Innovate to survive, sell to thrive

Most everyone knows that innovation is defined as the vibrant and dynamic fusion of invention and commercialization.

Joanna Sinclair, 18.06.2014

“For some reason, far too many companies – let alone governments – seem to forget what commercialization means. I will give you a hint: it has to do with sales and customers,” says Ken Morse, serial entrepreneur, angel investor, global sales veteran, Visiting Professor at ESADE Business School, Founding Managing Director at MIT Entrepreneurship Center 1996-2009 and Chairman of Entrepreneurship Ventures Inc.

“Approximately fifteen years ago at MIT, we looked into the critical success factors of corporations. We found sales to be a far more important factor than technology in determining whether the venture became a brilliant success or just average. Sales was, and is, a critical success factor in building young companies to survive, and thrive in the tsunami of global competition.”

“Very few business schools include sales courses led by practitioners in their curriculum. It is surprising how few business schools teach sales at all. I am a visiting Professor at ESADE Business School in Barcelona, which is a rare exception. ESADE cooperates with Aalto University and the work we are doing together on innovation, entrepreneurship and design thinking has important potential. I am excited about the collaboration.”

Morse affirms that the best way to create a successful startup is to have a demanding customer – and the best way to fund a startup is with customer money.

“Beachhead customers ensure that the company’s first products are a realistic solution for a real world pain, rather than an academic exercise. When I teach entrepreneurs, we always start with sales. Then we go into marketing and after that we look into team building. It is only when those workshops have been embraced that we turn to growth financing.”

“So many people think that all they need is the money. That is such a misguided notion, especially in today’s environment. Money takes you nowhere, without continuous innovation. Continuous Innovation is not an option, it is imperative. You need innovation, customers and sales: without these three, success is highly unlikely,” Morse says and reminds: “Too much money shields the founding team from the realities of focus.”

Innovation can come from many sources – but usually from customers with pain

According to Morse, key factors to becoming an innovative corporation include being open-minded to inventions from both outside the company and within; properly managing both incremental and radical innovation opportunities – but not over-managing them – and letting room for external and internal scouting. 

“Incremental innovation comes from continuous improvement of products, services and methods. Evidence suggests that incremental innovation is best done within the business units, utilizing people who are close to the customers.”

“Radical innovation is game changing and rare. Probably only 5-10 % of innovations are radical. They require a significantly longer time horizon than incremental innovations. Rolling out radical innovation may cannibalize an existing product line or business, so the whole process is best managed by a central team headed by a long time company veteran. She should have great relations around the company and report directly to the CEO.”

“Corporations should remember that there are plenty of smart people outside not working for them. Open innovation is an opportunity that can bring considerable advantage and also boost internal innovation efforts.”

“Also, if a company is not going to use one of these internally developed inventions, it makes sense to make use of it somehow, through joint ventures, licensing or spin offs. Finally, external innovation scouts are a good idea for many reasons, for example to identify disruptive technology that can be exploited, before it disrupts you!”

Avoid what is easy to measure – focus on the right stuff

Morse underlines that governments need to start paying more closer attention to what they are supporting in initiatives aiming to drive entrepreneurship and innovation.

“Governments often measure what is easy to measure. It is simple to measure the number of startups and provide them quick funding so they don’t die. But those hothouse startup companies rarely grow to over 8-12 employees – we need more companies like KONE, worth billions of euro.”

“While it is great to be technology oriented, inventors are rarely able to commercialize their breakthrough ideas by themselves. Technologists need to team up with entrepreneurs and intrapreneurs to bring their inventions from lab to market. It takes diverse passionate teams to create global, innovative success. The CEO must always be a sales guy, who has carried a bag before.”

Morse asserts that there is no way to build a winning startup team without validating the company’s value proposition, and the  best way to do that is to have two or three well respected early customers who have achieved significant, quantifiable success using your solution.

“After you have some early, real world market success it is easy to recruit top talent. It is good to remember that most investors prefer to invest in teams instead of technology. The chances of getting good funding, on good terms, depend on having the right people on board.”

Morse says he personally prefers investing in adult teams who have ‘done it before’.

“Incubators for whiz kids may sound good, but they may actually be counterproductive. The most successful commercialization efforts are usually achieved, and the most successful global companies are usually built, by teams of experienced innovators, typically around 40 years old.

Sustainable global success in innovation is rarely achieved by genius kids acting alone, without ‘adult supervision’. My advice to young, eager entrepreneurs is to get advice from experienced, good people with gray hair – or no hair.”

Failure is the mother of success

A key reason for favoring seasoned professionals in entrepreneurial teams is the fact that they have failed. Morse reminds that trying and failing can be priceless, a stepping stone leading to success. Morse is good proof of this notion. Before building up MIT’s Entrepreneurship Center, Morse was a high-performance leader in global high-tech companies for over 35 years, predominantly in China, Japan and Europe. He co-founded six high-tech companies with MIT friends and classmates. As Morse puts it: “Five of these ventures had successful IPOs or mergers; one was a disaster.”

“Whenever a company tries, but fails, they should be celebrated, not criticized! In Taiwan, there is a saying: ‘Failure is the mother of success.’ This same viewpoint could help in Finland: seeing failure as learning. Failing fast, rapid prototyping, pivoting and re-entering markets, these are the pillars of an effective innovation ecosystem.” Morse says and reminds that the business press has an important role to play in changing the way failure is perceived. “Perhaps local newspapers should write positive articles and give prizes to teams that tried and failed, as well as those which achieved success. This is my 20th trip to Finland, I’d love to come back and help give out those prizes!”

“Create like a god, command like a king, work like a slave,” Morse sums up his advice to entrepreneurs, startups and established executives who share the aspiration of driving their company to global success.  “Especially startups should focus on milestones more than calendar dates. Focus on how and why prospective customers will buy from you, and pay you money. Hope is not a strategy. Remember that excellent sales people are essential for growth. Cash flow is more important than your mother! Effective elevator pitches are essential to enable speed and momentum – and realize that you have only two choices: innovate or die.”

Design thinking is part of the Design Thinking for Business Innovation Program by Aalto EE and ESADE.

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