Lessons from Corporate Innovators

Peter Steinberg — President, Innovative Thought

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Episode 9: Peter Steinberg — President, Innovative Thought

Peter Steinberg is rapidly becoming a key partner of ours at the Carnegie Mellon Corporate Startup Lab.

He is a well know Rugby coach as well as a leader in thinking through executive education. I’m more focused on the later, but the synergy between these is interesting.

The first part of the interview gives you a lens into how Pete approaches exec ed and innovation. Then, the second half of this interview focuses on our collaboration at the Corporate Startup Lab.

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Sean Ammirati: 00:03 Welcome to Agile Giants, Lessons from Corporate Innovators. I’m Sean Ammirati, your host, co-founder and director of the Carnegie Mellon Corporate Startup Lab, and partner at the early-stage venture capital fund, Birchmere Ventures. Each week, I’m going to talk to guests who are experts at creating startups inside large corporations. I believe fundamentally, a startup within a company is the same as one inside the proverbial garage. A group of entrepreneurs trying to make the world a better place, using new ideas and inventions. However, I also believe some of the techniques and processes are just inherently different. This podcast is going to explore those similarities and differences.

Sean Ammirati: 00:56 On this week’s episode of Agile Giants, I’m joined by Pete Steinberg. Pete’s a really interesting guy. If you look him up on social media, you’ll see that most of the people following him are actually rugby fanatics. Because Pete’s been a coach at Penn State, as well as the Women’s National team, going to the Olympics, and some of the national events. And actually has a podcast where he talks about rugby around the world.

Sean Ammirati: 01:18 But more to the point of this episode, is that Pete also has spent a bunch of time doing executive education. He has some interesting parallels between his life as an athletic coach, and his life as an executive coach and executive trainer. We’ve collaborated on a number of different initiatives at Carnegie Mellon, and I think he has a really interesting perspective into how to teach and help organizations think about innovation.

Sean Ammirati: 01:40 Also, going back to Episode 2, where we had Ryan from Smucker’s on, Pete actually was a consultant who worked with the Smucker’s team on a lot of the things that Ryan was talking about. If you haven’t gone back and listened to Ryan’s episode, and I know we have a number of new subscribers now, I’d encourage you to go back and listen to Episode 2. It’s a really interesting lens into how a CPG companies look at innovation and building out new products and services that are transformative.

Sean Ammirati: 02:13 All right. Welcome to another episode of Agile Giants. Today I’m joined by Pete Steinberg. He’s the guy I’ve gotten to know over the last few months at the Carnegie Mellon Tepper Executive Education Program. We’ll talk a little bit about all the different ways we’re collaborating in a minute, here. But Pete, maybe as a way to get started, could you just give people a quick overview of your background?

Peter Steinberg: 02:31 Sure. Despite my accent, I’m a proud American. Born and brought up in the U.K. However, Dad’s from New York City, and I’ve been in the states for 25 years. What originally brought me to the states was a PhD in geochemistry. Spent a couple of years doing that. I spent a few years in Florida doing a research project. After a couple of years, decided it wasn’t what I wanted to do, but ended up working in the business school in executive education. Did that for six years, learnt a ton. I was at Penn State, was great. Penn State had faculty from around the world, people like Ram Charan out of Harvard. Just really smart people, sort of my informal business education. And then, for the last … I keep saying 15 years, but it’s probably getting close to 20 years now.

Sean Ammirati: 03:13 [Laughing] Years keep moving as it turns out.

Peter Steinberg: 03:14 I know. I’m like, I’ve said 15 years for five years. So, for about the last 20 years, I’ve run my own innovation consulting practice.

Sean Ammirati: 03:22 So talk just a little bit about what you do with clients in that innovation consulting practice.

Peter Steinberg: 03:27 Sure. I’ll start with sort of how I got into innovation. I would probably label myself a little bit more as sort of a learning and organizational development guy. That’s kind of my background. I do a lot of work on team development and leadership. And about, a little bit more than a decade ago, one of my clients came to me. I’d worked with him on his team, and been promoted to the Director of Innovation, first time I’d ever had that role.

Peter Steinberg: 03:54 He asked me to come out and talk with him, so we sat down and chatted. He talked about how he had to develop an innovation department. What he said was, he said, “I’m talking to all these consulting firms, and all these agencies, and they’re talking about technology, and how we should revamp our R & D. And they’re talking about process, and how we need a stage gate, and we need a portfolio.” And he said, “But I think this is a people business. But I can’t see anyone doing people.” He said, “Can you do some research for me?”

Peter Steinberg: 04:22 So, that’s how I started. We did some research. I partnered with Sam Hunter, out of Penn State, who’s done a lot of work on creativity and innovation. He’s an IO Psych professor … and started to develop the people side of innovation. So, we do work with helping organizations identify, develop their innovation leaders, as well as helping them embed the people and culture side into their innovation approach.

