Billion dollar start-ups, born from surplus
The twentieth edition of Sogeti VINT's Symposium was themed “Design to Disrupt”. A range of fascinating speakers eloquently addressed their take on how to organize disruptive innovation. In my previous post, I addressed how sheer randomness in the form of serendipity was quite often a source of innovation. Now, I would like to address another under-addressed driver of innovation: under-utilised surplus of resources.
One of the stories that triggered my attention the most at the VINT Symposium was presented by Even Heggernes, Airbnb’s country manager for the UK and Ireland. He pointed out that Airbnb kicked off when its founders - 3 flatmates in San Francisco - saw rental prices rising. Having no bedroom for spare, they decided to rent out their living room as a place to sleep on an airbed to make ends meet. They set up a website, and were surprised by the popularity of their airbeds, and allowed other people to do the same on their platform. Using Ycombinator as rocket fuel for their new venture, they passed the $10 billion valuation mark recently.
The pressing necessity for paying the bills, a rather apparent and obvious problem, drove them to experiment with an available surplus of living room space with an airbed and a crappy website.
Airbnb is not alone however. Car service Uber was born when its founders experienced a frustratingly long wait to get home from the LeWeb conference. “Seeing so many, almost empty cars, either parked or manned with the driver alone, they could not get why they were waiting for a cab in the rain”, Niek van leeuwen, Uber’s country manager for the Netherlands explained at the VINT Symposium.
Both problems, high real estate prices (Airbnb), and low availability of affordable transportation (Uber), are countered with the digital activation of a resource surplus. For Airbnb, it is the empty rooms of individual owners a city is littered with, while many people are desperately seeking for a hotel room. For Uber, it is the tons of underused cars, blocking city traffic.
Both resource surpluses are inherently apparent in cities all over the world. Considering the trend towards urbanization, the activation of more and different kinds of resource surplus will be an obvious consequence.
Managing accidental innovation
More often than not, innovations are the result of sheer randomness. In other words, they were discovered while their inventors were looking for something else, a phenomenon often described by the term serendipity. Some of these accidental inventions have had profound effects on people’s lives. For instance: the microwave, the pacemaker and even Viagra were all discovered by chance.
Despite accidental innovation’s potential, corporate environments are often not the best breeding ground for serendipity. This is because wandering of the beaten path in search for “God knows what” is generally not considered an efficient contribution to the organization’s objectives. How can corporates try to reap the benefits of serendipity?
In a Harvard Business Review Blog post titled “Make serendipity work for you”, Mark de Rond, Adrian Moorhouse, and Matt Rogan describe how serendipity relates to innovation on a rather conceptual level. They stress the importance of principles such as: a certain degree of dissent, knowing your history, and the relevance of socializing, diversity and tinkering. Shaping your organization for the adoption of such concepts is a different matter.
When we move towards the disruptive part of the innovation spectrum, into the realms of new product and service innovation, or even business model innovation, matters get complex for leveraging the slightest serendipitous opportunities. These types of innovations are not simply captured in the existing structures of an organization, and are very likely to conflict with its objectives on operational levels. Consider the call-center employee who is close to the customer and gets daily inspiration for new products and services. He or she will never be able to develop anything in the operational setting of his department.
Leveraging this type of opportunity requires the set-up of a new organization, or embeddedness in a special purpose enitity (SPE) specifically devoted to incubate such opportunities. Such SPE’s are places where ideas come to fruition, and where the above mentioned principles are the norm. They may have different organizational structures and incentives as compared to the parent company, but that does not mean that they are isolated. Ideas and lessons learned have to continuously flow both ways. Concrete examples of such SPE’s are corporate incubators, that are often open to ideas from third parties as well, which in turn relates to open innovation. However, most of the organizations possessing such incubators are R&D intensive and familiar with innovation in general.
Exceptions aside, it is obvious that many corporations do not organize for positive randomness in the form of serendipity. They organize themselves against negative randomness only, by trying to map and mitigate risk. This sounds like a missed opportunity, because many corporates need all the help they can get in guaranteeing their long term survival. Randomness could be a powerful ally.