Innovation at scale: A discussion with Beth Comstock

March 6, 2020

Here is an excerpt from the transcript of a conversation with Beth Comstock featured in an article for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out others, learn more about the firm, and sign up for email alerts, please click here.

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How tolerance for risk, patience, and thinking small (where funding is concerned) can lead to breakthrough innovation.
In this episode of the Inside the Strategy Room podcast, senior partner Erik Roth talks with Beth Comstock, former vice chair of GE, about the challenges corporations face in developing breakthrough innovations. Beth is an innovation leader who spent almost three decades at GE, where for a time she headed GE Business Innovations, which develops new businesses, markets, and service models. She recently published Imagine It Forward: Courage, Creativity, and the Power of Change (Currency, 2018). This is an edited transcript. For more conversations on the strategy issues that matter, subscribe to the series on Apple Podcasts or Google Play.
Erik Roth: Beth, thank you so much for joining us. Tell us first, what motivated you to write this book now and what do you hope executives take away from it?
Beth Comstock: I was coming to the end of my run at GE and wanted to capture what had happened, especially for the people in the middle of organizations who need a little encouragement and some tricks of the trade. Innovation is really hard. I wanted to capture the grittiness, the messiness, and the hard work that go into innovation and change.
Roth: If innovation requires messiness, how do you do that at a large organization?
Comstock: Just having the mindset that “this is going to be messy” helps. I came to appreciate the value of having at least two lanes or speeds in the organization. You have your now lane and your next and new lanes, and you allocate capital to them differently. You have to think about measurement differently and the kind of people and ideas you’re working with. Yet most people just lump them together into a big jumble. You don’t have a profit in the next lane—sometimes you don’t even have a customer—and yet you are trying to get your P&L in shape. There is a series of things companies can start doing differently just by clearly delineating a now lane and a next lane.
Roth: Let’s unpack that a bit. We often find ourselves in conversations with CEOs where they say something to the effect of, “I really want my organization to grow more predictably, more consistently through innovation. I tell my leaders where we need to go, but nothing happens.” What are they doing wrong?
Comstock: I believe most CEOs want to make that change but their people have not learned how to swim in a new way in the new lane. I came to appreciate the value of having coaches. It’s almost like a little voice on the team leaders’ shoulders that helps them navigate that. Not only do they need the right kind of money and budget setup to fund these efforts, they need different types of people. The team leaders need room to go out and discover. They have to want to see new ideas.
Roth: Leaders may hear what you just said and reply, “Ah, great. We’ve set up an incubator. We have our little accelerator over here. That’s going to be the answer.” But when they visit those side organizations 12 to 18 months later, things don’t look so pretty. There are some prototypes sitting around and some really frustrated talent. You look at the value that has been created and it’s negligible. Why is that not the right way to approach your next lane?Comstock: Sometimes all that is part of the answer. I do believe in having groups set up to test and learn and push ideas forward. But you have to assume that you have a good innovation strategy. Sometimes, people are just testing ideas because that’s what the competitors are doing but they don’t fundamentally believe in them or that they have the capability to execute them.

Roth: So what does a good innovation strategy look like?

Comstock: To me, innovation strategy answers the question, where are you going next? What is your unique value proposition in the world? Why do you exist? That’s important for both the now and next lanes. And then, what problems are you trying to solve for your customers?

I think you ask different questions in the next lane that help you form that strategy. Sometimes it’s about having a hypothesis: if you’re a dairy farmer and have a hunch that plant-based foods will be big in the future, well, why do you have that hunch? What are you going to do about it? Will you wait until the day everybody is drinking peashoot milk, or will you get out there and see what’s happening?

Roth: So how do you get an organization, particularly a large one, to chase hunches? Often, there is a need for proof before you even go explore, otherwise you can’t get the permission to test the hypothesis.

Comstock: I used to get that a lot from people at GE, who would say, “You’re a dabbler. That’s never going to amount to much.” And yet, when you trace anything successful, usually it started as a hunch that you had to dabble with. We always had an experimental budget. It should be 15 percent of your budget, your time, your people. You have to make room for that dabbling, provide resources, make it part of your operating system and know what you are trying to accomplish.

To me, it’s about speed to learning. You are trying to de-risk your way forward, so you want to find out what doesn’t work as much as what will work. That’s where people get confused. They say, “Oh, but that failed.” Yeah, but now you know not to spend any more time and money on that. What big companies do—I saw this time and again, and was guilty of it myself—is throw money at problems because we think that will provide the answer. They believe that if you have enough money, you can get there faster and bigger; you will get to scale. Sometimes, you have to verify early on whom you are serving and validate that you have the right offer. Do you even know how to make money? Large funding alone will not answer that question.

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Here is a direct link to the complete article.

Beth Comstock is the former vice chair of GE and the author of Imagine it Forward: Courage, Creativity, and the Power of Change (Currency, 2018). She is a director at Nike, trustee of The National Geographic Society, and former board president of the Cooper Hewitt Smithsonian National Design Museum. Erik Roth is the Global leader of McKinsey’s Innovation practice and a senior partner in McKinsey’s Stamford office.

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