Sean Ammirati: 04:49 Yeah, it’s interesting. Right? Because one of the things … You know I come at this more from doing traditional startups. And now, looking at how corporate startups work. But that’s as first an entrepreneur and now an investor. It’s funny, if you ask an investor, you ask an entrepreneur, what’s the most important thing about a startup, they’ll tell you people right away.

Peter Steinberg: 05:07 Immediately, right? Immediately.

Sean Ammirati: 05:08 It’s almost like a silly question. Like, what else would it be other than people? Right? And yet, I feel like that statement should translate into the corporate, but doesn’t always translate into the corporate environment.

Peter Steinberg: 05:17 Yeah. And I think it’s because it’s the less tangible thing. When a company says, “We want to grow organically, so we’re going to really invest in innovation.” The people that are in charge of that want to show something tangible. So, I can point to, “Hey, we implemented a stage gate process.” Check the box. “Hey, we have pulled a resource out of R & D, that are gonna be focused on innovation.” Check the box.

Peter Steinberg: 05:42 But I have this phrase, and we talked about it before, Sean. You know, it takes 50 yeses to get an idea out into the marketplace, and it only takes one no to prevent it from happening. And then, the other way I would put that is, you can look across business, and you can see places where there are no processes. And there are no R & D resources. But if you have a real innovator in that company, innovation happens.

Peter Steinberg: 06:09 And that’s, to me, sort of the analogy that helps me understand it really is … If you get the right people, innovation can happen. Resources and process makes it happen more easily. But you really need to make sure the people are in the right place.

Sean Ammirati: 06:25 Yeah, 100%. 100%. Okay. So maybe, just to make this tangible for people, and then we’ll pivot on beyond this … But just talk a little bit, we had Ryan on the podcast, who talked about what he was doing with Smucker’s. Maybe talk about how you worked with the Smucker’s organization as an example.

Peter Steinberg: 06:39 Yeah. And I’ll take it back a little bit further. The work that I really started doing that was probably the most fundamental, was back with what was called Big Heart Pet. Which was a pet business out in San Francisco, that Smuckers bought. Ryan worked with Big Heart Pet and moved with them. This was a company that was bought by KKR, so it was owned by private equity. And they said, “We actually really want to drive growth.” So, they really wanted to put an investment in innovation.

Peter Steinberg: 07:09 So, we worked with them to develop a unique recruiting process, where we went out and hunted for the best innovators in KPMG. We developed assessments, where we could assess based on what the research said were some of the criteria that made people good innovation leaders, along with the attributes that Big Heart Pet had as part of their HR process. And we helped them build an innovation function, an innovation team. We also helped them interact with different functions, whether it was R & D, or marketing. We helped put in place some of those processes that worked.

Peter Steinberg: 07:47 And also, we also do a whole bunch of things where we sort of help in the ideation process. Some big bets came good out of that. There’s Milk Bone Brushing Chews, that’s been a big win for them. And then, a new brand called Milo’s Kitchen, that came out of that innovation group. So we kind of helped them with the talent identification, we helped them with the talent development, and then we also helped them understand how to create the cross-functional teams, and help them work more effectively together.

Peter Steinberg: 08:17 Then Big Heart Pet was bought by Smucker’s. Smucker’s, a little bit earlier than I think some of the other CPG companies realized, that organic growth was gonna be big. The pet business is one of the few parts of the middle of the grocery store that’s still growing. So, they bought that pet business, and then I worked as part of a project team to help develop their growth function.

Peter Steinberg: 08:39 That’s why they had portfolio management. They had consumer insights, and they had innovation. Sam Hunter was also involved in bringing some of the best practice that was there. And we helped them stand up their growth organization, and we still work with Smucker’s, in helping their innovation leaders and their cross-functional partners, develop the skills that they need to be a really effective innovative company.

Sean Ammirati: 09:01 That’s awesome. It gives a sense of what you mean, when you say the people behind this process, as well. You’re just not looking at how to do it, although that certainly comes, that’s sort of an outgrowth of it. But getting the right people in the room, or as Jim Collins calls it “getting the right people on the bus.” Right? It naturally flows out of that. So, let’s talk a little bit about how you think about the actual coaching process with these executives. Then we’ll move into what we’re doing at Carnegie Mellon.

Peter Steinberg: 09:25 Yeah, it’s interesting. I’ll just talk a little bit about the innovator’s role in a large company.

Sean Ammirati: 09:32 Perfect.

Peter Steinberg: 09:33 I think one of the challenges is that innovation is a relatively new practice. And therefore, in many companies, it’s not a career. It’s a rotation. And whether it’s a rotation in R & D, or whether it’s a rotation in marketing … it’s something that people do for a few years, and then they move on. Well, in large companies, an innovation project can be somewhere between three and five years. So, if you think about it, if I come in and rotate into that position for three years, I may not even see a complete innovation process. And even if I do, once I’ve learned everything, I get rotated out.

