Disruption Games: How to Thrive on Serial Failure

By Trond Undheim

Common wisdom says that success breeds success, and indeed this is how most VCs pick startups, businesses select talent, and singles search for dates. In contrast, the evidence from science to startups shows that only repeated failure breeds success.

In Disruption Games, MIT’s Trond Undheim reveals how companies (and individua

• Language: English
• Publisher: Atmosphere Press
• Release date: May 1, 2020
• ISBN: 9781647646608

Book preview

Advance praise for Disruption Games:

Excited to hear MIT legend, star speaker and moderator Trond Undheim's new book, Disruption Games is available for pre-order. I cannot think of a better guide to the disruptive world that founders and executives inhabit.

— James Mawson, CEO and Founder,

Global Corporate Venturing

Through MIT, Trond has worked with some of the best startups in the world. Read this book for insights on what it took for them to succeed. Part business, part personal development, Disruption Games provides a blueprint of practical ways to jumpstart successful innovation through examining failure.

— Brent Hoberman, Cofounder,

Founders Forum, Lastminute.com, Made.com

Even though I was an experienced founder, I have to say the partnerships Trond facilitated when he ran the startup program at MIT ILP were instrumental to our launch and success.

— Natan Linder, Cofounder of Formlabs (3D printing) and Tulip Interfaces (advanced manufacturing app)

Trond is extremely knowledgeable about the use of technology to reach any customer base.

— David Molchany, Executive Partner,

Gartner Executive Programs

Trond is thorough, analytically strong and has the ability to push boundaries for himself and others.

— Constantijn Van Oranje-Nassau,

Special Envoy, Startup Delta

Trond is absolutely trustworthy, full of good ideas and has got the energy and the optimism to walk on trying to get things done.

— Jochen Friedrich, Technical Relations Executive at IBM

Praise for Leadership from Below,

also by Trond Undheim:

A must-read for any young manager looking to apply the lessons of eBay, Google and Facebook to the real world.

— Julian Herbstein, Founder and CEO,

Magic Fitness

It is a book containing real strategies for real people, based on a philosophy of leadership and a way of thinking that at first seems so obvious, yet at the same time remains so elusive to most of us.

— Espen Moe, PhD, Author of Governance, Growth and Global Leadership (2007); Professor of Political Science at the Department of Sociology and Political Science at NTNU

"Leadership from Below presents an important set of skills and concepts that anyone can use to maximize his or her potential influence and impact in an organization."

— Barbara Larson, MBA, Executive Professor,

Management and Organizational Development at the D'Amore-McKim School of Business, Northeastern University

Trond Arne Undheim

DISRUPTION

GAMES

How to Thrive

on Serial Failure

atmosphere press

Copyright © 2020 Trond Arne Undheim

Published by Atmosphere Press

Cover design by Ronaldo Alves

No part of this book may be reproduced

except in brief quotations and in reviews

without permission from the publisher.

Disruption Games

2020, Trond Arne Undheim

10 9 8 7 6 5 4 3 2 1

atmospherepress.com

.

CONTENTS

Introduction      3

Chapter 1:

How not to partner with startups      9

Silence is bad for corporate-startup collaboration      10

Legal rigidity hampers innovation            13

How to achieve great corporate-startup interaction      14

The tech innovator’s mindset      16

Chapter 2:

The social biosphere of corporate innovation models      23

The ascendency of the main modes of innovation      26

Chief Innovation Officers: A recipe for being unsuccessful      29

Distilling the innovation model      31

Chapter 3:

Innovation labs: The oldest form of training      35

The strange case of Fidelity Labs      38

Are Fidelity’s Fintech innovation efforts enough?      43

Integrated lab or skunkworks?      46

Chapter 4:

Innovation scouts: Unfocused training      49

Startup outposts      53

University partnerships      54

Moving beyond innovation tourism      55

Benefiting from failure      57

Chapter 5:

Corporate venturing: Training without results      59

Investing in VCs as a limited partner      60

Multicorporate investment funds      62

The challenge of establishing a corporate venture arm      67

Oracle’s venture and startup experience      72

Nokia’s innovation escapades      75

Chapter 6:

Open innovation: Outsourcing training      81

Is innovation always interesting?      81

Corporate innovation program successes      88

Hackathons—the newest innovation fad      92

Chapter 7:

Accelerators: Training hard the night before a big race      97

Five steps to follow to succeed with an accelerator      99

Best-in-class accelerators      101

Corporate acceleration—Founders Factory in the UK      102

Data acceleration—Athenahealth      102

Tech acceleration—Jaguar Land Rover’s incubator      103

Consumer platform acceleration—Samsung Next      104

Brand acceleration—The Brandery      105

Acceleration by recognition—Coca-Cola Founders Program      107

Do innovation metrics matter?      110

Truly practicing design thinking      115

Chapter 8:

Corporate-startup partnering: Training with an Olympian      119

Startup partnership in the automotive industry      120

The current obsession with startups      123

A Magna Carta for corporate-startup collaboration      127

Fostering revenue-generation internal spinoffs      130

Chapter 9:

