Director – Advanced Technologies, FirstBuild
Co-Founder and CEO, Giddy
Why you should act like a startup if you want to innovate
There’s a problem with innovation in large organizations - it’s set up to fail. Too often we see forgotten prototypes that line R&D department shelves or missed opportunities, because companies weren’t willing to take the necessary steps to innovate. I experienced this first hand as head of R&D and Innovation for GE Appliances, one of the largest, most established appliance brands in the U.S. In my role, I was responsible for our “Skunk Works” team - a group of the most experienced engineers in the business that could design and build any home appliance. To have access to such talent and the freedom to create my own department was no doubt an exciting opportunity. I took full advantage of the situation setting up regular brainstorming sessions with all the functions in my business, an innovation council that reviewed ideas every two weeks, demo days and more. My team oversaw a portfolio of ideas - many which were incremental improvements to existing products, while a small fraction of the portfolio were simply disruptive.
Fast forward seven years and I realized that I had managed the innovation process within the business well, but only two products had successfully made it from the “Skunk Works” lab to market. I was essentially a high performing innovation leader with little to show from it on the product side. Despite having smart executives and one of the best brands in the consumer products industry, I suffered from the typical roadblocks that often impede innovation in large organizations.
- The risk was too high. Being innovative and first to market is inherently a risky business. If a product does not exist in the market, the financial model for the innovative product is based on a lot of assumptions and very few facts. The cost of launching an innovative consumer product at scale could be tens of millions of dollars, in an industry where the EBITDA for businesses is in the low teens. If cost isn’t enough to make you think twice, take into consideration that the probability of an innovative product succeeding is no different than that of a hardware startup, below 10%. Given these factors, smart business executives will usually invest in incremental innovation in existing products rather than bet on a product that doesn't exist in the market.
- There’s little efficiency. Corporations are by nature evolved to deliver products to market with the maximum efficiency while minimizing risk. Producing a new product in low volumes or redirecting resources toward a product that may not succeed, was simply not efficient, and took too much focus away from the rest of the business.
- Long timelines. Bringing an innovation to market within a corporation required too many sign-offs, too much red tape, and ultimately, too much time. You have to be nimble if you are going to compete.
It became clear that what was really needed was a testbed, or rather a startup environment within GE Appliances, where we could establish an innovation pipeline. We needed a place where ideas could launch quickly, efficiently and at a minimum risk to the organization.
We also needed access to early adopters. Everett Rogers, author of Diffusion of Innovations, states that if an innovation doesn’t succeed in the early market, it won’t succeed in the mainstream market. The early market validates the innovation creating a groundswell of buzz that eventually seeps into the mainstream market. At GE Appliances we had a handle on the mainstream market, and had for more than 70 years, but we lacked access to early adopters - those who were less driven by brand, and more by technology and features.
Firstbuild is born.
To solve this problem we created FirstBuild, a global co-creation community that is a 100% subsidiary of GE Appliances, a Haier company. FirstBuild’s mission is to co-create innovative products for the appliance industry and validate them in market. In basic terms, it’s a startup within a larger corporation allowing us to bring products from “mind-to-market” in months so that each launch cost thousands of dollars instead of millions. By reducing the cost and time to market, we as a business, could now take more bets on innovation.
FirstBuild is both a physical building - a state-of-the-art microfactory in Louisville, Kentucky, and an online community (www.firstbuild.com). To gain access to the early adopter market locally we built FirstBuild on the University of Louisville campus. To reach a global audience, we built a custom online forum that allows people to submit ideas and vote on them from anywhere. To-date FirstBuild has a 13,000 strong community of makers who have contributed more than 1,500 ideas. On the validation side, FirstBuild has sold products to more than 25,000 early adopters, raising awareness via crowdfunding campaigns, social media, and PR coverage in tech and lifestyle outlets. In three years, FirstBuild has turned out 30 new products and completed five crowdfunding campaigns including the ninth largest hardware campaign on Indiegogo.
From an indoor pizza oven to a water pitcher that fills itself, FirstBuild has successfully built complex appliance products in low volume at its microfactory, while transitioning them to GE Appliances for scale-up. Financially, FirstBuild is on track to break even this year - the first R&D operation in the world that makes as much money from its innovation as it spends.
Needless to say, “Skunk Works” no longer exists, but in its place is something so much more - the perfect environment for innovation to thrive, even within the walls of a corporation. How have you nurtured innovation in a large organization and what roadblocks have you faced?