#19 What Every Innovation Program Gets Wrong
with Bud Caddell
Bud Caddell is the founder of NOBL, a global change agency that helps leaders make change. He grew up obsessed with technology, even serving as the Head of Technology at a venture-funded startup while attending high school. After years of helping the Fortune 500 develop innovative new products and services, Bud came to a realization: organizations don’t suffer from a lack of ideas, they suffer from ways of working that kill innovative ideas. He started NOBL to help organizations respond to a world of increasing change by fusing design thinking with organizational psychology.
Prior to NOBL Collective, Bud was a Partner at the management and strategic consultancy, Undercurrent. He also served as SVP of Digital Strategy and Innovation at Deutsch LA. His work has been featured in The New York Times, The Wall Street Journal, Forbes, and AdAge. Bud has been named “one of the most creative people under 30” by Business Insider and The Guardian named him as one of ten strategists to watch.
Bud’s clients have included: Pepsi, CNN, Volkswagen, Bank of America, HBO, Nasty Gal, Calvin Klein, Levi Strauss, esurance, The College Board, Bloomin’ Brands, Ford Motor Company, GE, Nike, Taco Bell, Reddit, and many others.
[00:57] NOBL – The origin story
[02:50] Bud distills the main ideas in the piece he wrote and why he wrote it
[05:42] Does every organization need an innovation lab…?
[08:09] Who are the Scalers…? And where can I find them?
[16:55] The Flywheel Model (aka the sexy diagram)
[19:11] Exit thresholds
[22:55] What’s the right level of separation between my core business and innovation team?
Yaniv Corem (00:40):
Hey, bud. Welcome to the show.
Bud Caddell (00:42):
Hello. Glad to be here.
Yaniv Corem (00:45):
Cool. So maybe let’s start with a bit of context. You founded Nobel spelled N O B L. Could you explain what is Nobel?
Bud Caddell (00:57):
Yeah. Let me, let me take you back in time a little bit. I am a recovering software developer, never a good one. And then I fell into sort of innovation consulting and was an innovation consultant for companies like Pepsi, GE, MX. I helped build a lot of innovation labs and prototypes and pitch decks, and, Oh my God. Oh my. And then sometime around 2008, 2009, I looked at my success rate and it was abysmal like the, so few of the ideas that I had put on paper or created in prototype, or even got to initial testing stages really existed in the world. And I realized that I was solving the wrong problem, that I wasn’t solving the culture and people problem inside of organizations. So I left the innovation world behind and started Nobel, and we really think of ourselves as a culture and change agency. And so, you know, the epiphany I always tell people about is that organizations aren’t suffering from a lack of ideas. They’re suffering from ways of working in cultures that kill good ideas from the people who work there.
Yaniv Corem (02:03):
Exactly. Exactly. So the first time I came across Nobel and your work was through this beautiful, beautiful article that you wrote titled…It is. It really is. And I, and I’ve said this before on a previous conversation, it also has like one of the sexiest diagrams I’ve ever seen. So, you know I’m, I’m hooked. I was hooked. So the, the article for our listeners is called What Every Institutional Innovation Program Gets Wrong. And I will link it in the show notes, but I was wondering if you could kind of give the gist of it, you know, distill the main idea for those who haven’t read it.
Bud Caddell (02:51):
Yeah, it was in response way back when when Google X, which was sort of the, the most experimental arm of Google was actually dismantling itself and thinking about what worked and what didn’t work. And so much of that story about they created all of these incredibly innovative ideas and projects in the world, but really failed to scale those ideas and especially failed to scale them back into the mothership. And so much of that felt like PTSD from my time as an innovation consultant, where you have a great idea, a great business case that you validated, and it’s like dropping a seed on a linoleum floor. You can’t expect it to sprout. So, and we were working with a couple of clients at the time, trying to do innovation differently inside their organizations and what, what dawned on me. And it’s, it’s really obvious in retrospect is just innovation is, is a Baton race.