MIT’s innovation secrets: Training with the best      139

The evolution of MIT’s innovation ecosystem      142

The characteristics of an MIT startup      151

The importance of failure in science      152

Chapter 10:

Serial entrepreneurs: The superheroes of innovation      157

Bose Corporation and MIT      158

Akamai and MIT      160

MIT’s top faculty straddle science and serial entrepreneurship      161

Jeff Karp’s vulnerable excellence      162

Professor Bob Langer’s 40 startups      164

The MIT Media Lab, Sandy Pentland, and the digital future      169

What’s so special about the MIT Media Lab?      172

The energy entrepreneurship of Yet-Ming Chiang      175

Stonebraker—the tech world’s equivalent of Tom Brady      177

The character of serial founder faculty      180

Startup focus and extreme hobbies      181

Chapter 11:

Startup failures and epic rescue operations:

Training without training wheels      185

A legendary startup pivot from Mars to marketing      186

TVision Insights—measuring eyes on screen      189

A123—from IPO to bankruptcy to reemergence      190

Beepi’s crash and burn in the used car market      191

The high-growth whirlwind      193

Chapter 12:

My startup experience: Training for yourself      197

The science of focus      202

The biggest startup failures of all time      203

Extinguishing the Torch:

How do I play the disruption games at the highest level?      207

Introduction

We all agree that your theory is crazy, but is it crazy enough?

— Niels Bohr (1885–1962), when presented with Heisenberg’s and Pauli’s nonlinear field theory of elementary particles¹

Common wisdom says that success breeds success; indeed, this is how most VCs pick startups, businesses select talent, and singles search for dates. In contrast, the evidence shows that only repeated failure breeds success.

Consider the Olympic Games. It is an epitome of the high-stakes environment. Participants enter through a rigorous set of competitions that provide a field made solely of the best of the best. Often, the athletes compete only a single time, but they train and hone themselves mentally and physically for years behind the scenes. This sort of muscular building, whether it is psychological or physiological, is virtually impossible to replicate outside the context of this competition.

When an athlete competes on the Olympic level, even last place is a mark of honor. And, more importantly, those who do not place as medalists more frequently join a continuing community of the ultimate athletes as coaches or trainers or, sometimes, as participants once again. These sort of high-level failures accomplish far more than any successes at a lower level may ever achieve.

The additional complexity with innovation is that it is a team sport, which makes it a social game as well as a mental or physical game, like chess or the Olympics. To describe this very activity, we bring in the notion of a social biosphere, which contrasts sharply with today’s prevailing under-standing of innovation either as (a) simply another business function (which needs a leader, a team, a budget, a structure, a templated process, and set of procedures), or (b) a mechanistic toolkit, so that you as a leader can pick freely, from a hammer or a saw whenever you want to, and expect them to perform the same every time, or even (c) a biological ecosystem that performs like insects do in nature (e.g., they swarm and they have some sort of natural dependency on each other).

Rather, I will argue, innovation is a unique combination of a social and physical setup—it is governed by social rules and it often depends on place-based interactions, even in the digital age. Innovation is far from a business function, and treating it as such is disastrous. Innovation is definitely not a mechanistic, engineering toolkit, and expecting it to be is what leads most traditional leaders to failure in innovation (not the fruitful type of reflexive failure we describe in this book, but simply failure). Innovation is also not fruitfully understood with a traditional biological metaphor, because it is a system created by and for humans specifically.

What kind of success or failure is your business setting itself up for? Over the next few years, failure will become a necessary growth strategy for any individual, firm, or collective. Are you prepared?

Disruption Games introduces corporate executives to groundbreaking strategies and frameworks to switch on growth through examining failure on the highest level and risking vulnerability to achieve high-level results. The book also helps entrepreneurs understand corporate thinking, structure, and priorities so both entrepreneurs and executives can partner and thrive. This book also offers my own insights on innovation through my experience at MIT, one of the world’s most notable hubs of innovation.

Through this exploration, readers will come to understand the relationship between failure and success in a dramatically different way than current business literature interprets these terms, typically as study successful firms, fail fast, and, at best, conduct cheap learning experiments. In contrast, Disruption Games fulfills the need for actionable insight on what is truly driving change and provides conceivable road maps on how to become a changemaker on the highest level. The deep insight is this: for failure to be instructive, it must have a deep cost in time and energy. You should not seek failure, but you should seek risk.

Under disruptive conditions, I’ve seen companies that were near monopolies for decades fall from grace in an instant or domain experts become outdated by a single research paper they had not yet read. Even startups can become outright dinosaurs by the perfectly timed product of the next startup. We are all trying to disrupt each other, let’s not forget. Whether you work for a Fortune 500 or are still in school, if you don’t participate and experiment with this world soon, you will be left behind. Many laissez-faire 6-year-olds already are—but some determined 60-year-olds are not. Experience will not protect you. Neither will inexperience.

