Corporate Explorers have our admiration for taking on the hard task of creating new businesses inside existing organizations. They are ambitious, purpose-driven managers willing to agitate for disruptive new businesses from within stable, successful organizations. Krisztian Kurtisz challenged the traditional insurance industry model, offering a digital channel that improves customer experience and slashes cost. Balaji Bondili at Deloitte is aiming to upend the hundred-year-old management consulting model of full-time consultants operating on client premises. Jim Peck at LexisNexis introduced a technology-led model for business insight that was a first of a kind. These are leaders challenging the basic rules of the business of which they are a part. Most do this from a position of weakness; they have no revenue or customer base. They are a cost to the company. They trade not on fact, but on the belief that they can create something new. This is a lonely position to occupy. Many Corporate Explorers have no peers inside the company and, at least at first, most have no team.

It is the CEO that usually puts them in this position, perhaps not personally, but at least by initiating a growth strategy or innovation aspiration that gets them started. Having put them in the role, what can senior leaders do to help make the Corporate Explorer successful? In this chapter we will focus on what CEOs and other senior managers can do to support new ventures. Specifically, how they create a corporate purpose that authorizes exploration and encourages Corporate Explorers to get started. Our role model is Vince Roche at Analog Devices, a $90 billion market cap technology firm. Since becoming CEO in 2013, Roche has led a remarkable growth story engaging his team in a bold, strategic ambition that stretched innovation beyond incremental improvements to its current franchise.

Roche's formula, which he shares with CEOs like Jensen Huang at Nvidia, Andreas Brandstetter at UNIQA, Takayuki Morita at NEC, and Ajay Banga at Mastercard, is grounded in a strategic ambition for the business that is emotional, logical, and aspirational. The ambition sets new rules for managers that encourage them to challenge convention, thereby providing a license to explore. This helps to accelerate innovations that had been languishing in the organization, as well as spurring new ventures to emerge that may have game-changing implications for the company's future. The CEO cannot own the new rules alone, they need to forge a social movement that can proliferate the new approach into the organization, led, eventually, if not at first, by the senior team. That license is bounded by a set of hunting zones that makes clear where the company wants to grow new ventures. The ambition gets added traction in the organization if it is succinctly articulated in a manifesto that summarizes the senior team's plan for growth.

Emotion, Logic, Aspiration

As CEO of Analog Devices, Vince Roche has changed the strategic rules by which his business operates. Analog Devices’ technologies are a bridge between the physical and digital worlds. They take information from the real, analog world, like touch, movement, and sound, and convert it into digital signals that computers can use. Analog's semiconductors are in mobile phones, cars, hospital scanning machines, satellites, and manufacturing machinery. Renowned for its technology leadership, for over 50 years, it has consistently out-innovated larger competitors like Texas Instruments, with superior semiconductor components. However, it was clear to Roche that sustaining this technology advantage would require a shift in strategy. Semiconductors would continue to be highly valuable to the global economy and the best would continue to command a premium. However, combining these technologies with software, artificial intelligence, and machine learning could open new, exciting areas for growth. Roche saw money moving to integrated systems that used hardware and software to capture data in the cloud, process them with advanced analytics and return an answer to a user.

Roche engaged his engineers with an ambition for the impact that the company could have on the world. He talked about the global challenges that the company could help to address, how it could “engineer good” for society and the environment. He saw an overlap between the company's great technical depth and the emergence of ever-more-complex problems at the intersection of physics, chemistry, and biology. Rather than selling a silicon chip, Analog would sell an answer. The answer would be whatever combination of hardware components, software, and data analytics were needed to solve the customer's problem. Roche reasoned that if they could solve strategic problems, customers would pay and give ADI a new source of competitive advantage. He called this strategy “Beyond Silicon” and instructed his business leaders to “move across and up the stack” to solve important customer problems with complete “whole product” solutions. He expanded ADI's view of spaces into which it could grow. It was no longer a deep technology firm, competing just to “win sockets” on a circuit board. It was also a vital contributor to critical business, economic, and social outcomes.

A strategic ambition has three dimensions – emotional, logical, and aspirational, as described in Figure 3.1. Like Roche's, an ambition needs to have an emotionally compelling quality that evokes a higher purpose – either a social one like Analog's Innovating for Humanity, Mastercard's War on Cash, or an audacious one like SpaceX's to Make Humans Multiplanetary. It also needs to be aspirational about performance, like General Motors’ vision to Sell Only Zero Tailpipe Emissions Vehicles by 2035. It should also be logical, providing guidance on what to do differently, like “Go Up and Across the Stack” or deliver “digital payment solutions,” not just payment processing.

