Failure Forums: Complexity Theory and the Role of Failure in Driving New Business Models

by Matt Hunt

Failure Forums: Complexity Theory and the Role of Failure in Driving New Business ModelsDriving corporate new business initiatives can be an incredibly challenging job.  There are the normal complexities of launching a new business, similar to entrepreneurship, but within a large organization there are many additional factors that can lead to failure.

Finding success in these endeavors requires navigating a series of complex forces like garnering internal resources, defining decision making criteria, and avoiding the landmines of corporate politics just to name a few.

Where some intrapreneurs see these forces as random obstacles others are trying to study them in a larger picture.  Some innovation experts see these forces as data points to be measured and evaluated as factors in determining innovation success or failure.  Brandon Barnett has spent 11 of his last 17 years at Intel driving new business opportunities and studying the science behind Intel’s innovation work.  He has come to understand that a failed initiative has more to do with internal and external forces than the merits of the opportunity itself.  The goal is that by studying these forces organizations can learn to innovate better.  This is Brandon’s story.

1. You have mentioned before that you have led a number of new business ventures where some have succeeded and others have failed.  How have both shaped your thinking about growing new businesses within a large company?

The process has made me think differently about the foundational differences between the successes and failures.  I realized that the challenges are much more about the “initiative within the organizational system” than the initiative itself.  Looking back, my successes and failures were not determined by the market but by the internal corporate forces.  I have observed that this is generally the case for most corporate innovation.  This fact is discussed openly in heuristics like “you must have CEO sponsorship” but it is just one manifestation of a deeper underlying system at play.

These corporate forces driving the success or failure of an initiative are what got me thinking about the complexity in driving innovation.  I had studied complexity theory in my PhD work years ago and as I expanded complexity to larger scales I found similar patterns for ventures within corporations, companies within markets, and markets within ecosystems.  In my current work I focus on understanding how underlying technological, social, and economic forces shape an innovation program’s success or failure in creating new business opportunities.

2. It seems as though markets are shifting faster and faster in high tech.  How have you seen that impact large company innovation programs?

I think about this in a couple ways.  For a specific company, what is fast or slow is the speed at which a market drifts away from them, or conversely how nimbly a company keeps up with the changes of the market.

With the digitization of so many things – books, music, identities, reputation, accountability – the number of ways that people can access and combine technologies has exploded.  So ‘speed’ is as much a matter of increasing the combinatorial possibilities as it is the shifts in the markets.

The latter is an evolutionary process and the former is an exploratory process.  So for modern companies to be innovative they must continue to advance their products (sustaining innovation), adapt to foundational changes in their markets (disruption, or changing bases of competition), and they must engage in the search for new value.  The impact to companies is the need for multiple innovation programs – each with different tactics and metrics – progressed simultaneously.

3. You have spoken about how you see Complexity Theory as a vehicle to better understand new business development.  Can you explain more?

At a conceptual level embracing complexity relative to business ecosystems shifts the perspective and focuses not on the market as the fundamental unity of analysis but on the forces that underlie it.  In other words, I think of a market as a system of exchange that emerges from the interaction of social, cultural, technological, economic forces.  If I can understand those forces I can gain insight into how a market evolves or a new market forms.

More precisely, I’m interested in the metrics grounded in complexity that can inform business strategy.  For example, we are working with Professor Rahul Basole at Georgia Tech to develop a theory of business ecosystem complexity based on coopetition and convergence measures.  Any individual company can be assessed relative to the overall network.  The theory is like the U.S.  Military adapting from the cold war to combating modern insurgency.  The complexity of an organization must match the complexity of the problem it is trying to solve.  We are trying to advance a rigorous framework that comprehends this complexity

4. This is not language that most companies use when they describe their efforts to drive new business opportunities.  Where do you recommend they start if they want to better understand this approach?

At Intel we launched a new business initiative called Digital Health.  The group produced some great products that allowed technology to gather unprecedented data in the patient’s home and deliver it to physicians.  After piloting the program we discovered that the physicians didn’t want all that data, especially if they were not being paid for their time to look at it.  We took the time to understand why they preferred to act on a single number and with that to better understand why the initiative struggled.

We might consider that near sighted of the doctor but I’ve seen business leaderships fall into the same myopic trap by making decisions singularly focused on net present value (NPV).  NPV is one measure of a business opportunity but it completely ignores all the complexity involved in a search problem – the search for value.  So I first recommend an exploration beyond tradition business tools and frameworks.

Through this journey we have built our innovation processes to focus on the search for new value in a framework we call the Business Opportunity Canvas which we modeled after Alex Osterwalder’s Business Model Canvas.  Other strong influences to the framework are from ecologist and TED Fellow Eric Berlow (collaborator on the WeTheData project) and Stuart Kauffman (author of At Home in the Universe).  Finally I would suggest that others examine the work of a former Intel colleague Thomas Thurston (now at Growth Sciences).  Thomas has shown how a data-based model can be distilled from theory and can be very influential in decision making (see the Innovator’s Manifesto).

5. What advice would you give corporate leaders who are trying to drive innovation within their organizations?

I would summarize my advice into three buckets:

  • Be doggedly tenacious about being specific in the type of innovation being pursued. Determine if the work is sustaining, new market, or disruptive innovation and organize resources, people, and processes around the different objectives of each.
  • Focus on the search for new value and measure how effective each experiment was in accomplishing this search. This changes the common heuristic from ‘fail fast’ to ‘experiment efficiently’ and ensures that the work is hypothesis driven, using diverse agents, and testing to maximize learning.
  • Embrace complexity. Innovation teams that first seek to reduce complexity will inevitably miss opportunities from that process.

Building new businesses within an organization has always involved portions of both science and art.  The work that Brandon and his colleagues are undertaking is an attempt to broaden the science portion by examining all of the complexities involved in the process.  With a better understanding how these underlying technological, social, and economic forces shape our businesses we can learn how to improve our chances for success in launching new business opportunities.

As a side note, Brandon and his colleagues are also taking what they have learned and are extending it beyond the confines of corporate innovation.  Last summer Intel sponsored the largest ever U.S.  hackathon (National Day of Civic Hacking) to search for new value opportunities within the public domain.  They’ve also created an accelerator to bring strategically related startups together in order to catalyze the opportunities found.  This work is the culmination of all the tools and the framework used together.  Collectively they are learning from all of the complexities in order to build something new.

image credit: edukart.com

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Five Ways Organizations Lose When They Cover Up Innovation FailuresMatt Hunt is the CEO and founder of strategy and innovation consulting firm Stanford & Griggs, LLC. With over 20 years of business and technology experience he has a demonstrated excellence in business strategy, innovation, and leadership development with large companies, small companies and non-profit organizations. You can follow Matt on his blog MattHunt.co and Twitter @huntm

7 comments

  1. Excellent Article and so much true that a good idea can only see the end if it overcomes both internal and external forces of organisational politics. This applies not only to big corporations but also to medium sized organisational where often self-interest for own survival take prominence at the expense of organisational interest.

    • Thanks Sushil! Sorry for my late response but I wanted to thank you for your feedback. In my work with companies of various sizes I have found the mid-size organizations most responsive to addressing this challenge. Small companies deal with risk and failure on a daily basis so it isn’t as big an issue. On the other end of the spectrum, many executives at large companies don’t take action because they feel that they cannot really change things. Thanks again! -Matt

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