The benefits of disruption come from practiced and cultivated innovation. In this book, the metaphor of training is deployed to describe how you might think of that process.

Like any game, disruption follows certain rules. Except that those rules are not disclosed to everyone. You have to discover the rules. The rules might vary depending on who you are: each domain has its rules. They have emerged quickly. They are unstable. By the time you know a rule, it might get broken. You can excel at the disruption games by getting a feel for the game itself. You can only do that by going native, by going deep, where failure hurts and could cost a lot. Innovation requires a rudimentary theory of practice, not a rigorous one. On the other hand, you can put yourself in high-stakes settings with high probability of learning where your chances of innovating are far higher than average. Just be prepared for the fact that exposure may not be gradual, since full immersion has real consequences.

Chapter 1 is about how not to partner with startups. It describes the tech innovator’s mindset and talks about how complex it is to foster innovation in teams and organizations, if that’s what you are in charge of. Read it to figure out what a startup partnership entails, from the startup’s side and from the corporate side.

Chapter 2 outlines the social biosphere of corporate innovation, which basically means it describes a new way to see innovation portfolios as living things that require attention and care. Innovation is also highly dependent on creating a desirable social setting where it can occur on a regular basis, it is not just about technology.

Chapter 3 looks at innovation labs, the oldest form of innovation structure and asks whether it is viable in today’s business environment. Labs are costly to maintain. They also require critical mass.

Chapter 4 discusses innovation scouts, individuals whose charge it is to find innovation and connect it to the corporation in various ways. One of the most exciting jobs in today’s workplace, it is also a near-impossible job to execute to perfection.

Chapter 5 outlines the various ways of doing corporate venturing, from VC investment to creating a corporate investment unit. The recommendations I make are based on observing and taking part in hundreds of venturing processes across multiple industries, such as life science, finance, information technology, manufacturing, and retail.

Chapter 6 opines on open innovation, which is a way of outsourcing innovation to external parties. Under which conditions is this a good idea? How is the field evolving? What might the next wave of open innovation look like?

Chapter 7 is about accelerators, which help startups get to market. These can be implemented in many ways. Should you want to build an accelerator or asses the accelerator you have, I provide a few steps to think through and offer some industry examples. In brief, the ones with a true asset to offer are more effective.

Chapter 8 looks at corporate–startup partnering, perhaps the most efficient of all innovation tools. Why so efficient? Because partnering does not require a big institutional infrastructure. On the other hand, it is also the most difficult task to succeed with. Why? Because it asks a lot of those who take part in it. Is your organization startup-ready? Is your startup corporation-ready?

Chapter 9 reveals some of MIT’s innovation secrets. Regardless of where you are in the world, you have likely heard of MIT. Many universities are so inspired that they name themselves Institutes of Technology as if the name itself would rub off on them. If you don’t have it in you to read this chapter, the high-level insight therein is to make sure to reward overlapping, competing initiatives in order to foster innovation. The point is not so much how MIT’s ecosystem evolved, but to demonstrate how a culture of technological innovation is embedded in conditions specific to an institution. If you want to see something similar happen in your own context, you need to build on local ingredients and be mindful of the need for critical mass for things to start happening at scale.

Chapter 10 is about serial entrepreneurs, whom we should all be so lucky to interact with on a daily basis. There is so much to learn from people whose lives pivot around innovation. The goal is to try to empathize with them, try to understand why they got there, why what they are doing seems to them the most compelling thing they could do with their lives—every time. The particular focus here is on serial founders with a strong university connection.

Chapter 11 is about why startups fail. It also describes some extraordinary rescue operations and pivots. When things start to fail, the energy can often be channeled to more valuable pursuits and the venture or the people involved can recover. Even if that does not work, failure offers a lot in terms of learning. To maximize such learning, you need to embrace and fully grasp the situation you were in. If you move on too fast, the learning is lost.

Chapter 12 is about my startup experiences. Have they been worth it? What have I learned? Sometimes, failure is just failure, but even then, there is a silver lining in reflecting around it for personal growth. This chapter examines what can be gained from such examples.

In the coda, briefly I reflect on how to play the disruption games. Participating in disruption games entails allowing yourself to learn without guard rails. Be mindful that your actions do not exist in a vacuum. Thrive on serial failure—but make sure you spread the risk; learn from your surroundings, too.

Chapter 1

How not to partner with startups

Don’t let it end like this. Tell them I said something.

— last words of Pancho Villa (1877–1923), according to legend

This book is written, in large part, to settle a misunderstanding. Tech startups are so alluring these days that everybody thinks they should be a founder, that they need to obsess about startups, and live and breathe technology. Far from it; in truth, many of us would be better off simply adapting the tech innovator’s mindset and building an organizational repertoire that mimics, courts, and most importantly, deeply understands founders and everything that they do, including their frequent failures.

The good news is, this is very doable. As the evidence collected through interacting with thousands of founders, academics, policy makers, and executives will show, the tech entrepreneur’s mindset includes seven key behaviors that anyone can master: