, and I think a lot of what innovators or entrepreneurs do is close the gap between the future and the present by seeing something about the way the future’s going to be—Peter Thiel talks this in his book, seeing some truth about the way the world is going to be and doing it before the world gets there. And if you do a truth that everybody knows, it’s not really that innovative, because everybody else was going to do it anyway, but if you see something about the future that no one else sees, that’s where you can really make a big delta. You can change the world.

Like you said, you then have to go do market validation, because you think the future might be that way, but you could be wrong, and trying to figure out if you’re wrong the cheapest and fastest possible is the goal in that case. But I think that’s where big innovations lie, when you draw clean slate, like for either of your businesses, and look at the way people might think about banking in the future. They might not even use that word. They have their money, they have these things they want to do. Someone might invent some new way that people might want to act with their money and that could be revolutionary, but then you have to go find out if it is. Because it’s a crazy idea at first, right up until it becomes a breakthrough. And it could just be a crazy idea, it might not actually become a breakthrough, and finding that out cheaply is I think the goal of innovative process.

Chui: And Bill, let’s stay with you for a moment. You’d remarked to me before that innovation of big companies is hard. Why is that? Let’s see if they agree.

Gross: Well, I think that equity is a big part of—yes, okay. Well, I think that equity and autonomy are a big part of unlocking human potential to cause them to innovate. So for example, in all of our companies, we always want people to have minimum of 30 percent equity, up to 70 percent equity in the management team, the execution team. And we want to give them a huge amount of autonomy, so that they do what I call permissionless innovation, they don’t have to go to anybody else to get approval. I think permissionless innovation caused two of the latest, greatest waves of innovation history: the PC platform, where you didn’t have to go ask anybody to go develop an application for it, and then on the Internet, with the HTML protocol, where people could do whatever they wanted. If companies can come up with a way to incent and leave alone, then I think they can have innovation.

Chui: Do you ever have to ask for permission in your companies?

Hopkins: Well, we’re into seeking forgiveness. And, you know, part of the deal in doing this—we talk about this a lot together, but you really have to be a renegade and you really have to be willing to get that phone call that you really don’t want to get, because—

Chui: Which one is that?

Hopkins: Well, you know, “What the heck are you doing out there? We sent you to California and you’ve gone native.” You know? But it’s—you know, we’re equity investing as well, because we really deeply want to be embedded and really understanding what we think are the most relevant technologies for our company or business models or capabilities. But, you know, I think increasingly it’s—there are a lot of great ideas, but very, very few companies have honed that skill of how do you take an idea and truly translate it into an investable kind of concept. And so we’re really working on taking a lot more smaller bets and being able to kind of, again, almost in a stage-gated way, kind of starve them for money at the beginning and allow them to get to a point where we’re ready to put down serious money. But these are different skills, and we’ve had, you know, both of us have grown up in vertical, hierarchical power-based systems. The world doesn’t work like that anymore, and so how do we help change that and have leadership understand the power that can come by encouraging and finding—frankly, I bet you’re seeing—new talent pops up when they believe you’re going to do this kind of work. And that’s when it gets exciting, you know?

Chui: I’m actually curious. I mean you’d mentioned you’re doing a lot of venturing, and have been for a while.

Hopkins: Yes.

Chui: Bill says equity is an important part of that, as well as autonomy, but I think the history of corporate venturing has been, let’s call it mixed. So what have you learned over the time that you’ve been doing corporate venturing? What works, what doesn’t?

Hopkins: Well, as a former CFO, the immediate thing was let’s make sure we have risk buttoned up. So we really developed a very tight model on risk so that anything we were doing would never embarrass the company or create any kind of franchise risk or, you know—monetary risk, obviously. And that’s been really—

Chui: Let’s pause there for a moment though. Isn’t part of venturing taking on risk that otherwise, in other types of financing, you don’t?