Bold ambitions give Corporate Explorers the permission to be just that—bold. Typically, managers in large organizations learn to stay within a swim lane. They are actively discouraged from reconceptualizing departmental boundaries to enable the business to capture a bigger opportunity. This drives them to deliver results on the scale of their existing short-term responsibilities. Setting a scale of ambition equal to the opportunity or threat gives a Corporate Explorer permission to think big and set their sights on something more.

Similarly, in 2010 Mastercard CEO Ajay Banga committed his firm to the ambition of “waging a war on cash”. He wanted to set a new scale of ambition that would shift the firm away from competing head-to-head with Visa, and toward delivering services for the 85% of retail purchases still being made with cash or check. Banga wanted to position Mastercard to lead the coming FinTech revolution, rather than staying within its credit card payment niche. This set a higher scale of ambition for Mastercard’s innovation efforts.¹ By 2020, Mastercard Labs had built a portfolio of products and services with an annual revenue potential of $1.5 Billion. Japanese tech giant NEC is also resetting its markets with an ambition focused on impacting human life. It is adding businesses in areas like biometrics, smart cities, and cancer drug discovery.²

License to Explore

A well-crafted strategic ambition gives Corporate Explorers license to challenge a firm's core beliefs, without necessarily undermining them. Human beings have a strong need to imagine a better future, and new ventures are motivated by the anticipation of creating something new and improved. Ambition provides the link between today and what is to come – it helps reset expectations. This was Jensen Huang's approach at Nvidia as he faced being pulled into the Intel Black Hole. Instead of evoking the impending crisis to win a head-to-head fight, he set his sights on cocreating a new future with his team. He wanted Nvidia to solve key science-related problems emerging in the world. He asked his team, “What are we great at and love doing (i.e., if we weren't getting paid for it, we'd do it anyway)?” and “What doesn't exist today, but the world would love it if we made it?” What emerged were ideas like supporting high-performance computing to deliver artificial intelligence to speeding scientific discovery for the delivery of autonomous vehicles. These are now obvious areas of growth for a technology firm, but 10 years ago this would have seemed like a fantasy to many of Huang's semiconductor industry colleagues. Nvidia's value has increased by over 2000% since 2015 when the markets started to see the strategy pay off.

Roche's new strategy challenged the core beliefs of his technology leaders. Engineers at Analog Devices were accustomed to having considerable freedom to operate. Product teams were highly decentralized and free to innovate products that would sustain leadership in a specific segment. Roche's strategy asked them to continue to focus on technical performance – colloquially described as the “speeds and feeds” of the chip – but he added a focus on customer impact. His goal was for engineers to “go up the stack” by understanding the impact an innovation would have on the customer's business. He had to reset the rules for innovation at Analog Devices. Engineers had to know how well they were addressing a customer problem; did it deliver a competitive advantage; was it easy to adopt and use? This shift challenged the core identity of his technology leaders. They asked, “Did Analog still value silicon engineering skills?” These had been at the core of the company for 50-plus years, so why change? The company's performance had never been stronger.

Roche saw his strategy as bridging the old and the new. Companies would continue to rely on Analog Devices for technologies that capture data about the real world. He spent many hours in conversation with the company's technology fellows listening to their concerns and helping them make the connection between the past and future. Once they saw that the vision was additive not destructive of the firm's past capabilities, they were more ready to invest in up-skilling themselves and shifting the company's trajectory. They were not ending the focus on translating the physical into the digital world, they were simply rendering solutions in software as well as silicon.

These new rules give managers permission to explore. Anyone that had been unsure about backing radical innovation or even actively blocking it thinks again. There is now a new priority, a new path to long-term growth. This signal had a radical impact at Analog Devices. It authorized innovators that were otherwise struggling to break through the corporate hierarchy. One aspiring Corporate Explorer was Tony Montalvo. He was trying to solve the problem of how the telecommunications industry could create 5G cellular phone service. The silicon hardware inside mobile phone base stations had reached its limits and it would be very costly to scale it to carry 5Gs expanded bandwidth. Montalvo had pioneered a software-defined radio that was more flexible and a tenth of the size of the traditional hardware-centric option.