Bud Caddell (03:49):
It’s a relay race between sort of, you know, the people who live at the edge, who you want to experiment with things that can’t scale yet that don’t have a business model yet behind them that are just exploring wholly new ideas and diffusing new technologies. But then you have the other side of the organization, which is optimizing what you did yesterday. So how do we keep the lights on for cheaper? And there’s this enormous Canyon between those two teams and the realization that we were going through with a few of our clients and as articulated in the piece is that there’s this missing scale team and function. That really is the Baton handoff between your lab that probably exists in Silicon Valley or far away from headquarters. And then the day to day product managers and general managers in the organization, there, there needs to be a team whose job it is to scale innovation, both commercially and internally. They need to be your best entrepreneurs. They need to also understand how to integrate with your existing systems. And it’s just this, this complete absence in most organizations. And that’s why you get a lot of you know, not invented here, reactions from VPs when innovation teams try to hand over work. That’s why there’s such a cliff between new ideas and then seeing those ideas in the world, in the real world as part of like the prod, the company’s portfolio. Yeah. Right,
Yaniv Corem (05:16):
Right, right. And in the piece you say I’m going to try and quote you here as a large institution, you need an innovation lab. And I find that super interesting. Does that still hold true today? And I’m also wondering what you mean by innovation lab?
Bud Caddell (05:42):
I mean, it’s somewhat dated that when we think about innovation labs, even from like 10 years ago, we picture you know like a space in San Francisco or in the Valley with lots of random technology, we often picture a physical space. Right. which is far less interesting in times of COVID of what we’re really talking about now, but you do need a dedicated team who is looking three to five years out in terms of possibility, because especially for public companies, they’re just so obsessed, not even on the quarter, but I’m talking about on the day, you need a special group of people who are freed up to think truly about the future and about who can disrupt you, about new technologies that can make consumers lives easier and better. You absolutely need a team and that team can now be dispersed. There’s so many tools that allow that to happen, but you need resources behind that. That’s the other thing. So often in organizations we find is that you’ll, you’ll hear innovation spoken about nonstop, you’ll even read it in annual reports, but there are no resources behind it. So it’s completely unfunded. Yeah. It’s absolutely insane that, or, you know, let’s be totally honest. Innovation is often a holding pen that organizations send weirdos to, to sort of send them out to pasture. And it’s like a year later they’ve moved on because there was like no career progression, no impact or anything. Yeah?
Yaniv Corem (07:17):
Yeah, exactly. Like I keep remembering that CB insights quote you know, someone’s stuck in their career, give them innovation. I think it was something along those lines. Yeah, absolutely agree. Yeah. Now, okay. So you’re saying that you need that third team, the scalers I keep coming back, you talked about exploration and optimization, and I like that you used the word optimization and not exploitation because I keep thinking about that paper by March, right. Exploration and Exploitation in Organizational Learning. So why do you think they’re missing that, that third piece? Like why does that happen?
Bud Caddell (08:09):
It was a funny revelation to me because before I started doing corporate innovation, I worked at a lot of startups and almost every one of the startups I worked for failed to scale. And so often scaling is the, is the absolute hardest part of any new venture yet corporations seem to think because they’re innovating within their own walls, that they are protected from the challenges of scale. I mean, scaling everything from trying to find a viable business model to integrating with systems, to, you know, finding more than your first five customers to, you know, just so many things that can stop just from scale on the external world. And then internally it’s just inertia, it’s politics, it’s incentives, it’s organizational structures. And yeah, I think the organizations just convince themselves they were insulated from those challenges. Meanwhile, you know, at least one person’s data point like ours, my success rate and the success rate of the firms I was working for were so, so small because they really like, we had great ideas on paper.
Bud Caddell (09:17):
I mean, we, you know, we’ve, we worked on projects where the CEO would give a rallying speech internally that this was going to be their next huge innovation. We would look, we literally looked at buying a factory in China to start to mass produce this new device for the company. And then within weeks it had completely fallen apart because the head of stores would have to give up retail space for it. The head of marketing would have to give up some of his holiday budget to cover promoting it, which he didn’t want to do. And all these people were not incentivized to, to actually promote innovation. And I get it and that wasn’t in their yearly goals, but it was just like, it’s just like one one loss too many at the time. And that was when I realized I was solving the wrong problems.
