Disruption Games: How to Thrive on Serial Failure
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Common wisdom says that success breeds success, and indeed this is how most VCs pick startups, businesses select talent, and singles search for dates. In contrast, the evidence from science to startups shows that only repeated failure breeds success.
In Disruption Games, MIT’s Trond Undheim reveals how companies (and individua
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Disruption Games - Trond Undheim
Advance praise for Disruption Games:
Excited to hear MIT legend, star speaker and moderator Trond Undheim's new book, Disruption Games is available for pre-order. I cannot think of a better guide to the disruptive world that founders and executives inhabit.
— James Mawson, CEO and Founder,
Global Corporate Venturing
Through MIT, Trond has worked with some of the best startups in the world. Read this book for insights on what it took for them to succeed. Part business, part personal development, Disruption Games provides a blueprint of practical ways to jumpstart successful innovation through examining failure.
— Brent Hoberman, Cofounder,
Founders Forum, Lastminute.com, Made.com
Even though I was an experienced founder, I have to say the partnerships Trond facilitated when he ran the startup program at MIT ILP were instrumental to our launch and success.
— Natan Linder, Cofounder of Formlabs (3D printing) and Tulip Interfaces (advanced manufacturing app)
Trond is extremely knowledgeable about the use of technology to reach any customer base.
— David Molchany, Executive Partner,
Gartner Executive Programs
Trond is thorough, analytically strong and has the ability to push boundaries for himself and others.
— Constantijn Van Oranje-Nassau,
Special Envoy, Startup Delta
Trond is absolutely trustworthy, full of good ideas and has got the energy and the optimism to walk on trying to get things done.
— Jochen Friedrich, Technical Relations Executive at IBM
Praise for Leadership from Below,
also by Trond Undheim:
A must-read for any young manager looking to apply the lessons of eBay, Google and Facebook to the real world.
— Julian Herbstein, Founder and CEO,
Magic Fitness
It is a book containing real strategies for real people, based on a philosophy of leadership and a way of thinking that at first seems so obvious, yet at the same time remains so elusive to most of us.
— Espen Moe, PhD, Author of Governance, Growth and Global Leadership (2007); Professor of Political Science at the Department of Sociology and Political Science at NTNU
"Leadership from Below presents an important set of skills and concepts that anyone can use to maximize his or her potential influence and impact in an organization."
— Barbara Larson, MBA, Executive Professor,
Management and Organizational Development at the D'Amore-McKim School of Business, Northeastern University
Trond Arne Undheim
DISRUPTION
GAMES
How to Thrive
on Serial Failure
atmosphere press
Copyright © 2020 Trond Arne Undheim
Published by Atmosphere Press
Cover design by Ronaldo Alves
No part of this book may be reproduced
except in brief quotations and in reviews
without permission from the publisher.
Disruption Games
2020, Trond Arne Undheim
10 9 8 7 6 5 4 3 2 1
atmospherepress.com
.
CONTENTS
Introduction 3
Chapter 1:
How not to partner with startups 9
Silence is bad for corporate-startup collaboration 10
Legal rigidity hampers innovation 13
How to achieve great corporate-startup interaction 14
The tech innovator’s mindset 16
Chapter 2:
The social biosphere of corporate innovation models 23
The ascendency of the main modes of innovation 26
Chief Innovation Officers: A recipe for being unsuccessful 29
Distilling the innovation model 31
Chapter 3:
Innovation labs: The oldest form of training 35
The strange case of Fidelity Labs 38
Are Fidelity’s Fintech innovation efforts enough? 43
Integrated lab or skunkworks? 46
Chapter 4:
Innovation scouts: Unfocused training 49
Startup outposts 53
University partnerships 54
Moving beyond innovation tourism 55
Benefiting from failure 57
Chapter 5:
Corporate venturing: Training without results 59
Investing in VCs as a limited partner 60
Multicorporate investment funds 62
The challenge of establishing a corporate venture arm 67
Oracle’s venture and startup experience 72
Nokia’s innovation escapades 75
Chapter 6:
Open innovation: Outsourcing training 81
Is innovation always interesting? 81
Corporate innovation program successes 88
Hackathons—the newest innovation fad 92
Chapter 7:
Accelerators: Training hard the night before a big race 97
Five steps to follow to succeed with an accelerator 99
Best-in-class accelerators 101
Corporate acceleration—Founders Factory in the UK 102
Data acceleration—Athenahealth 102
Tech acceleration—Jaguar Land Rover’s incubator 103
Consumer platform acceleration—Samsung Next 104
Brand acceleration—The Brandery 105
Acceleration by recognition—Coca-Cola Founders Program 107
Do innovation metrics matter? 110
Truly practicing design thinking
115
Chapter 8:
Corporate-startup partnering: Training with an Olympian 119
Startup partnership in the automotive industry 120
The current obsession with startups 123
A Magna Carta for corporate-startup collaboration 127
Fostering revenue-generation internal spinoffs 130
Chapter 9:
MIT’s innovation secrets: Training with the best 139
The evolution of MIT’s innovation ecosystem 142
The characteristics of an MIT startup 151
The importance of failure in science 152
Chapter 10:
Serial entrepreneurs: The superheroes of innovation 157
Bose Corporation and MIT 158
Akamai and MIT 160
MIT’s top faculty straddle science and serial entrepreneurship 161
Jeff Karp’s vulnerable excellence 162
Professor Bob Langer’s 40 startups 164
The MIT Media Lab, Sandy Pentland, and the digital future 169
What’s so special about the MIT Media Lab? 172
The energy entrepreneurship of Yet-Ming Chiang 175
Stonebraker—the tech world’s equivalent of Tom Brady 177
The character of serial founder faculty 180
Startup focus and extreme hobbies 181
Chapter 11:
Startup failures and epic rescue operations:
Training without training wheels 185
A legendary startup pivot from Mars to marketing 186
TVision Insights—measuring eyes on screen 189
A123—from IPO to bankruptcy to reemergence 190
Beepi’s crash and burn in the used car market 191
The high-growth whirlwind 193
Chapter 12:
My startup experience: Training for yourself 197
The science of focus 202
The biggest startup failures of all time 203
Extinguishing the Torch:
How do I play the disruption games at the highest level? 207
Introduction
We all agree that your theory is crazy, but is it crazy enough?
