Small Bets On The Future: Building a Resilient Innovation Portfolio

I recently finished reading "Venture Mindset" by Ilya Strebulaev and Alex Dang and wanted to share a few concepts from their book. They make a compelling case on how to change innovation practices, based on years of research and learning from the VC space. 

Below is one idea (more in the next posts) that I wanted to start with:

Many small bets (don't bet the farm)

 Theory: Executive leaders can be drawn to focus majority of their time on "big bets" - large multi-year corporate programs with high level of certainty. While these are undeniably important, they sometimes overshadow more forward-looking innovation projects.

Ilya advocates for adopting a venture mindset that balances these big bets with smaller, long-term investments in early-stage ideas. The approach is to support multiple early stage ideas at once. Just like a VC investor, corporate leaders could define the milestones that serve as check-points for further resources as the projects mature and demonstrate customer acceptance and feasibility.

Application: The theory is nice, but how does it apply in a large corporate innovation setting? At the end of the day, the success rates are low, timelines are long, and a stable business may be better off by focusing resources on maintaining and slowly growing the core.

Here is a thought experiment to challenge the sceptics: imagine you have 100% certainty that among your colleague ideas and early stage projects there are 3 breakthrough ones, each of them doubling your business in 5 years. Would you want to discover and fund them? Would be concerned with getting there faster? Would it change your thinking about prioritization or projects that fail?

Because you don't know which of the ideas are the winning ones, you'd have to make many small bets and carefully look at all data that's coming in. How did the customers respond? What did the employees say? How would it impact the business at scale? Filtering out ideas becomes an exercise in narrowing in on most successful ones, each step taking you closer to identify winning propositions.

Considerations and Questions:

- Differentiating projects with a breakthrough potential (e.g., 20%+ incremental revenue) from the ones driving incremental improvements for the core business.

- Portfolio size for multiple growth vectors without spreading teams too thin. How many projects are expected to deliver 90% of your growth? Are you overly reliant (betting the farm) on the success of a single program?

- Tension between narrowing the funnel through prioritization and giving these projects a real chance to succeed, which can take multiple attempts. How are you setting up the infrastructure for rapid experimentation? 

#innovation, #venturemindset, #productdesign, #portfoliostrategy