Peter Steinberg: 10:10 You see it a lot. And I think that there’s fundamentally, if companies want to be really effective at innovation, they need to identify the right people to lead. And then they need to give them a pathway that keeps them involved in that innovation process. One of the interesting things is that Nielsen, for consumer packaged goods … and that’s where we’ve done a lot of our work, but we’re not solely there, does a annual sort of innovator’s award, innovation award. So, the big bets, they’ve gone well. And if you look at it, and if you look over the last five years of the innovation award, what happens to all the people that led those innovations? What do you think happens to them?

Sean Ammirati: 10:49 Get promoted.

Peter Steinberg: 10:50 They get promoted. Then they’re out of innovation, and what do you not see the following year? Or following two years? You don’t see that company launching big products. Even though, people would argue, the people in the process is so critical. Actually, if you take that innovation leader out, innovation doesn’t happen. I think, to me, it’s about how do we foster the skills, and how do we foster the career that allows people to … once they get good at it, to continue to do it.

Sean Ammirati: 11:20 Where do they get promoted to, in your experience?

Peter Steinberg: 11:23 It depends on which function they are. Right? It depends if they’re technical, or if they’re business side. If they’re on the business side … The problem is, the head of innovation, that’s not a pathway to being the CEO or general manager. Because it’s seen as a rotation. It’s often a department that sits away from the structure. So, a lot of it depends on how you’re structured.

Peter Steinberg: 11:46 Some companies have their innovation group, on purpose, completely outside of their business, because they don’t want them to be driven by this quarter, or this year’s business demands. But then, how do you take somebody who’s really successful over there, and tell them that they’ve got a career? They don’t. They’re there for a while, and if they really want to become a CEO, they have to come back into the business.

Sean Ammirati: 12:05 One thing I’ve been thinking about, and this is not something I’m ready to definitively say, but I’ve been thinking about, and your comment right here is reinforcing this a little bit … is, there’s a different DNA in companies that were started as digital companies. It’s not that they’re completely different. They’re not. But there are certain things that are different about the culture, and sort of the attitudes and aptitudes of those companies. And when I think about a company like Amazon or Apple, the people who launched those transformative, innovative projects — you know — AWS or the iPhone. Really, think about what a pivot both those were, for both those companies. Those executives are told to go do more of that kind of stuff.

Peter Steinberg: 12:55 Right.

Sean Ammirati: 12:55 Or, in the case of Andy at AWS, run … what if it were a stand-alone company. I mean, AWS would be another one of the ten largest companies.

Peter Steinberg: 13:05 [crosstalk].

Sean Ammirati: 13:07 You’re basically CEO of a massive company. And yet, I think there’s a bunch of unfair advantages that a company like a CPG company has, that should make them want to behave the same way there. But it’s like it’s just not part of their culture, or something, that-

Peter Steinberg: 13:24 Right. You’ve hit the nail on the head. I think the cultural transformation at Smucker’s, I mean, I think that they … I want to say it’s three or four years since they bought Big Heart, and it’s three or four years that they’ve been working on becoming more innovative. And I think that it’s really been remarkable that it’s taken them, like, they’ve done a really good job. They’ve got a couple of big bets that are out in the marketplace. Ryan Thomas talked about them in one of the previous podcasts. He talks about Jif Power Ups as being one of the big successes. And I think that they’ve made a tremendous transformation. But I would also say they’re probably about a third of the way there.

Sean Ammirati: 14:03 Sure.

Peter Steinberg: 14:03 Right? And it’s taken them four years. So, having the commitment of the senior executives to really drive that takes a lot, especially with the pressures that you have making your quarterly reports to the Street, and those sorts of things. For me, I think one of the big cultural differences is, if I was the head of a large company, I would expect the heads of my business units to be innovators. And I think that’s often not the case. It’s not an expectation, that if you’re the head of a business, you’re a general manager, you should be leading the innovation. But that’s not how those guys got there.

Peter Steinberg: 14:42 They got there by managing the bottom line really well. They got there by, maybe they’re really good at sales. They got there by having a skill, but it wasn’t innovation. And therefore, these large business units are not led by natural innovators. They are led by managers, So, those managers tend to be risk-averse. They tend not to be open to ideas. And probably the biggest challenge that they have is that they don’t like ambiguity. I think ambiguity, in my experience, meaning the willingness to deal with ambiguity, is probably one of the biggest cultural challenges that large companies have.

Sean Ammirati: 15:13 Yeah. Awesome. We could talk about this a lot more, but I do want to get to what we’re doing at Carnegie Mellon together, as well. So you’ve come in, and just, I think, been a great part of helping … seeing you think about how we do executive education differently. How we collaborate with companies different. So maybe talk a little bit about that. Then we can riff back and forth on how that relates to CSL and all that kind of stuff.

Peter Steinberg: 15:32 Yeah. So, I came on board last year with Carnegie Mellon. Maria Taylor, who was the head of Executive Education, she was actually sort of my mentor back when I first got into the business 20 years ago. We still collaborate and work together significantly. So she brought me on, because she felt like Carnegie Mellon has such an amazing brand in the area of entrepreneurship and innovation, but we’ve not done a great job of leveraging that, in terms of working with our corporate partners.

Peter Steinberg: 16:04 And it takes a different, to me, it takes a different approach in the area of innovation, than it does in some of the more traditional areas like leadership or strategy. Because often, we have to change perspectives. So, strategy and leadership, you’re often building on what you did in your MBA, or it’s very common. Like, you’ve read books. But actually, we’re asking people to think very differently. Not just about themselves, but about their business, and about their people. And fundamentally, about how they’re going to run their company.

Peter Steinberg: 16:33 That transformation requires a lot more hands-on work, a lot more reflection, and as a rugby coach, what I would say … a lot more practice. They actually need to practice the things that you want them to do. So, it’s not standing up in front of a classroom as a professor, and talking to them for six hours. It’s talking to them for 20 minutes, and then applying it. Talking to them for 30 minutes, and then applying it. So, it’s a slightly different model of how the executive classroom works.

Sean Ammirati: 17:00 Yeah. It actually … it relates to how we think about teaching entrepreneurship, in general, at the Swartz Center at Carnegie Mellon. Swartz Center is our cross-campus center, that is how we’re going to do entrepreneurship at Carnegie Mellon, based within the business school’s building. Myself and Dave Mawhinney, who runs that center, and Bob Blattberg, who’s faculty with us there … A couple years ago, we took a hard look at, “Well, how do you teach entrepreneurship?” Because it’s different than how you teach accounting or finance, or statistics.

Peter Steinberg: 17:27 Right.

Sean Ammirati: 17:28 And part of it is exactly what you’re saying. You can’t just teach it; you’ve got to actually go do it. The other part of it is, it’s not as quick to figure out if you’re right or wrong.

Peter Steinberg: 17:40 Right. That’s the ambiguity, right? That’s what I talk about, is dealing with ambiguity, which is really hard for executives in large corporations.

Sean Ammirati: 17:48 And it’s hard for students, too. My students in … not executive, my traditional students, many of them have never gotten a B in their life. So we say come up with a business idea, and tell me the 10 things that need to be true about that business idea. And they assume that they must be right 10 out of 10 times. ’Cause they’ve never gotten less than a 90% on anything.

Peter Steinberg: 18:08 Right.

Sean Ammirati: 18:08 And then we sent them out to go talk to customers, and they come back completely embarrassed. Like, “Man, I was wrong on four of these ten core hypotheses.” It’s like, “Great. You did a really good job.” That’s not failure.

Peter Steinberg: 18:18 Right. It’s learning. It’s learning, right?

Sean Ammirati: 18:20 That’s right.

Peter Steinberg: 18:21 It’s like the growth mindset.

Sean Ammirati: 18:21 That’s right. So we say, when we’re going to teach entrepreneurship at Carnegie Mellon, what we’re gonna do is three things. We’re going to expose people to processes and frameworks. That we say, “entrepreneurs who tend to be successful, tend to use these approaches more than those approaches.” They tend to talk to customers earlier in the process. They tend to take this iterative approach, whatever. We then give them a chance to go immediately go put that into practice. You got to go apply it immediately. And then we expose them to the stories of entrepreneurs who’ve been successful.

Sean Ammirati: 18:54 Because case studies, in a different sense of that word … not sort of HBR case study but exposure to case studies of success. And I think, as it relates to Exec Ed, and teaching innovation, it’s not that dissimilar. We’ve got to actually have them apply the things we’re teaching, get a chance to talk about them, feel the discomfort of that ambiguity, and then actually use that as the catalyst to change behavior.

Peter Steinberg: 19:18 Yeah, it’s interesting. I had a really interesting conversation with Joe Boggio, who’s at the Innovation Center for Capgemini. We were having this conversation, he said, “Well, if you’re the CEO of Kroger, what do you do?” Right? So, we were having this conversation, and Joe’s … who’s like, I mean, he’s a really interesting guy, and has some … he’s a bit of a visionary, I think. And Joe’s like, before he can transform his company, he has to transform himself.

Sean Ammirati: 19:55 Yes.

Peter Steinberg: 19:55 He’s like, before you can even think about how I’m gonna do it differently, he has to completely change the way he views his business, the way he views his customers, the way he thinks about himself. Because what put him in that role to be the CEO of Kroger, is not what’s gonna make him successful in the future. And that’s what you’re talking about. It’s like this idea of, “No, we need you to fail some.” You have to fail a little bit, or maybe a lot. But you’re not gonna be Amazon by low-risk, incremental, and never failing.