Hopkins: It is, but you’re also really trying to have—we’ve created a system where we have legal and bank reg, and the compliance guys all involved very, very early on, even when we’re just looking at a company. And so by the time we’re ready to invest, they’ve been able to ask all those questions and been able to say, “Well, what if this happens, what if that happens?” So it’s measured risk. It’s very much understood risk, you know, and I think that has been really, really important. And then really I think driving this willingness to say, look, let’s put down this hypothesis and let’s go try it out and really be able to kind of experiment there. And that’s starting to really take hold now, so we’re excited about it.

Chui: What doesn’t work in corporate venturing in your experience?

Hopkins: What doesn’t work is scaring people, you know, trying—

Chui: Who gets scared?

Hopkins: Well, I mean trying to come in, you know, “We’re all going to get disrupted, the world’s going to come to an end…” and rattling everybody’s cage. Because look, these people who run the businesses—just like Guy deals with—these are, it’s a hard job running a business these days, and these people are working very intense. And it’s very, very difficult to make room for this kind of thinking. And you have to find increasingly interesting ways to engage people, to be able to say—this has to be an “and,” not an “or.” And that’s what we’ve been working on, and that’s why we’re experimenting, with this work with Bionic, on really trying to put great ideas in and think about kind of putting them through almost a very intense 90-day with an entrepreneur-in-residence kind of, you know, “What about this, what about that?” kind of model. And our leaders are seeing that as, “This could be really interesting.”

Chui: You take a BU head and put them in the role? How do you—

Hopkins: No, we’re letting—we’re having our businesses actually propose ideas that they feel are very important but they haven’t been able to get where they want it to go, and now we’re putting it through, just like you were trying to pitch to your VC why it’s ready to go to the next step. So we’re trying to build that skillset, to really—and our leaders have been—of course, we brought them out to the Valley, and we had a really great session with them this summer that—you know, Marc Andreessen was, as you can imagine, his incredible, irreverent self, and Jeff Weiner hosted us, and we went—and Scott Cook was just like unbelievable for these guys. And it really helped them understand why it can’t just be execution we’re calling for. We have to add discovery, and we need both sets of skills. And that has taken root. But it’s taken multiple times up the mountain, so if you’re not willing to fall down, forget it. But, you know, you really have to put yourself in their shoes and understand how hard it is to run one of these core businesses, and helping them gently understand how these things are being disrupted.

Gross: Can I say something about the risk part?

Chui: Please.

Gross: So a big company has so many advantages. It has the brand, it has the money, it has customers, it has all these things. As Peter said last night, it’s kind of amazing that a small company even ever succeeds, despite all those odds. There are some things a big company can’t do, and I think because of investments that you would make, or the new things you would pursue have to meet some certain bar, like the risk that you said, like—I’ll give an example: There’s people launching businesses that might not even be legal. Like Uber and Airbnb might not even have been legal, but they just said, “I’m going to launch these things, and I’m going to see if the laws change, or I’m going to try and get the laws changed.” Those kind of businesses might not come out of your company, because your legal departments might not have allowed them, if they were analogous in your line of business.

Hopkins: Yes.

Gross: And yet, there are other businesses that could come out of your investing that you could help them immensely because of your brand and because of your credibility.

Hopkins: You could argue Bitcoin might be one of those.

Gross: Exactly, exactly. So that’s—I think that’s exactly a space that’s going to be very tough decision as to how you participate, because of legality and other issues, and yet, maybe you need to participate—that’s the core of your business, right, payments. So I think it does propose very tough challenges, because if there’s a legal department that can say no before the innovation even starts, sometimes that’s the right thing, sometimes that might not be the right thing.

Hopkins: But that’s why we’ve brought them in early, and we’ve found it’s been a really great partnership.

Chui: Great. Well, we’ve talked about […] you know, arguably an outside-in type innovation. You’ve talked about inside-in and inside-out as well. How do you think about the mix of that? David mentioned how much companies are spending on innovation together, but as you’re thinking about where should we invest, how do you think about that mix?