This was exactly the sort of solution that Roche intended when he asked the company to go “Beyond Silicon.” However, Montalvo was struggling. His innovation broke the rules, and his managers were more concerned with converting short-term revenue opportunities, not the sort of radical innovation he was proposing. Roche's actions changed the context completely. Instead of an outsider, Montalvo was now at the center of the strategy. When it came to market, Analog's platform was half the size of the traditional approach, had lower power consumption, supported eight times the bandwidth, and was cheaper to the customer. This innovation has accelerated the rollout of 5G globally, with Analog a central player in the ecosystem, generating more than $1.5 billion of revenue for the company. This was an early win for Analog's strategy, demonstrating its transformation from a technology component company to a system solution provider.

Montalvo now had a license to explore, to push beyond the conventional boundaries. Empowered by Roche's ambition, other Corporate Explorers have since emerged at Analog Devices. One manager created a business to use sensors and analytics to improve manufacturing output and prevent unplanned down time. This advanced technology can do things like detect when a car has not been correctly assembled simply from the sound of pieces of metal clicking together on the production line. Another Corporate Explorer has applied for United States Food and Drug Administration approval for a device that can detect when a patient is going to suffer congestive heart failure. In both cases, these nascent businesses use the base technology of Analog Devices and then complete the solution with hardware, software, and increasingly, services.

Social Movement

One of the frustrating realities CEOs face is that their power is more limited than people often appreciate. The former British Telecom and Lucent Alcatel CEO Ben Verwaayen once told us that the “biggest mistake a CEO can make is to believe what is written on his business card.” Ben believed CEOs are not the primary executor of anything. Instead, they influence, set a context and the agenda, and pick the people.³ This is the CEO's power to convene a group, bring them together and give them a task. Humans are social animals, highly responsive to the signals about whether they fit into a group. When humans see others adopting a new behavior, particularly if they have authority in the group, then they are likely to conform. It is about evolution. Humans learned it is safer to belong to a group and not hang out as easy prey waiting to be eaten. A social movement is the new herd. When the herd inside a company like Analog Devices learns that there are new rules, and that people in authority are adopting them, they tend to follow. This is what makes a social movement inside a company so powerful. It triggers the herd instinct to take a leadership group in a new direction, making it okay to break with convention and adopt a new way of working. A well-articulated strategic ambition can set new rules for strategic decision-making and authorize innovation beyond the core.

Perhaps the most successful example of a social movement we have experienced was at IBM in 2000 to 2008. IBM's strategy leader at the time was Bruce Harreld, an outsider in a corporate headquarters role given the mission of breaking IBM's pattern of missing disruptive innovations. Harreld defined several emerging business opportunities that had the potential to scale into new disruptive businesses. However, he knew there was a high risk that these fledging units would be crushed by existing core business units. He chose to form a social movement to help protect them. Harreld convened a series of multiday strategic leadership forums (SLFs) at Harvard Business School to work through this problem with the leadership group. The sessions were one-quarter education on the threat of disruption and toxic assumptions in the organization and three-quarters on how IBM could close its opportunity gap to build these new units. Over three years, more than 500 executives participated in these SLFs. Harreld had engineered a social movement that understood why these new ventures, and Corporate Explorers like Carol Kovac, were so important to the future of the firm. Harreld used his convening power to build a social movement and gave IBM's extended leadership team a way of working that helped them make progress on a series of growth opportunities.

Similarly, at Analog Devices, Roche convened an SLF for his top 100 leaders to work on how to close the gap between the ambition and the reality. He knew that many in the group were fully on board with his vision. Some, however, were skeptical, and others unsure if he was serious about transformation. At the forum, Roche challenged his team to increase the rate of business, not purely technical, innovation at Analog Devices. He showed that they were relying on mature products, some more than 10 years old, to sustain growth. Although valuable assets to the company, he wanted to ignite a new era of innovation based on solving more valuable problems with integrated solutions.

Roche then turned his sights on the senior business leadership, sending the top 30 business and technology leaders to Massachusetts Institute of Technology for three multiday sessions. He challenged them to learn how the firm would capture value from the “Beyond Silicon” strategy. He wanted to transfer responsibility for the commercial strategy for going up the stack to his business leaders. Roche was recoding the DNA of the firm so that engineering and business leaders would be more likely to put software, algorithms, and digital business at the center of Analog's engineering capabilities and business strategy. At Analog Devices, the social movement encouraged others to develop exploratory projects, as Montalvo had done. One vice-president created a series of cross-functional teams to investigate opportunities up and across the stack. We will follow the story of one of these teams in the next chapter, describing how Kevin Carlin was inspired by Roche's vision to push the boundaries of Analog's business model. He developed the company's first ever e-commerce solution, a Smart Motor Sensor that can be self-installed, connected to the web, and operational within 30 minutes.

