Balancing Sustaining and Transformative Innovations in Corporate Portfolios

On this week's episode of Inside Outside Innovation, we sit down with Elliott Parker, CEO of the Corporate Venture Studio High Alpha Innovation. Elliott is back on the podcast to talk about his new book, The Illusion of Innovation, where we talk about the pitfalls and practicalities of launching innovations in a corporate environment. Let's get started. 

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Interview Transcript with Elliott Parker, Corporate Venture Studio High Alpha Innovation CEO

Brian Ardinger: Welcome to another episode of Inside Outside Innovation. I'm your host, Brian Ardinger, and as always, we have another amazing guest. Today we have Elliott Parker. He is the CEO of the Corporate Venture Studio High Alpha Innovation, and author of the new book, The Illusion of Innovation: Escape Efficiency and Unleash Radical Progress. Hey, welcome back, Elliott. 

Elliott Parker: Brian, good to see you. Happy to be here. Thanks. 

Brian Ardinger: It's good to have you back. I think it's been almost two years, 90 episodes since you were back on. So, let's refresh the new listeners about who you are and what is High Alpha Innovation, and then we'll get into the book. 

Elliott Parker: Yeah. So, I'm CEO and founder of High Alpha Innovation. We're a venture builder that works with corporations, universities, and world class entrepreneurs to build amazing what we call advantaged startups that go solve really important problems. 

Brian Ardinger: It's a fascinating model. There's a lot of things that have popped up since our last conversation. We can dig into all of that stuff, but the reason I wanted to have you on is you've got this new book out called the Illusion of Innovation. And I think you've distilled probably a lot of your learnings over the years into this book. The title itself, the Illusion of Innovation, what does that mean to you and why did you title it that? 

Elliott Parker: The book is an act of love and frustration. It's the idea that, the frustration piece is that so much of what large corporations are doing under the guise of innovation doesn't work. Doesn't produce the meaningful change they seek, and often leads to disappointment and we need to fix that. 

The love part is that I want corporations to be successful. We all should want corporations to be successful. There are certain things, certain problems that only corporations can solve that people collaborating through the form of corporation can address. And so, the problem is that corporations over the last 50 years have actually become worse at confronting opportunities and challenges.

There's more capital on corporate balance sheets than ever before. And at the same time, they've become less capable of meaningful innovation. And what I wanted to figure out is why is that and what do we do about it? And that's what the book focuses on. 

Brian Ardinger: Well, I mean, you, you think about it maybe 30, 40, 50 years ago, the bigger companies had the bigger R&D budgets, and they were, seem to be exploring and building in different ways. And now you see a lot of this company kind of pulling back on that and like you said, kind of doing innovation theater. Do you think companies can create innovations by themselves today, or you know, what's been broken in the model? 

Elliott Parker: Yeah. I think the way that companies go about it needs to change, actually. That we're in a fundamentally different point in the economy than where we were 50 years ago. And the old model, the corporations could centralize assets and resources inside the wall of the company, control those resources and the transactions between them and generate profit. 

The new model in the economy of today, it's much more decentralized. Meaning small teams and individuals have a lot more power. And can do things that previously only corporations could do.

The challenges that corporations in many cases haven't changed how they go about innovation, R&D, M&A, primary levers for innovation have become less effective than they once were. Still very good options, but less effective than they once were. It's a big problem. The irony of it is, is that they're better managed than ever before.

They're just optimized for the wrong thing. We've gotten really good at managing our corporations to make them safe and predictable. We've gotten a lot better. There's a lot less variance in the system, and it turns out it's that variance that produces learning and produces meaningful innovation. And so, as a result, we're seeing less of it. Companies are better managed. Ironically, it's a problem. 

Brian Ardinger: Yeah. I think you have a quote in the book, growth results from actively seeking surprises, not from predictability. They are two different, I guess, muscles almost. You know, working in a predictable business model, executing on that, optimizing for that is different than I'm in the wilderness. I sense or I have a hunch of a problem here. How do I figure out how to create value from solving that problem or whatever? 

Elliott Parker: You've got to seek deliberate inefficiency, which is a hard thing to do. Our organizations are optimized in every way for capital efficiency, meaning cutting out costs, avoiding problems, making things as predictable and safe as we can.

That does not produce innovation. In fact, that produces sterility over time and produces death. We don't live in systems like that. We don't thrive in systems like that. You've got to find ways to invite some degree of purposeful inefficiency that creates learning by discovering anomalies and things that challenge the status quo.

Brian Ardinger: So, you talk a little bit about how do you embrace that chaos instead of the predictability. Can you talk about maybe some examples or ways that companies can start thinking about surviving or thriving in a chaotic environment versus a static environment? 

Elliott Parker: Yeah. In the end, the CEO of Netflix said it really well. Reed Hastings, he said, chaotic and messy will beat sterility every time as long as that chaos is productive. And that's the trick. It's making that chaos productive. I think the best analogy way that I think about it is what we see in natural ecosystems where there's a tremendous amount of resiliency.

Think about the Amazon jungle and the way the Amazon jungle innovates. Incredibly resilient, and yet none of the innovation is done in a hierarchical way. It's not objectives driven. It's not broadly communicated in the system. It's not centralized. And it's not expensive. Innovation in the Amazon happens in a very decentralized way.

It's a random walk. It's not objectives driven. It is constrained by available resources, but there isn't some master plan. It's not communicated, and it, it happens at the level of individual organisms or cells in that ecosystem. Where if the innovation of mutation fails too bad for that organism, but the ecosystem's fine.<...