Wollaert: Well, I think whether it’s internal or external, or incremental or disruptive, you always need a very clear strategy—what is your growth strategy, what is your innovation strategy—in function of your mission, I guess. So for us, it’s very clear, delivering something new that creates new value in support of the mission, to refresh the world, to bring moments of optimism and happiness, and to make a difference. So value can be very different, you know, and it’s not just shareholder value. It can also be reputational value, it can be value for the planet and for the communities in which you operate, which hopefully over the longer term translates into, you know, ultimately shareholder value. So from that perspective—I don’t know if I answered your question directly, but—

Chui: Is it 10-20-70?

Wollaert: It’s 70-20-10. [LAUGHTER] You know, innovation behind a core, and then the disruptive or the outside-in—there are parallels, but there’s a 70-20-10 relationship. But what is interesting though, what we found is, you know, say if you’re well-established—or we’re still working on well-establishing ourselves; it’s a never-ending story—you know, around the world, we’re plugging ourselves in in the startup community, in 10 locations; we are also here in Silicon Valley. Around the world, we’re plugging ourselves in, in the world of inventions, right? What we found out is that it is very important—although this is external and outside-in—it’s very important that you organize yourselves internally to actually handle the amount of inquiries and proposals and stuff that comes to you, because when you plant your flag out there, especially when you are a well-known brand, you attract attention.

Hopkins: Exactly.

Wollaert: Which is great, but then you need to kind of—we learned that—it took us a year or two to really reorganize ourselves internally, especially the R&D space, you know, to be able to vet and assess the proposals that came to us and relatively rapidly respond yes or no, or, you know, maybe next step or whatever it is. That’s very important.

Chui: So deal flow hasn’t been a problem for you?

Wollaert: Sorry?

Chui: Deal flow hasn’t been a problem for you?

Wollaert: No, no, no, no. I think the ideas come from everywhere, you know? There’s no one meeting that I don’t end, I mean in large sessions, that I don’t end with the words “Be eternally curious.” You know, it’s in all of us. And whether that is an incremental thing, it can be a little process improvement, process step improvement that reduces waste in terms of time or whatever. It’s important, you know?

Chui: You mentioned 10 locations around the world. How did you choose those?

Wollaert: Well, it’s interesting. I looked at a map—and you can find these maps on the Internet, by the way. It’s a heat map of where the biggest activity of invention takes place, right? And the indicator we took is patent applications. It’s not a perfect map, but it’s patent applications. And then you see you’ve got to be in Tokyo and you’ve got to be in Silicon Valley, and then in the Northeast of the U.S. and in Israel and so many other locations. So these are the hotbeds of invention, so that’s where we are placing ourselves.

Similarly, there’s also a heat map that you can find on the Internet that is the heat map of the activity of startups. And they are not perfect matches, by the way, you know? So you would find Tokyo is not necessarily such a big hotbed for startups—it is for technology invention. But then you find that there are interesting cities in Latin America, like Buenos Aires, and even Santiago de Chile, that there is a huge activity there. And of course, again, Silicon Valley. So that’s how we select those locations, combined with certain business needs, internally driven as well, where we’d like to prioritize.

Chui: Great to hear the Internet is useful as well. [LAUGHTER]

We’re going to come to the audience soon for other question, but, Bill, if I could ask you, you know, we’ve talked about venturing, but incubators, accelerators—you know, there are these shared service models. Can you talk a little bit about that? You’ve been involved with for a long time there. How have you seen that evolving?

Gross: Well, I’ve seen an explosion of accelerators and incubators, and I think it’s totally a great thing. I think that if you’re going to—everybody talks about failing fast and—

Wollaert: Fast and cheap.