Sean Ammirati: 20:27 That’s right. And I’m really big on delineating between two types of failure. There’s a failure where the idea you have is super ambitious, contrarian in certain ways, and turns out to be incorrect. And what I’ve just learned over and over again is, you do enough of those things, and you’re a reasonably smart person, enough of those contrarian bets will actually be contrarian but correct, to pay off all the ones that don’t work.

Peter Steinberg: 20:51 Right. Right, right. That’s right.

Sean Ammirati: 20:52 You got to be comfortable with that. There’s a different type of failure which is, you do the wrong kind of work.

Peter Steinberg: 20:57 Right.

Sean Ammirati: 20:57 And that … people often, when they hear me, say, “Oh, you need to be tolerant of failure.” Their mind goes to that sort of intellectually lazy bet. That’s not what we’re talking about here. We’re talking about taking big swings. Which, by definition, will include striking out on a regular basis.

Peter Steinberg: 21:14 Okay. So, is doing the wrong work saying “no” to a risk? Or is that a different kind of failure?

Sean Ammirati: 21:20 That would a type of that type of failure. But also, sitting in a conference room and brainstorming for six months, before you talk to a customer, is doing the wrong kind of work.

Peter Steinberg: 21:31 Right. Got it. Yeah, yeah, yeah. Which, by the way, is how almost all strategy is done in large organizations.

Sean Ammirati: 21:37 And it’s how startups 15 years ago, did a lot of their work, too. I mean, traditional startups before the lean startup methodology, a lot of them would try to come up with the perfect system, and then take the kind of field of dreams approach. Like, build it, and just trust people will come.

Peter Steinberg: 21:52 Right.

Sean Ammirati: 21:53 Over the last ten years, we’ve learned this more lean from the lean manufacturing approach, to taking this more iterative, minimizing waste approach. But that’s a relatively new thing, in how startups are built.

Peter Steinberg: 22:05 So, this is interesting because we’ll talk about some of the work that we’ve done. I had a client come to me, and they said, “We really struggle with what to do with startups.” Very large company. And they said, “We don’t know, should we do it ourselves? Should we buy one? Then if we buy one, how should we manage it?” So they came to me and they were like, “What are we supposed to do?” And I said, ‘Well, I’m not sure. But I think I know some guys that know.” And that’s when I brought them to the corporate startup lab. So, how would you go about working with a company like that, that has that kind of challenge?

Sean Ammirati: 22:37 So, I believe that there’s real power in doing a little bit of all of those things. Like on the podcast last week, we had Priscilla Beal from Bayer. She runs a program called G4A, which started as “Grants for Apps”. Because when Bayer was starting this, every company needed an app.

Peter Steinberg: 22:56 [crosstalk].

Sean Ammirati: 22:56 Right. What was your app strategy? And today, it’s really “Grants for Startups”. The way it works is, they work with the business unit to say, “Here are the challenges that we have.” And actually, in an open-innovation framework, issue those challenges to startups, and have a predefined, like, “We’ll pay you … “ You know, different amounts of money, but order of magnitude … $50k, $100k of revenue, to come in and help us solve that. And they have it pre-negotiated, that if this works, this is how we get some warrants in your business, or equity. The structure, I think, is nuanced, depending on the type of company. There’s a bunch of things that factor in.

Peter Steinberg: 23:30 Right.

Sean Ammirati: 23:30 And I think that makes a lot of sense, as one of the things you should do. But I also think they have a program inside Bayer called Thrive, that is how they actually build some of these capabilities internal, with internal teams working on that. And I think also, it’s an underappreciated part of the “yes, and” strategy is you need to properly partner on the customer side, plus buying some of them, you need to do some internally. You also need to partner with people who are good at this kind of stuff.

Peter Steinberg: 24:02 Right.

Sean Ammirati: 24:03 And that may sound self-serving at Carnegie Mellon, but I was thinking, general academia’s an under-levered asset in corporate America.

Peter Steinberg: 24:10 Right. And I think we’re back to the people, right?

Sean Ammirati: 24:13 Correct.

Peter Steinberg: 24:13 So, I think the challenge is that you can have a startup with the right strategy, that’s gonna target the right customers, that’s gonna help you. But if you don’t have the right people with the right capabilities, it’s not gonna work. And I see that all the time. Here’s another question for you. These large companies have all of these assets. I know that when Ryan was on, he talked about the power of the brand. He said, “What an asset. You have Jeff. How do you leverage that?”

Peter Steinberg: 24:43 I think one of the biggest challenges that companies have is, “How do I leverage my supply chain? How do I leverage my operations? And how do I leverage my brands, but with a startup mentality?” What do you think about … ’cause you have your three different “ands”. What if you have something that’s outside, but actually, you really want to be able to leverage your supply chain, ’cause that’s gonna be really useful.

Sean Ammirati: 25:04 So then this becomes a question of how do you integrate that in. Do you integrate it in as a customer with an option to buy? Do you integrate that in by bringing that talent internally, as an internal startup? There’s financial engineering that makes sense in each of those different things. What I would say though, is make sure that work is anchored by big, broad … what we would call in the venture capital community, investment theses behind what you’re doing. I see a lot of executives who, they miss the anchoring on the … what are they driving at.

Sean Ammirati: 25:39 Bosch talked about this on the podcast they were on. Bosch is a large industrial company. They make a lot of money through the automotive space, a lot of money through appliances, power tools, construction. They had a big thesis inside Bosch, around how the Internet of Things was gonna change industrial companies. And they realized that that is a multi, multi-billion dollar opportunity for Bosch. So they spun up this thing called The Connectory, that helped them work with startups, get smarter on IoT. Because they knew that that thesis is so important for an industrial company like Bosch, that’s making the shift from atoms to bits, basically.

Peter Steinberg: 26:17 Right. Right.

Sean Ammirati: 26:17 Then it’s like, “Oh man if we don’t get smart on IoT, we’ve got a problem.” Going back to this Kroger question, which has been sort of rattling in my head since you asked it, I think that the thing that you need to get the Kroger CEO comfortable with, is what are the things that are going to transform retail in the next few years. And have some hypotheses around that. That you’re gonna do a number of build by partner invest against that. So that you can actually have your informed opinion, and then when Amazon comes into your space, buying Whole Foods, it’s like, “Okay, that’s scary. The market’s gonna react. They’re gonna do what they’re gonna do. But we have our advantages in this space, as well. And we are not intimidated that Amazon understands commerce better than we do.”

Peter Steinberg: 27:00 Right. Right. But that only happens if you’ve really thought about it. And you’ve developed like … I love hypothesis thinking. The idea is that you get the hypothesis, and you test it, and you’ll continually test it, right? So it doesn’t sit. Which I think is that the other idea of ambiguity that executives like, they like to have a strategy. They like to have a three to five-year strategy. And they like to write it down and put it up on their shelf, and say, “Well, I have my strategy.” When actually, in the dynamic world that we’re in, is you’ve got to have your hypotheses, and then you’re continually testing it and evolving as the marketplace evolves.

Sean Ammirati: 27:33 100%. And you cannot decide that that was a bad decision when the first one doesn’t work out.

Peter Steinberg: 27:42 Right. Right. Right. That’s it. But that’s the power of the hypothesis and the testing. So when it doesn’t work out, it’s learning that you bring back to your hypothesis. And you say, “Right. So it failed. Let me go back to the hypothesis. Can the hypothesis still be true, even with that failure?”

Sean Ammirati: 27:58 That’s right.

Peter Steinberg: 27:58 And you say, “Yeah, it can still be true.” In fact, you might end up with that failure having greater belief in your hypothesis. And I think that’s the power of the corporate growth mindset. Which only works if you have a hypothesis. If you’re launching that startup or that new product, and the only thing you care about is the bottom line, then that failure is a loss of income, loss of projection, all of those sorts of things. But if it’s founded on a hypothesis, that failure can really come back and help you build.

Sean Ammirati: 28:27 Yeah. And I think, in terms of the bottom line part of it, you’ve got to be comfortable with taking a portfolio approach.

Peter Steinberg: 28:33 Yeah, yeah, yeah. Absolutely.

Sean Ammirati: 28:34 You just cannot evaluate these on a deal-by-deal basis. And certainly, the other challenge, to your point, is you can’t evaluate it on quarterly results. So, most of these companies need to end up carving some money out, that they sort of explicitly say, “This needs to be measured differently.”

Peter Steinberg: 28:52 Yeah, I think … Yeah. I think that’s right. And I think that the portfolio approach, I mean, you have your horizons, right? It’s sort of like, you can look long-term, you can look short-term. And look, most of these companies need to grow incrementally every year. So, it’s not just about the big bets. But having that portfolio approach …

Peter Steinberg: 29:09 But then, you also have the technical ability to actually implement it. So you end up with sort of … The best one I’ve seen is sort of a nine-box, which is sort of the three different levels of technical implementation from your techie guys, and then the three different horizons on time, that you have. And use that to be at a balance out, balance out your portfolio.

Sean Ammirati: 29:30 That’s right. You can think about it as also, is this an existing product to a brand new product. Existing customer base to brand new customer base.

Peter Steinberg: 29:36 Exactly. Yeah, yeah. Right, right.

Sean Ammirati: 29:37 Right? And what I would say is, I actually think how to deliver an incrementally better existing product to an existing customer, is actually a really well-understood thing in almost every company.

Peter Steinberg: 29:50 That’s right.

Sean Ammirati: 29:51 The people who are good at that are the people who get promoted. The challenge is, the things that you learn on how to do that well, are not how you do these corporate startups well.

Peter Steinberg: 30:00 And it’s actually not just the corporate startups. That’s not how you do big innovation in large companies. However, in the amount of people time, and sometimes, even the amount of resource investment, can be the same for a small bet and a big bet. The difference is the risk. It’s not actually that the big bet is more expensive, it’s just more risky.

Sean Ammirati: 30:22 Right. Yes, that’s right.

Peter Steinberg: 30:23 I mean, sometimes it’s more expensive, but not always.

Sean Ammirati: 30:28 What you want to do, is you want to make those investments iteratively, so that you’re not spreading the capital, kind of peanut butter across that-

Peter Steinberg: 30:37 So, do you see the idea when you were talking about “yes, and”, and the different models a company had. Do you see that also as like a portfolio approach?

Sean Ammirati: 30:45 Yes.

Peter Steinberg: 30:46 So it’s sort like I’m stretching. I’m going to do something internally. I’m going to joint venture with someone. I’m going to start or buy a startup. That’s another way of distributing risk, in case one of them doesn’t work.

Sean Ammirati: 30:59 100%. Right. And I think Bayer [last week’s episode] is a very good model. They’ve got all those different activities that they’re doing with different brands. They’ve got G4A and Thrive. And I think what you want is, you want to make sure that the learnings are being shared across those groups. You don’t want the group that’s doing the partner with startups stuff, to not know what’s going on, on the internal innovation ideas, or kind of internal startups, we would call them. But, yeah.

Peter Steinberg: 31:24 So, one of the interesting things that we’ve talked about, I think might be an interesting subject for the podcast, is this idea of social networks, and how important social networks are in the world of innovation. And it’s funny, because when you read the research about social networks … like you see social, and you think Twitter, and you think Instagram. But we’re actually talking about people.

Sean Ammirati: 31:46 Right, we are talking about real networks.

Peter Steinberg: 31:46 Yeah, real networks of people. So the idea is there’s the interactions between those people is really important about the functions. The corporate startups are kind of on the leading edge of some of the research here. So talk a little bit, if you could share about what you’re doing.

Sean Ammirati: 31:59 This is part of the advantage of being at Carnegie Mellon. We have a number of professors at CMU who are the leading academics in this area of social network analysis. People like Dr. David Krackhardt. What’s interesting is, we’ve now intersected that with this transformational innovation, or what we call corporate startup. And I think, end up with a really interesting challenge for how to do these things. Which is, what are the right groups of people to get involved in these activities? Because what I can tell you is, in a traditional startup, and three guys and gals at Y Combinator, right? What you want is you want some combination of people who sell stuff, people who make stuff, and people who design stuff. Or a hacker, hustler and designer.

Peter Steinberg: 32:41 Right.

Sean Ammirati: 32:41 And that’s a really ideal founding team. That is not the ideal founding team for a corporate startup. So what we’re trying to ask ourself is, as these groups come together, as these innovation groups come together, what are the right groupings of people, and then, what’s the right way for them to interact with each other. So, we’re just beginning this exploration on, okay, inside of a large healthcare company, which is the first group that we’re working with, this healthcare company makes a bunch of regulated medical devices. They’ve got hundreds of different innovation ideas happening within their activity. The question quickly becomes, “Okay. What’s the right way to form a group of people, have them work on it?” And that the right and ideal group of people may evolve through the life cycle of that project, as well.

Peter Steinberg: 33:25 Yeah.

Sean Ammirati: 33:26 What you’re doing for that first quick experiment may be very, very different than what you want to do when you’ve got some element of product market fit, and you’re looking to scale it up through your supply chain, or whatever the case may be. But there’s a lot more people involved in these projects. And it’s slightly different disciplines than what you see in a traditional startup.

Peter Steinberg: 33:44 Yeah. That’s really interesting. That’s sort of an extra layer of research above what some of the stuff that I’ve done as a practitioner. So, one of the things that I think we’ve identified in the work that we’ve done, is that you need a small core team. And it might even be just one person. But probably two or three people, that are involved throughout the innovation process.

Peter Steinberg: 34:05 So they can, like the early on customer's voice. I call them like, they’re the customer voice, as you implement, and you operationalize and commercialize that business, to make sure the customer's voice isn’t lost. But through those different steps, you bring people on board to be part of your innovation team. And one of the things that we’ve found to be really successful is, early on, getting people from functions that are going to be involved down the line … so you talk about sort of the manufacturing people, and the plant people, or the salespeople. If you can get them involved early on in the ideation, or in the opportunity assessment, and all that sort of stuff, then that makes it successful. But what the Corporate Startup Lab is gonna do, is they’re gonna prove that’s true. As opposed to, “That’s just my experience.” Right? Hopefully, that’s the goal.

Sean Ammirati: 34:53 That’s the goal. Or prove it’s not true, but I think it is. But the interesting thing about this is, there’s also a lot more of those people who are involved part-time. Which-

Peter Steinberg: 35:01 No, no no. It’s all on the side of their desk, almost always.

Sean Ammirati: 35:03 Right. Which is very different than a traditional startup.

Peter Steinberg: 35:05 Right.

Sean Ammirati: 35:05 Right? If you said, “Oh, I’ve got two full-time founders. And then I’ve got ten very, very part-time people involved … “ Any VC would say “there’s a focus problem”. But inside a company, it’s a little different. So yeah, there’s a lot that we’re just beginning to do research on. As I said, we sort of kicked off our first research study there, and have more going on. We could talk a lot about this.

Peter Steinberg: 35:34 Well, what people don’t realize, is that we talked about an hour before we got on the podcast.

Sean Ammirati: 35:38 That’s right. This could go very, very long. And we will need to have you back on, Pete. And I think as we have more success stories out of our collaboration, we should bring them into the conversation, as well. But I wanted to end the way I like to always end, which is I love getting people’s, sort of hearing people’s career trajectory, and sort of what guides it. Because, in addition to corporate executives and entrepreneurs who listen to this, I also have a lot of students listening to this.

Sean Ammirati: 36:01 And students from all over campus. You’ve had a pretty interesting career, from rugby to executive ed to coach. What advice would you give to somebody coming right out of school? Maybe not with a geology degree, but what advice would you give a student coming out of school right now, with maybe a technical degree, who may want to do the kinds of things that you’ve done in your career?

Peter Steinberg: 36:20 What I would say is, I think, and I believe in the marketplace, people are looking for different thinkers. And it’s interesting. I had a client that did an analysis on the innovation team. And their best innovation leader was the only one without an MBA.

Peter Steinberg: 36:35 So I think I would encourage people not to think about their career as being a straight line. Probably the biggest thing I ever did, that has helped my career, is to coach rugby. I have learned so much about teams, and leadership, and how to get people to work together, and I bring that every day into my consultant practice. I hear a lot of people talk about focus, and they can’t do things. I think, find things that are outside of your career, that you think you can … that help you grow, and help you learn. And you’ll find a way to leverage that into your career down the line.

Sean Ammirati: 37:10 Just talk a little bit about the rugby. ’Cause we’ve touched on it a couple of times, but people may not know what … So, what did you do with these rugby teams?

Peter Steinberg: 37:15 All right. I’ll put all the cards on the table. I was a pretty mediocre rugby player in England, in the mid-90s.

Sean Ammirati: 37:21 Which makes you like the best American-

Peter Steinberg: 37:23 Right … So, my thought was, ‘Hey, I played with good players. I was good enough to play with good players.” And some guys that went on to play for England, and things like that. But I wasn’t good enough to make that. So I said, “Well, I’ve got a U.S. passport. Let me go to Penn State. Penn State has a great geology program, and also a really good rugby program. I’ll go there and play.” I turn up at Penn State, and I find out only undergraduates can play. Now, state college is in what’s called Center County in Pennsylvania.

Peter Steinberg: 37:49 And when they were building the state university, they couldn’t decide between Pittsburgh and Philadelphia. So they stuck it in the middle. So, there was no rugby around there. So, at the age of 23, I started coaching. I coached the men for a little bit, and then I ended up coaching the women for about 19 years. It was a club sport at the start, and then went into the athletic department as we went on. We won 10 National Championships. I went on to coach the U.S. Women’s. I’ve been to a couple of World Cups, and I went to the Rio Olympics. And also coached men at a high level. And it was interesting. In my last couple of years with the Women’s National team, I became focused on two things. One is, how do we leverage data.

Peter Steinberg: 38:30 I was looking for advantages. The U.S. Women are not the best-resourced team in the world. So I was like, “How do we compete?” I was like, “How do we leverage data?” And then, how do we innovate the way we play, that’s different than anyone else? And it was just a really interesting way of … I was actually able to take my business and apply it to the U.S. Women, and we got to the semi-final of the World Cup in 2017. It was the first time for 20 years, that we got to the semi-final. And I think that it was a lot of the new stuff that we were doing, is what helped us get there.

Sean Ammirati: 39:01 That’s very cool. All right. Well, that’s a good note to end on. As I said, we’ll have to have you back. Hopefully, with a client that we’ve had some impact with together. We can sort of tell the story together, Pete. But thanks for coming on Agile Giants today.

Peter Steinberg: 39:12 Absolutely, Sean. My pleasure.

Sean Ammirati: 39:23 I hope you enjoyed this episode of Agile Giants. If so, consider sharing it with a friend. And if you think it’s worth five stars, which I hope you do, please go to iTunes and rate it, so that others can find this content, as well.

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