Abstract
Andrew Binns, co-founder of Change Logic, a Boston-based strategic advisory firm, Charles O’Reilly, Frank E. Buck Professor of Management at Stanford Graduate School of Business (and a co-founder of Change Logic), and Michael Tushman, Paul R. Lawrence MBA Class of 1942 Professor Emeritus at the Harvard Business School (and also a co-founder of Change Logic) have written a guidebook - a work of synthesis resulting from their own experience as consultants, educators, and researchers - for corporate explorers. These corporate explorers, say Binns, O’Reilly, and Tushman, are managers who are part entrepreneurs, those employing the innovation disciplines to initiate emerging ideas, and part change leaders, those capable of creating support for further organizational investment.
From their combined consulting experiences, the authors found large companies that are currently beating the odds of industry disruption and successfully creating new ventures in established organization in mature and emerging businesses. They identify four key factors - possessing strategic ambition, employing innovation disciplines, having an ambidextrous organization, and exploring leadership - that explain their “corporate explorer” concept.
First, corporate explorers set an explicit strategic ambition justifying the pursuit of two potentially competing goals - efficiency and profit - in exploration into new market spaces. The authors have found examples of corporations that now view disruption as an opportunity and not something that their executives should fear from losing market share to new, entrepreneurial entrants. To the contrary, these executives are willing to experiment with disruptive (i.e. to their core organizational purpose) business models, as they are cognizant that if they are not in front of this impending industry disruption, they will become its victim.
Second, they applied three distinct innovation disciplines: (1) ideation to identify valuable customer problems and ways to solve them, (2) incubation to learn which ideas can grow into a profitable new business, and (3) scaling by assembling the customers, capabilities, and capacity to convert a validated idea into a fully operational business. The first discipline, ideation, involves generating innovative ideas to build disruptive business models that can match the company’s strategic ambition. The second discipline involves incubation, whereby managers convert a great idea into a validated business proposition, i.e. business model - or even canceling or pivoting the emerging business project. The third discipline, scaling, takes the validated business model and converts it into a sustainable, revenue generating business organization.
Third, companies have learned to adopt an ambidextrous organization approach separating the exploratory ventures from the day-to-day operational business. The ambidextrous business model allows a company to operate with a portfolio of businesses, each in different stages of organizational maturity - some experimental in nature, while others mature, profit generating businesses. The key to successful management is to separate the experimental ventures from the company’s core business, thus allowing both to execute their own strategies appropriate to their individual maturity level.
Fourth, a new class of manager emerged with an interest in applying these innovation disciplines to fulfill the company’s strategic ambition. These corporate explorers are not transplanted entrepreneurs; they bring a different skill set and motivation and are adept at managing change, which helps them escape the negative effects of being a part of a large corporation. Together with the senior managers that authorize their work, they demonstrate a new capability of leadership that corporations need to build new, disruptive ventures.
Examples of corporate explorers are found throughout the book. For example, Kristian Kurtisz, CEO of Hungary for UNIQA Insurance, possessed an explorer’s insight, believed he could initiate change (and disruption), and found a way to embed the values of the risk-sharing community into a modern insurance business. The result: Cherisk, a new user-friendly, low-cost line of insurance products digitally available through a monthly subscription fee. Cherisk assumes its customers are acting in good faith in reporting claims, and uses advanced digital technology to spot fraudulent claims retrospectively. With active engagement of his company’s senior leadership team (although Kurtisz initiated the idea outside the senior leadership team) and other key stakeholders, Cherisk was launched in 2018, and within 2 years had acquired 100,000 Hungarian clients.
Another example involves Carol Kovac, manager of IBM Life Sciences, the most successful emerging business opportunities program (among 20) launched at IBM. The idea/innovation behind Life Sciences was to create solutions relevant to the fast-emerging life science market triggered by the decoding of the human genome in the 1990s. Life Sciences, in stark contrast to IBM’s traditional focus on engaging with major players in developed markets, actively engaged with hundreds of life science start-ups. This non-traditional approach resulted in IBM Life Sciences exceeding $3 billion in revenues within 5 years of launch - well beyond the initial goal of reaching $1 billion in 3 years. Kovac reached this goal by breaking IBM “rules” and maintaining commitment to her vision in the face of executive hostility.
Corporate Explorer is in many ways a complement to O’Reilly and Tushman’s 2016 book Lead and Disrupt: How to Solve the Innovator’s Dilemma, where the authors describe how IBM and other corporations deal successfully and unsuccessfully to ideate, incubate, and scale new internal ventures. In Corporate Explorer, Binns, O’Reilly and Tushman are focusing on what specific factors - strategic ambition, innovation disciplines, ambidextrous organization, and exploring leadership - these new leaders need to embrace to be a successful corporate explorer. This book is replete with useful examples illustrating how these factors were instantiated by successful corporate explorers. The result is further development of O’Reilly and Tushman’s thesis in their excellent Lead and Disrupt.
While a strong proponent of using cases to illustrate the practicality (and usefulness) of conceptual models and arguments, I could not help but question whether this book could have been more concise, i.e. shorter, and still successfully transmitted its message to the reader. Specifically, the second half of the book is where the number of chapters could have been reduced from six to four (with two in each section). Nevertheless, Corporate Explorer provides a useful narrative for both the 21st century manager and the graduate business student.