Hunting Zones

At the core of innovation lies a paradox. Too little diversity of ideas and it is hard to find breakthrough business ideas; too much and innovation can become disconnected from strategy. We saw this at one European firm. They had encouraged managers to propose new ideas for how the company could take advantage of emerging innovations like the sharing economy and two-sided software platforms. They asked us to help them diagnose why so few of these projects developed into fully fledged businesses. The answer was that despite the brilliance of some of the innovations, there was relatively little connection between the ideas and the company's business strategy. They had ambition, but it was so broad-based that it encouraged ideas that could not get funding. The business leadership did not want them.

We advise CEOs to set boundaries around the license to explore. It may seem paradoxical to constrain innovation, but we find that it can give it focus and increase the success rate. At Analog Devices, CEO Vince Roche set an ambition for the company to solve more complex and more valuable customer problems by moving up and across the technology stack. This ambition helps to define high-level hunting zones. In Analog Devices’ case, they identified the Internet of Things as a hunting zone. They knew this was a new trend affecting many of the company's core markets and that it offered the potential to solve more complex problems by adding intelligence to existing offerings.

When Jensen Huang set his ambition to put Nvidia at the center of artificial intelligence, he issued an invitation to anyone in the organization who wanted to join him on the journey. He wanted to excite his engineers and get them to turn their collective genius to this innovation challenge. However, it is important to note that this was not an open-ended exploration. Just as Huang invited creativity, he defined boundaries. Huang knew that there were specific industries that would likely be the earliest adopters of AI. Armed with this knowledge, he challenged his team to search for problems that could be solved in four specific hunting zones: gaming, autonomous vehicles, enterprise computing, and scientific computing. These were new end markets for the company, which had previously sold directly to original equipment manufacturers like makers of personal computers. More than a decade later, Nvidia's strategy has paid off with market leadership in many of the end markets that Huang initially defined. Along the way, they caught some tailwinds that were not in the initial set of hunting zones, such as a rapidly expanding need for high-performance chips to power cryptocurrency transactions. Similarly, attempts to create a range of Nvidia gaming devices, such as the discontinued Shield Tablet and Shield Portable, have yet to be successful. However, Nvidia's strategic definition of hunting zones and pursuit of its ambition have been immensely effective.

These high-level hunting zones align to the firm's strategic ambition, but they need more definition and granularity to be useful to a Corporate Explorer in deciding where to discover unserved or underserved customer needs and ideate solutions (see Figure 3.2). You can get to this next level of detail by considering four factors:

1. Megatrend – a potential tailwind for a new venture coming from changes in society, politics, regulatory changes, technology, and so on.
2. Company Advantages – assets you can leverage from the core business that give you the opportunity to take advantage of the tailwinds from the megatrend.
3. Market Attractiveness – hypotheses about the size of the potential market in terms of revenue potential, concentration of users, intensity of competition, and possible rate of growth.
4. Attractive Customer Problems – evidence of something that customers cannot do today that would generate value for them if they could. This is not a certainty, just a hypothesis.

At UNIQA, Andreas Brandstetter, launched another exploration unit, in addition to Cherrisk, called SanusX to investigate opportunities to transform healthcare in Austria. His ambition is to create a solution for the caring industry that help UNIQA's customers live longer, safer, and healthier lives. This suggested to UNIQA that there were two high-level hunting zones to explore – one that helped people get healthy and another that helped them to stay healthy. They identified the megatrends of an aging population, increased urbanization, and overall pressure on the public health system. They had several important company advantages including a large customer base, as Austria's largest private health insurance provider, plus a thriving hospital business. UNIQA invited a team of outside experts, doctors, nurses, politicians, and public health experts to advise them on the problems customers experienced getting and staying healthy in Austria. This team created a vivid picture of the points of maximum pain and inefficiency for patients, healthcare professionals, and providers – the customer problems. The map helped them envision the areas where they could have the maximum beneficial impact on the ecosystem. They also mapped the money flows to understand how value is created and captured in the ecosystem today, which added depth to their understanding of market attractiveness.

Firms also set criteria for what opportunities they think are worth pursuing within a given hunting zone. At Amazon, ideas for new businesses are considered if they meet three criteria: (1) they offer a differentiated customer experience, (2) they can grow into a large business, and (3) they can provide great returns on invested capital. At Corning, the multinational material sciences firm, new business ideas are pursued if they can generate at least $500 million in revenue over a five-year horizon. At IBM, new business opportunities must be aligned with the larger corporate strategy and promise $1 billion in new revenue over five years. A firm's definition of big enough depends on its scale of ambition, maturity of its businesses, and the severity of the threat posed by disruption.