— Niels Bohr (1885–1962), when presented with Heisenberg’s and Pauli’s nonlinear field theory of elementary particles¹
Common wisdom says that success breeds success; indeed, this is how most VCs pick startups, businesses select talent, and singles search for dates. In contrast, the evidence shows that only repeated failure breeds success.
Consider the Olympic Games. It is an epitome of the high-stakes environment. Participants enter through a rigorous set of competitions that provide a field made solely of the best of the best. Often, the athletes compete only a single time, but they train and hone themselves mentally and physically for years behind the scenes. This sort of muscular building, whether it is psychological or physiological, is virtually impossible to replicate outside the context of this competition.
When an athlete competes on the Olympic level, even last place is a mark of honor. And, more importantly, those who do not place as medalists more frequently join a continuing community of the ultimate athletes as coaches or trainers or, sometimes, as participants once again. These sort of high-level failures accomplish far more than any successes at a lower level may ever achieve.
The additional complexity with innovation is that it is a team sport, which makes it a social game as well as a mental or physical game, like chess or the Olympics. To describe this very activity, we bring in the notion of a social biosphere, which contrasts sharply with today’s prevailing under-standing of innovation either as (a) simply another business function (which needs a leader, a team, a budget, a structure, a templated process, and set of procedures), or (b) a mechanistic toolkit, so that you as a leader can pick freely, from a hammer or a saw whenever you want to, and expect them to perform the same every time, or even (c) a biological ecosystem that performs like insects do in nature (e.g., they swarm and they have some sort of natural
dependency on each other).
Rather, I will argue, innovation is a unique combination of a social and physical setup—it is governed by social rules and it often depends on place-based interactions, even in the digital age. Innovation is far from a business function, and treating it as such is disastrous. Innovation is definitely not a mechanistic, engineering toolkit, and expecting it to be is what leads most traditional leaders to failure in innovation (not the fruitful type of reflexive failure we describe in this book, but simply failure). Innovation is also not fruitfully understood with a traditional biological metaphor, because it is a system created by and for humans specifically.
What kind of success or failure is your business setting itself up for? Over the next few years, failure will become a necessary growth strategy for any individual, firm, or collective. Are you prepared?
Disruption Games introduces corporate executives to groundbreaking strategies and frameworks to switch on growth through examining failure on the highest level and risking vulnerability to achieve high-level results. The book also helps entrepreneurs understand corporate thinking, structure, and priorities so both entrepreneurs and executives can partner and thrive. This book also offers my own insights on innovation through my experience at MIT, one of the world’s most notable hubs of innovation.
Through this exploration, readers will come to understand the relationship between failure and success in a dramatically different way than current business literature interprets these terms, typically as study successful firms,
fail fast,
and, at best, conduct cheap learning experiments.
In contrast, Disruption Games fulfills the need for actionable insight on what is truly driving change and provides conceivable road maps on how to become a changemaker on the highest level. The deep insight is this: for failure to be instructive, it must have a deep cost in time and energy. You should not seek failure, but you should seek risk.
Under disruptive conditions, I’ve seen companies that were near monopolies for decades fall from grace in an instant or domain experts become outdated by a single research paper they had not yet read. Even startups can become outright dinosaurs by the perfectly timed product of the next startup. We are all trying to disrupt each other, let’s not forget. Whether you work for a Fortune 500 or are still in school, if you don’t participate and experiment with this world soon, you will be left behind. Many laissez-faire 6-year-olds already are—but some determined 60-year-olds are not. Experience will not protect you. Neither will inexperience.
The benefits of disruption come from practiced and cultivated innovation. In this book, the metaphor of training
is deployed to describe how you might think of that process.
Like any game, disruption follows certain rules. Except that those rules are not disclosed to everyone. You have to discover the rules. The rules might vary depending on who you are: each domain has its rules. They have emerged quickly. They are unstable. By the time you know a rule, it might get broken. You can excel at the disruption games by getting a feel for the game itself. You can only do that by going native, by going deep, where failure hurts and could cost a lot. Innovation requires a rudimentary theory of practice, not a rigorous one. On the other hand, you can put yourself in high-stakes settings with high probability of learning where your chances of innovating are far higher than average. Just be prepared for the fact that exposure may not be gradual, since full immersion has real consequences.
Chapter 1 is about how not to partner with startups. It describes the tech innovator’s mindset and talks about how complex it is to foster innovation in teams and organizations, if that’s what you are in charge of. Read it to figure out what a startup partnership entails, from the startup’s side and from the corporate side.
Chapter 2 outlines the social biosphere of corporate innovation, which basically means it describes a new way to see innovation portfolios as living things that require attention and care. Innovation is also highly dependent on creating a desirable social setting where it can occur on a regular basis, it is not just about technology.
Chapter 3 looks at innovation labs, the oldest form of innovation structure and asks whether it is viable in today’s business environment. Labs are costly to maintain. They also require critical mass.
Chapter 4 discusses innovation scouts, individuals whose charge it is to find innovation and connect it to the corporation in various ways. One of the most exciting jobs in today’s workplace, it is also a near-impossible job to execute to perfection.
Chapter 5 outlines the various ways of doing corporate venturing, from VC investment to creating a corporate investment unit. The recommendations I make are based on observing and taking part in hundreds of venturing processes across multiple industries, such as life science, finance, information technology, manufacturing, and retail.
Chapter 6 opines on open innovation, which is a way of outsourcing innovation to external parties. Under which conditions is this a good idea? How is the field evolving? What might the next wave of open innovation look like?
Chapter 7 is about accelerators, which help startups get to market. These can be implemented in many ways. Should you want to build an accelerator or asses the accelerator you have, I provide a few steps to think through and offer some industry examples. In brief, the ones with a true asset to offer are more effective.
Chapter 8 looks at corporate–startup partnering, perhaps the most efficient of all innovation tools.
Why so efficient? Because partnering does not require a big institutional infrastructure. On the other hand, it is also the most difficult task to succeed with. Why? Because it asks a lot of those who take part in it. Is your organization startup-ready? Is your startup corporation-ready?
Chapter 9 reveals some of MIT’s innovation secrets. Regardless of where you are in the world, you have likely heard of MIT. Many universities are so inspired that they name themselves Institutes of Technology as if the name itself would rub off on them. If you don’t have it in you to read this chapter, the high-level insight therein is to make sure to reward overlapping, competing initiatives in order to foster innovation. The point is not so much how MIT’s ecosystem evolved, but to demonstrate how a culture of technological innovation is embedded in conditions specific to an institution. If you want to see something similar happen in your own context, you need to build on local ingredients and be mindful of the need for critical mass for things to start happening at scale.
Chapter 10 is about serial entrepreneurs, whom we should all be so lucky to interact with on a daily basis. There is so much to learn from people whose lives pivot around innovation. The goal is to try to empathize with them, try to understand why they got there, why what they are doing seems to them the most compelling thing they could do with their lives—every time. The particular focus here is on serial founders with a strong university connection.
Chapter 11 is about why startups fail. It also describes some extraordinary rescue operations and pivots. When things start to fail, the energy can often be channeled to more valuable pursuits and the venture or the people involved can recover. Even if that does not work, failure offers a lot in terms of learning. To maximize such learning, you need to embrace and fully grasp the situation you were in. If you move on too fast, the learning is lost.
Chapter 12 is about my startup experiences. Have they been worth it? What have I learned? Sometimes, failure is just failure, but even then, there is a silver lining in reflecting around it for personal growth. This chapter examines what can be gained from such examples.
In the coda, briefly I reflect on how to play the disruption games. Participating in disruption games entails allowing yourself to learn without guard rails. Be mindful that your actions do not exist in a vacuum. Thrive on serial failure—but make sure you spread the risk; learn from your surroundings, too.
Chapter 1
How not to partner with startups
Don’t let it end like this. Tell them I said something.
— last words of Pancho Villa (1877–1923), according to legend
This book is written, in large part, to settle a misunderstanding. Tech startups are so alluring these days that everybody thinks they should be a founder, that they need to obsess about startups, and live and breathe technology. Far from it; in truth, many of us would be better off simply adapting the tech innovator’s mindset and building an organizational repertoire that mimics, courts, and most importantly, deeply understands founders and everything that they do, including their frequent failures.
The good news is, this is very doable. As the evidence collected through interacting with thousands of founders, academics, policy makers, and executives will show, the tech entrepreneur’s mindset includes seven key behaviors that anyone can master: