Last week I talked to Steve Blank in Boston before our public Master Class. We had a chat about why established organizations have such a hard time to get beyond innovation theater. Here’s a quick visual of that conversation.
Steve and I talked about McKinsey’s Three Horizon model of innovation and how leadership might explain why most organizations can’t systematically create growth innovation. Companies managed by Horizon 1 CEOs focus primarily on optimizing the existing and proven business model and value propositions.
Companies led by Horizon 3 CEOs typically reinvent or expand their business models and value propositions systematically while they’re still successful. Horizon 3 CEOs create more and faster growth because they typically create an innovation portfolio. They are willing to accept that some innovations will fail. In fact, they understand that failure is mandatory to discover home runs.
Amazon’s Jeff Bezos is one of my frequently cited examples. In 2015 and 2016 Bezos writes about Amazon’s innovation culture in his annual letter to shareholders. In the 2015 letter, Bezos points out that he is proud that Amazon is the best place in the world to fail.
He also shares how that failure has been crucial to learning how Amazon’s business model innovation can help the company grow (it’s why Amazon has been the fastest company to grow from $0-100 billion in revenue). In his 2016 letter, Bezos explains how Amazon tries to maintain a “Day 1 Attitude”. Meaning: while Amazon gets bigger and world class at execution, the company still maintains a parallel innovation culture. The same that Amazon had when it started on day 1.