Manifesto

Strategic ambitions can sound like slogans when reduced to fit in with the confines of a book. Each of the CEOs we have featured – Roche, Brandstetter, Huang, Banga – go beyond these headlines to create a connection to the rationale behind the strategy and build its emotional resonance with employees. The underlying logic of a strategy is often very clear when the company is founded – think about the Elon Musk Tesla and Space X examples mentioned earlier – but as it ages some of that clarity is lost. The strategy-as-death-by-PowerPoint takes over and the core beliefs of what will enable a business to win get lost. We encourage CEOs to write strategy manifestos that succinctly state the case for the ambition. What it is, why it is the chosen path, and what it will take to succeed. In three or four well-crafted pages they have infinitely more impact on employees than a dry set of strategy PowerPoint charts.⁴ They are a statement of belief that communicates the new strategy rules that the CEO wants the leadership to apply. This is a critical enabler to our Corporate Explorers as it connects the broader strategic logic to ideas for individual ventures.

The strategic ambition and the boundaries of the hunting zones set the Corporate Explorer up for success. The work of ideation, incubation, and scaling new ventures are anchored in the company's growth aspirations, strategy, assets, and competencies. This connection is critical to sustaining them on a long journey to build a new venture. Corporate Explorers must ideate to generate disruptive business concepts that solve customer problems, they incubate those concepts to validate the underlying commercial assumptions, and then scale them into sustainable revenue streams. Along the way, there will be many twists and turns, as assumptions about what customers want, or how to bring a product to market, need to be revised.

A strong link between the Corporate Explorers idea for the new venture and the senior team's strategic ambition sustains them on this journey. We find scaling starts in ideation because that is where this vital connection is forged. Consider the fate of two Corporate Explorers seeking funding for a new venture. The first emerges unexpectedly, requesting $1 million to scale a new venture with very promising data from experiments. The senior team has no prior knowledge and does not see the connection to the firm's vision or business strategy. At best, they will decide they need to learn more and ask the Corporate Explorer to do more experiments so that they can assure themselves of the opportunity. In other words, it is paused, perhaps shelved. The second Corporate Explorer has developed a new venture that realizes a shared ambition for the future of the firm. The senior team has helped to select the initial hunting zones and received regular updates on progress from experiments. When they are asked for and given $1 million to progress the venture, it is the realization of a shared aspiration. Both these Corporate Explorers may have high-potential new businesses to propose, but one has the benefit of a leadership that is on the same journey, which significantly improves their chances of success.

Narrowing the scope of ideation by using hunting zones is controversial for some in the global innovation industry. They argue that any constraints on innovation reduce the diversity of ideas and the potential to make unexpected breakthroughs. This is one of those areas where what works for an entrepreneur does not transfer to the world of the Corporate Explorer. In the corporate world, innovating without constraint is a recipe for creating zombie businesses disconnected from the strategy that nobody wants to fund. There can be interesting learning from such adventures, but it is a waste of a Corporate Explorer's time and energy to pursue an idea that will never receive executive support.

Chapter Summary

This chapter described how CEOs, and the senior teams, play a big part in the success of Corporate Explorers. Most importantly, they define a guiding strategic ambition that legitimizes exploration by linking it directly to the company's growth aspirations.

A good strategic ambition is emotionally compelling, it engages the organization's passion for innovation. It is logical, providing the connection to the overall business strategy, so that exploration is seen as integral and not alien to success. It is also linked to performance, setting a scale of aspiration appropriate to the threat or opportunity of disruption. A strategic ambition inspires more Corporate Explorers and enables their success, through five different mechanisms.

First, it sets new rules for making strategic choices about what markets the company serves, its business models, and offerings.

Second, these rules create an explicit license to explore with a permission to break with the past, so widening the range of possible innovations that emerge.

Third, the strategic ambition becomes a rallying point for senior managers, that form a social movement in the organization that replicates innovation in line with the ambition.

Fourth, by defining hunting zones – where it wants to invest to realize its growth ambitions – the ambition gives guidance to Corporate Explorers on what sorts of opportunities are more likely to receive corporate support.

Fifth, leaders articulate their ambition in a manifesto, thereby helping explain the ambition, new rules, license to explore, hunting zones, and social movement, to the wider organization.

Many new ventures will fail to succeed as they move through ideation and incubation. However, a strategic ambition sustains to ensure that more nascent new ventures replace them and keep the organization on a path to meet its growth aspirations.