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Few doubt that something extraordinary has happened at Nvidia, as its share price has risen by more than 8,000% over the past decade. It now ranks in the top 10 of the most valuable companies globally, thanks to its transformation from the world’s leading provider of graphic processors to a leader in computing for artificial intelligence and autonomous driving. CEO Jensen Huang has confounded the conventional wisdom that established companies cannot reinvent themselves and their industries through radical innovation.
Nvidia isn’t an outlier — rather, we see it as one of the more eye-catching examples of the developing trend of large corporations leading radical innovation. Among them is LexisNexis, which became an early leader in big data analytics by creating a multibillion-business that is larger than the original legal information firm. Another, Deloitte Consulting, is challenging the hundred-year-old management consulting model with Deloitte Pixel, a new open-talent model. Best Buy has broken out of its pure-play retail box to create a health tech and services company for the elderly. And MasterCard has moved from a focus on processing credit card transactions to creating new digital payment solutions.
A new cadre of leaders is driving disruptive ventures from inside large corporations. These corporate explorers are ambitious, purpose-driven managers willing to agitate for disruptive new businesses from within stable, successful organizations. They ideate, incubate, and scale innovations, much as an entrepreneur does. However, innovating inside an existing corporation is different in important ways from conventional entrepreneurship. These leaders need an enabling context that authorizes and encourages them. This is the role of what we call a strategic ambition.
Defining an Ambition
CEOs like Nvidia’s Huang, Analog Devices’ Vincent Roche, MasterCard’s Ajay Banga, and Best Buy’s Hubert Joly have provided their organizations with a strategic ambition that excites aspiration and hope, not fear.
Most fundamentally, leaders articulate an emotionally engaging higher purpose for their companies — like Joly’s aspiration that Best Buy must “enrich people’s lives through technology and contribute to the common good.” Many companies have mission and vision statements that articulate a commitment to a higher purpose. They may tell us where the company stands on important social issues like climate change and the Black Lives Matter movement. Best Buy’s statement does more than this: It contributes to the organization’s innovation strategy, committing the company to applying technology to meet a social need. These emotionally charged aspirations also set a scale of ambition equal to the threat or opportunity of disruption — such as General Motors’s vision to “sell only zero tailpipe emissions vehicles by 2035.” They provide a logic for a new strategy that bridges the past and future. At Analog Devices, CEO Vincent Roche engaged his semiconductor engineers with an ambition to go “beyond silicon” to solve important customer problems, leading to new sources of growth as it combines software and data analytics with traditional hardware components.
Ambition that speaks to emotion, logic, and aspiration gives leaders the terms to define new rules for strategic decision-making. These accelerate innovation by letting managers know that what the senior team expects them to do has changed. These rules are proliferated in the organization by leadership movement, a semiformal grouping of leaders anointed to carry the message. This provides wannabe corporate explorers with a license to explore, helping to accelerate innovations that had been languishing in the organization, as well as spurring new ventures to emerge that may have game-changing implications. Finally, an effective strategic ambition also sets boundaries, or hunting zones, so that there is a tight alignment between innovation and the company’s strategy.
Create New Rules
Traditional approaches to change often rely on a fear-based formula: the narrative of a burning platform — an urgent, existential problem threatening the company. However, fear inclines people to avoid risk. Setting the organization’s sights on creating something new and improved is much more motivating.
When Banga, MasterCard’s former CEO, set the ambition of waging a “war on cash” in 2010, he not only created an emotive slogan but also set a new scale of ambition for the company. He shifted focus from competing with Visa for credit card transactions to capturing the 85% of retail purchases that were still being made with cash or checks. Banga saw the fintech revolution coming and wanted to position MasterCard to drive it rather than stay in its credit card payment-processing niche. This engaged employees’ emotions and provided the strategic logic to apply to new areas of growth. By 2020, MasterCard Labs had built a portfolio of products and services with an annual revenue potential of $1.5 billion, including new business payment services and a proprietary blockchain solution for helping to digitize supply chains.
Form a Leadership Movement
CEOs have limited direct influence over the decisions employees make. If they are going to make new rules stick in the organization, they need others to join them to help build momentum for change. Fortunately, humans are social animals: Evolution taught us that there’s safety in numbers, so we’re highly responsive to the signals about whether we belong to a group. We’re quick to notice when the rules change for group membership, and if the new rules are sufficiently consistent, we adapt our behavior to conform. A leadership movement signals that there are new rules for group membership and that people in authority are adopting them. This kind of social movement assures people that it’s OK to break with convention and adopt a new way of working — a cultural shift.
At Analog Devices, Roche knew he was recoding the DNA of the company so that engineering and business leaders would be more likely to put software, algorithms, and digital business at the center of its engineering capabilities and business strategy. Instead of deciding how to do this on his own, he gave the responsibility to his business leaders. While many were on board with his vision, many more were skeptical. He confronted his top 100 leaders with data that showed they were relying on an increasingly mature product set to sustain growth, and he challenged his team to increase the rate of business innovation, not purely technical innovation, at the company. The team stepped up by creating a series of sprint teams — operational, sales, and product development — each focused on a different aspect of realizing the ambition.
Provide a License to Explore
Bold ambitions give corporate explorers permission to be just that — bold — and set their sights on something more. Typically, managers in large organizations learn to stay within their lanes, avoid stepping over departmental boundaries, and focus on delivering results on the scale of their existing short-term responsibilities. But with the introduction of a strategic ambition, anyone who has been unsure about backing radical innovation or has even been actively blocking it thinks again. There is now a new priority — a new path to long-term growth. Strategic ambition authorizes innovators who otherwise struggle to break through the corporate hierarchy.
Roche’s license to explore gave life to an innovation that used software instead of silicon circuits in the transceivers of cellphone base stations, which became a key enabling innovation for the emergence of 5G networks. It inspired one vice president at Analog Devices to conduct a set of business experiments around opportunities in the internet of things — an initiative that led to an internet-connected remote sensing device for electric motors that’s packaged with analytics to support predictive maintenance. Another manager led the creation of a device, now in trials, that can detect when a patient is going to suffer congestive heart failure. These nascent businesses use the base technology of Analog Devices and then complete the solution with hardware, software, and services, just as Roche’s ambition anticipated.
Set Hunting Zones
A license to explore also needs boundaries. Hunting zones describe where a business sees the best potential prospects for realizing its growth ambition and help to narrow the focus of exploration. When Huang set his ambition to put Nvidia at the center of AI, he invited his team to think creatively: “What are we great at and love doing?” and “What doesn’t exist today, but the world would love it if we made it?” However, this was not an open-ended exploration: Huang defined boundaries. He had a strong sense of which industries would likely be the earliest adopters of AI and 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 processors to manufacturers of computers and other electronic devices. AI and autonomous vehicles are now obvious areas of growth for a technology company, but 10 years ago this seemed like a fantasy to many of Huang’s semiconductor industry colleagues.
Businesses identify hunting zones by applying a simple lens: Find a megatrend with high-value customer problems you can solve with assets you have or can acquire, and apply them in the most attractive market segments. For example, under Joly’s leadership, Best Buy executed an audacious growth strategy into elder care. The company identified the megatrend of an aging population and considered the advantages it had as a trusted brand with national reach and an army of Geek Squad tech-support personnel. It identified key customer concerns — such as the strong desires of elderly people to age at home and of their adult children to know that they are safe. This led Best Buy into new product and service areas, as well as some acquisitions, to develop offerings for the most attractive market segments. Defining a hunting zone in this way helps to align the energy of corporate explorers with where the business is ready to invest.
Answering the Big ‘Why’
Leading innovation in established corporations is hard work. Great companies are rarely disrupted because they do not see disruption coming: Kodak had all the digital photography assets it needed, Nokia had the same for the smartphone, Blockbuster passed on acquiring Netflix, and Barnes & Noble could have purchased Amazon. The problem is that the gravitational pull of the traditional business makes it intensely hard to justify investments that appear to serve a different agenda. When threatened, we humans seek safety in what we know: the skills, capabilities, and routines that made us successful. This makes it even more difficult to move into new areas of opportunity.
Strategic ambition provides an emotionally engaging aspiration that creates a logical bridge between the past and the future. It answers the big “why” question that tells nascent corporate explorers that it’s OK to risk taking the business into the unknown. And it provides the context for corporate explorers to ideate and incubate innovation and new business models and eventually take some of those to scale.