Gross: Yes, exactly. And you take risks and all that, but employees will always watch how people’s careers move if they take those risks and fail versus what the company says. So you have to actually walk the talk completely in that, because if you make all those platitudes but people see a person not promoted because they took a try and it didn’t work out, that completely, everybody sops that up instantly. But I think people do have to take those risks, and I think failure is very valuable, if you learn from it, if you take a smart at-bat. I mean think about in baseball, you know, and average person goes up to the plate and strikes out three out of four times and a superstar goes up and only strikes out two out of three times, you know, goes from .250 to .333 and he’s the highest-paid person in the league. But smart art-bats are extremely valuable. It’s valuable for startups too, and I think accelerators or incubators give more teams those smart at-bats to learn from, and that leads to more great companies. So I think it’s a really great thing for more, more chance for more entrepreneurs to take good at-bats.

Chui: What about corporate accelerators, versus…?

Gross: I think the same thing. I think—

Hopkins: We’ve had a terrific experience in Israel. We’ve gone two teams through, and really, I have some companies that we’re probably going to integrate into Citi, so we’re very pleased with the results.

Chui: Can you draw out any lessons about what’s been particularly successful there?

Hopkins: First of all, the Israelis just have an awesome attitude toward startups. We had a phenomenal woman running it, who was just very, very fantastic at managing the relationships and connecting them with the right people, and really just did an outstanding job. And I think if you’re going to get engaged, you have to be able—you said this earlier, you have to be able to follow up. You can’t just get everybody wound up and they say, “Oh, well that was interesting.”

So we’ve heard this several times today, people talking about end-to-end systems, and that’s fundamental. So you’ve really got, in all these accelerators and everybody, you know, getting excited, we all say, well, this is great, but before you get everybody wound up, who’s going to catch the great ideas? So you have to be able to think about it completely as a system.

Chui: Great.

Wollaert: Yeah, so also in Israel, we—it’s an experiment we started this year with a new model, kind of, again, reaching out to a hotbed of, you know, innovation, startups, and then what we also do find sometimes is that the technology in Israel too many times stays in Israel.

Hopkins: Yes, that’s true.

Wollaert: Right? And in Silicon Valley it stays in the U.S. So there’s an opportunity to kind of bridge—and we call the program Bridge, and it was launched basically by our IT leadership internally to say, well, focus is digital technologies, right, that may have an application to our operations across a supply chain, in digital marketing, doesn’t matter, and we bring then a selection of these startups into our corporate headquarters, expose them to the different business leaders—and I’m not crying success yet, but it is very promising, the process.

Chui: Great. Let’s go to the audience. Is there a question here? Peter, up here?

Vander Auwera: Thank you. Peter Vander Auwera from Innotribe SWIFT. To your point, end-to-end innovation, my experience is it’s very difficult to get ideas, prototypes, incubations that are in the sandbox and to get them back into the core. So what are your three challenges that you see in that domain, and what have you found to solve those challenges?

Hopkins: That’s a really, really great point, you know, because we use our investing to kind of get concepts and then labs to kind of start thinking about, “All right, how do we get to prototype?” But you’re actually right on. We call it the teenage years, which are always very challenging. And increasingly, the feedback and advice we’ve gotten from many places is we probably need a third place to keep them for probably a two-year period before we send them back into a business.

Chui: College.

Hopkins: Yeah, it’s true. And it’s—you know, it can be annoying to have teenagers. But I think it’s a really important point, and it’s one that we feel is a part of the model we have to build out.

Chui: Great. Next question?

Debow: Hi, Daniel Debow from Salesforce. I do emerging technologies there. I’m also a two-time startup entrepreneur. I sold my company to Salesforce, so that resonated with me. You quickly went over the point about equity, and I wanted to go back to it, because I actually think it’s an incredible important point, that the types of people who start these companies, yes, they’re motivated by changing the world, but they’re also motivated by money, by equity. And it’s very, very difficult to make $10, $20, $30, $40, $50 million dollars—which is what a CEO of a startup can do, or more—as an entrepreneur, as a corporate entrepreneur. The managerial economics, it’s okay for senior-level execs to that, it’s possible, but I don’t think anyone’s ever figured out how to create those incentive structures for individual entrepreneurs inside companies. So two-part question: Have you seen anyone even try to do that? Because I think it would be very interesting. And second, if they were going to try, do you have any ideas on how that could be structured?

Wollaert: Shall I take it? So it’s not that we have all the experience and the knowledge on it, because we are still relatively early in the process. When we build what we called the founders networks—so those are serial, I mean proven entrepreneurs that are attracted to our system, our brand, our company because of our reach, scale, whatever it is, and they come with certain ideas, and the goal for us was to nurture that talent and that idea to a point of startup and then let’s see if we later on can’t scale it into the business.

So that was how we designed, how we started off with that model. We made a mistake to hire those people, and we thought that if we hire them and we give them the freedom, operationally, physically, you know, different incentives, equity plan and so forth, then they can act like startups. The reality is, that’s not true. The moment they become, they’re on the payroll, you know, legal, HR, you name it, IT—it just, it doesn’t work, you know? Very interesting learning.

So we changed the model. We pivoted in fact the entire model of the founders, and they are now independent, arms length. We basically, we fund them, basically by giving them a loan, until the startup becomes material, in which case, you know, the loan becomes a small equity stake, and then from there they have the total freedom. So it’s very important, and so they can attract investors from outside, they can say what they want, they can go out and leverage the Coca-Cola system if they want, and I think that is very important. So I think you have to have that hands-off, if you really want the entrepreneurial spirit, and then the equity reward is just like in every other startup.

Gross: I think that’s a very enlightened way of doing it. I think that is fantastic.

Hopkins: Very cool.

Chui: Yes. Next question?

Nwokorie: Hi, I’m Ije Nwokorie, from Wolff Olins. My question is around, you’ve all given really eloquent examples of how you need to set things out from the mother ship, as it were. Have we given up on the mother ship? Can the mother ship itself become a creative, innovative enterprise? Talk to us a bit about that, in your examples.

Hopkins: I completely believe that can happen and people desperately want to do that, but part of our roles is helping making that feasible and giving them ways to get involved, and that’s kind of why we’re testing this new idea, to really allow concepts that, you know, perhaps a leader feels could be really, really breakthrough but they say, “I just don’t have the time, I don’t really know where to start.” Great, bring it in here, and let us kind of see if we can incubate that for a while and get it going. But you have to be, you can’t do this kind of work if you’re not optimistic about the mother ship, and—because part of what we’re all trying to work on is—you know, our company is 200 years old. Your company is…?

Wollaert: Oh, 128.

Hopkins: Yes. And there are things, there are inherent DNA that made these companies great, and you have to go back and grab that, and maybe it’s going to have a different way of being, but that’s why we love discovery so much, because the reason why these companies have existed for over a century is because there were some great capabilities there, and how do we kind of give them a new lease on life?

So it’s the part of the work that is the hardest, but it’s the most rewarding, when you see that light go on. And we’re just going through this right now, with—I’m just getting an update, I was out last week, and two of our regional CEOs got so excited about this process that’s—I’m going to be there in person to watch, you know? It’s great. And you have to be there, you have to have that. And we’re not giving up. I know you’re not.

Wollaert: Yeah, no, no, absolutely not. And it’s not an either/or, again. You know, I do believe innovation in the mother ship is definitely, it’s encouraged, right—be eternally curious—and possible, if it doesn’t challenge—whatever the innovation is, if it doesn’t challenge your business model or operating model then you can actually get the mother ship to embrace innovation.

I’ll give an example: Coca-Cola Life, for instance, which we launched now in the U.S., which is a brand new, a fourth type of Coke, right—and I know I’m kind of advertising here, but, you know, this is deep research in sweetness, right? It is risky, I can tell you. It is very risky, especially because it’s about the core brand, but we, you know, people embrace it and make this happen. Or the PlantBottle innovation, where we tried to change in all the plastic bottles, you know, made from renewable material instead of fossil fuel material. This is a big disruptive technology, but it doesn’t challenge our operating model or our business model, and that’s, then the mother ship can embrace innovation very easily.

Chui: But that also suggests when it does challenge those models—

Hopkins: You have to have the ring fence.

Wollaert: Yes, absolutely.

Gross: Well, I think big companies often, well, they’re of course trying to protect their existing revenue streams. That’s what makes it so hard, the very thing you said, if it threatens the existing—I think some companies can even get past that though, in rare cases, but they have to have an amazing leader. Because companies often get, you know—this is a comment that people sent out last night after the talk, that there’s a chief idea-killer, there’s a VP of no, there’s a VP of status quo, a VP of stay-the-course, a director of analysis paralysis, you know, all these other roles that get formed in a company. But one story I would give to show the contrary is in 2006, the iPod had grown to a $5 billion a year business—the iPod made $50 billion over its life, and when they came out with the iPhone in 2007, I think the people in the iPod division begged Steve Jobs to not put an MP3 player in the iPhone because it was going to kill their business. And he said, “Screw that, I’m shipping that anyway,” willing to cannibalize his $5 billion dollar-a-year business that was paying the bills.

Now, of course, in hindsight, we say, well, look at the iPhone, it was such a big hit. But it wasn’t obvious that that was going to be. So I think sometimes a company can even be willing to cannibalize its own revenues and it takes a very long-term thinking leader to do that, but it can happen, and I think it should happen.

Chui: Great. Let’s go to the lightening round, here we go. Quick answers—quick questions first. Present company excluded, who is the person doing the most interesting work around innovation today? Bill?

Gross: Larry Page.

Hopkins: I like what Beth Comstock’s doing.

Chui: Guy?

Wollaert: I tend to agree, but of course Google as well, yes.

Chui: Where do you find the most innovative people? Guy?

Wollaert: Everywhere.

Hopkins: In places you least expect.

Gross: Art colleges.

Chui: Are innovative people formed by nature or nurture?

Gross: Both.

Hopkins: I think it’s a DNA thing, but you can teach it.

Wollaert: Both.

Chui: What large company other than your own is doing the most interesting work in innovation?

Wollaert: Sorry, Google.

Hopkins: Yeah, it’s hard. You’ve gotta like that Google X.

Gross: Tesla.

Chui: What large company should feel most threatened by innovation?

Gross: I think big educational institutions and big banks.

Hopkins: I think big banks have to be threatened.

Wollaert: I think energy and healthcare sector.

Chui: If you were running a corporate venture portfolio, and you might be, in what company would you most want to invest?

Wollaert: You know, if I would know, I wouldn’t probably tell you. [LAUGHTER]

Chui: Acceptable answer.

Hopkins: I was dying to invest in Waze, but I just couldn’t make it make sense.

Gross: Uber.

Chui: What’s your favorite way to source innovative ideas?

Gross: I like to look at problems that I have personally.

Hopkins: Absolutely go out to the crowd.

Wollaert: Internet search. It’s amazing what you can find.

Chui: Love that Internet. Where in the world should people be looking—where in the world, location-wise, should people be looking for innovative ideas or companies?

Wollaert: Well, certainly here in Silicon Valley and the Northeast. Israel, as I mentioned. But also India, and even in Africa, as we’ve seen earlier today.

Hopkins: I think there’s a lot of interesting things going on in places like Madison, Wisconsin. We’ve certainly been hearing about Detroit, but there’s some real—these smaller communities doing some very interesting things.

Gross: Places that have jumped the landline and go right to smartphone.

Chui: What is the biggest barrier to scaling innovation at a big company?

Gross: Independence.

Hopkins: Culture.

Wollaert: Not-invented-here syndrome.

Chui: And what’s your most effective way to influence a big company to adopt an innovative idea?

Wollaert: Just do it.

Hopkins: Make them part of it.

Gross: Show them the money.

Chui: Thank you. Please thank our panel.

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