Yaniv Corem (10:05):
Yeah, absolutely. Do you think that these skills, I’m trying to think, like what would be you know, kind of the the, the characteristics that defines them? Like what, what would you look for if you had to put together a team of scalers?
Bud Caddell (10:24):
So when we do this normally? And then a lot of the companies we work for because we work with a lot of the Fortune 500, they have some kind of innovation function. So when we start to think about, okay, how do you broaden what’s the next stage out from that? We think about one just bringing across sort of like the technical product manager of the product, because they understand actually how it works, but then we need someone who can bridge the gap between the, the organization’s main systems, technical systems to be able to help scale that, to like be, and then also really, I said it before, and you know, it’s a term, no one loves, but intrapreneurs, like they’ve got to be able to play the political game. And, and curry favor. Like one of the, I get asked a lot, like what, you know, what trainings do innovation teams need, and people so often go Design Thinking, and I’m my first instinct is always persuasion and negotiation.
Bud Caddell (11:20):
I’m like, unless you actually, you know, like I forget the exact title of the book, but like Getting To Yes is like actually a much more important book to read than like learning double diamond. Because yeah, you’ve gotta be able to sit in a conference room with someone who has short term goals and incentives has more projects on their backlog than they can actually execute has a matrix organization. So they have three bosses breathing down their neck and you have to convince them why this new innovation isn’t just shiny and new, but also will meet their goals and will fulfill what they need and what you need.
Yaniv Corem (11:58):
Yeah. Plus the risk, like you’re asking people to take on a lot of risk and, you know, most corporates, they don’t like risk. So your, your job is even harder, right?
Bud Caddell (12:11):
Yeah. I mean, everything about the modern organization is about reducing risk and, you know, bureaucracy is such a bad term, but like it was created so we could mitigate risk and we could balance decision making. But the beast has grown at this at this point. And yeah, you’ve got, and you can try to dismantle it. A lot of our work at NOBL is trying to what we get, what we call getting to like minimal viable bureaucracy inside organizations. But you also just, you know, you have to have those folks internally that can navigate those relationships, navigate those, those political waters, because innovation so often is innovation by miracle inside an organization. And you’ve gotta, you’ve gotta be better than luck.
Yaniv Corem (12:58):
Right, right. More than 50/50 chance to either side, I guess, like either fail or succeed, but like, don’t, don’t hang in the balance of like pure luck.
Bud Caddell (13:13):
Well, the worst thing, I mean, like innovation should fail for lots of reasons. Right. But the reason why it shouldn’t fail is because of internal politicking, right? Like the market should beat the shit out of you. The user should come to hate you if you, if you build a really bad product, but the idea that, you know, I’ll share an example. We were working with a client and we were trying to convince them to turn their, like most boring advertising over to machine learning. We were like, you know, like these are banner ads. Let’s, let’s, let’s, let’s let machine learning compare and contrast like 70,000 different assets to find like the highest performing unit for these sites. We dressed the room and all the permutations that were generated. And we started to show them what was already early like early winners on certain sites. And the client came in the room, listened for about 10 minutes and turned to us and said, but I like blue cars, even though the algorithm. Yeah. And it was just, it was just like throw out the entire thing. And it, and it was one of those moments where it’s like, well, I can’t debate you because you’re not a rational person. And you are not someone who should be interfacing with innovation.
Yaniv Corem (14:34):
Yeah. That’s, that’s it. Well, I mean, you know, it’s not surprising, like most of the decisions that get made, I dunno, at least from my experience, they feel like that, like, you know, you stick your thumb in your mouth and hold it up and yeah. It’s that way, we’re going that way. A lot of times it just feels like that.
Bud Caddell (14:55):
Yeah. Well, I think, I don’t know. I think that somewhat the holdover of the cult of Steve jobs, which was like one man, often one white man can know the future and no one else can. And meanwhile, they did lots of user testing and it was a very big team that had lots of debate and, and dissent and things like that. But when we think, when the story comes out…
Yaniv Corem (15:22):
It’s, it’s how they spun it. Right. It just, it makes for a better story, like who wants to hear about all the hard work that they went through and you know…
Bud Caddell (15:30):
Me! I love data. I love those stories.
Bud Caddell (15:34):
I mean, that’s why I only watch shows about like high performing teams that struggle. That’s like the only things I watch, Star Trek, West Wing. I love, I love all that shit.
Yaniv Corem (15:43):
There you go. There you go. So you know, this is a challenge because we’re on audio, but I wanna, I want to talk about the diagram, AKA, the sexy diagram which you call it’s the model, right? It’s the model and you call it the flywheel. And to me it resembles like a bicycle transmission. You got the big wheel, the small wheel and kind of the chain that links them together, transmits the energy. Right. but I don’t know if you planned it this way, but it seems like it’s going, so from left to right, you’ve got the small wheel, it’s the explore team. You got the chain or the middle, which is the scale team. And then the big wheel is the optimize. It’s like the core business and this idea of innovation, it goes from left to right, from explore through scale, to optimize, but only goes one way, is that intentional? Can it work the other way?
Bud Caddell (16:54):
I think, you know, I think it’s possible, but I often think about product development as this endless treadmill from being brilliant to boring, you know, and I think every, every product in the world has a shelf life. You know, that doesn’t mean they all have to completely die, but there’s this there’s, you know, and it reminds me of a Clay Shirky quote of “Technology only becomes interesting when it becomes boring.” So, so there’s a moment like explore teams should be exploring the very edges of what’s feasible in the world with, with emerging technology. But those, you can’t really do a lot with it. I mean, they, they usually make a cool presentation, but it’s not, it’s not a commercial viability yet. And so then it needs to be handed over to a scale team who can really figure out its, its viability.
Bud Caddell (17:48):
And even its desirability, I mean explore teams shouldn’t completely divorce themselves from consumer or user desirability. But depending on what category you’re in, sometimes you just need pure R&D for exploration and then it hands over to that scale team. Who’s real, whose job is, is, is to assess, is this a true commercial opportunity for the business and to pursue it long enough until it can then fold into the optimized core of the business, which, you know, honestly, the challenge there is like, it keeps sustaining that product until the cost of defending it is no longer sustainable. Right. That’s what I, that’s what I think of. And sometimes oftentimes in your product portfolio have product, literally there just for defense, right? Like we’re just, we’re just sort of propping this up still so that we stop competition from coming in, but you have to have again innovations in the pipeline.
Yaniv Corem (18:43):
Yeah. That’s absolutely true. So those are the what you call the exit thresholds like right out of every, every stage Explore has the MVP and the Scale has the proven economics. And then the Optimize has the, what you call the termination threshold of unsustainable economics. So when it no longer is creating the value that it was intended to.
Bud Caddell (19:10):
Right, right. And you know, and the Explore team or explore phase, like we love measuring just like rate of failure, like rate of failure should be really high. You should be trying a lot of things you shouldn’t be committed to. You know, just a single concept explore team or scale team is really about, you know, I, now these days I’m really more fascinated with how interconnected they are to the rest of the organization. You know, I, I don’t want them to be an Island of Misfit Toys. I want them to be hyper connectors inside the organization. I want them to be hyper influencers. And then, you know, the Explore team is, you know, is basic like CPG, how do I, how do I maintain the health and viability of this product over a long time? And how do I, how do I find ways to decrease costs and maintain quality, or even like slightly uptick quality, sometimes I can, you know, to your point of, does it always have to go from innovation all the way to optimization?
Bud Caddell (20:06):
Can it sometimes go the other way? Sometimes you can find new technologies that you can diffuse into old products to keep them alive for somewhat longer. I think about, like, I think about when motors became small enough that you can install them and in razors, and suddenly you could add like a tiny motor to your standard razor. And I don’t know what benefit that provides, but it provides like talk value, I suppose. So you can, you know, sometimes you can keep an old product alive with a diffusion of a new, a new technology or a new trend.
Yaniv Corem (20:40):
Right. I want to, I want to challenge you though, about something that you said about the the, the Explore team, because you were saying something to the extent of like measuring the failure rate and they should be failing, you know, like, like crazy. Is that really, really, so, I mean, it, it, it sounds or feels a little like, you know, the the Steve Jobs stories, like it’s a good story, but does it really happen because the people in the Explore are sometimes just as afraid of failure as like these sort of adopt, I guess the, the culture of the organization. Somehow somewhere it permeates. You know, and then, and then they no longer want to fail
Bud Caddell (21:28):
Yeah. And I’m dating myself a little bit because my days as like a pure innovation consultant was probably seven, eight years ago. And we still talked about failure a lot. And now it’s not as it’s, it’s cooler to talk about learning. Like we fail to learn. I don’t know. I actually made products and I failed a lot and I failed stupidly and amazingly in lots of other things, I think I can usually, if you show me the portfolio of your innovation team, I can usually tell you how knitted they are to the rest of the organization and how, how, how too connected they are. Right? Like, we’re, I’m working with a client right now who had an innovation function. And then they shook the Etch a Sketch and decided to embed those innovation resources inside the brands themselves, and suddenly all of that exploration from like a three to five year time horizon, like dramatically slammed down to one year. And so it was no longer about really future-proofing the business. It was, they were almost just like hired hands.
Yaniv Corem (22:41):
Yeah. So, so there’s a, is there, is there like a, is there like a right relationship or right distance or a right gap between those two functions?
Bud Caddell (22:51):
It’s a good question, like there was um…
Bud Caddell (22:55):
One of my white whales is it was like years ago, I found a study that showed that like the success rate of an innovation team could be correlated to the geographic distance from the headquarters of an organization. And I’ve been trying to track that article ever since. But that requires you to really have the Scale team though, because if you’re only like 500 miles away from headquarters, you really will suffer the dropped baton. But if you do have that Scale team, that can be that, that tether between the two that is really successful. You know, and it’s just, it’s, it’s, especially in a time like this, so we’re talking together, right? Like at the, at maybe the dip of the first part of COVID here in the US maybe there’s a second wave, we have a lot of companies who are in like either free-fall or panic, even companies that seem to be doing well.
Bud Caddell (23:54):
And some categories are still hyper concerned about, about, you know, the day to day and the stock market makes no sense whatsoever. And so I’m seeing across our clients a lot of like bringing innovation closer and closer and people over gripping on it. And I see what could have been longterm opportunities for organizations become sort of like immediate short term gains. And I’m seeing people who would have sat on that Explore team, whose job it was to think about really the future of the organization in a defensive and offensive way now just fulfilling, you know secondary roles on teams. And I think I, you know, there’s going to be a bounce back at some point, and I think it’s going to be costly. And that’s why in every recession or in every moment, like this disruptors come out, because while established companies panic over the day to day, there’s someone out there who’s taking bolder and bigger risks on a shoestring budget in comparison as well.
Yaniv Corem (24:57):
Right. Exactly. So this, this article it was born out of experience, right. Working with your clients. Did you, then, after you wrote it, did you implement it? And what were some of the, the learnings?
Bud Caddell (25:14):
We’ve built a few Scale teams. I mean, I wrote that the moment we were building a couple and we’ve done a few after, you know, I would say what’s working what hasn’t we had to get smarter and smarter about who we dedicated to that Scale team. Now, I often ask the question of who is a cultural influencer. Who’s been with the company who can, who has made the impossible happen in the company. And those questions help us figure out who’s the right sort of lead for that role. Again, a bigger focus on persuasion and negotiation is something that we’ve learned. But you know, we’ve still suffered like the same the same things that all innovation teams suffer. I mean, we’ve, we’ve built innovation teams that have gone and won you know, lots of press and have earned millions of dollars for organizations.
Bud Caddell (26:08):
And then a new CTO will be hired and they’ll completely shake the Etch A Sketch and start over again. It’s just, there’s, you know, innovation has that problem and most organizations that it is sexy. It’s either, it’s either the pasture that you put the weirdos out to, or it’s where people think they’re going to make their name. And both of those are problematic in terms of the projects that are literally in the pipeline. But I mean, we’ve had, we’ve had pretty big successes at the same time and that model has, has held up pretty well. And I think what’s actually more interesting to me is I think that article is probably like three or four years old now. And really in the last like six to 12 months has the attention actually been applied to it, like HBR picked it up.
Bud Caddell (26:58):
And we’ve been having conversations like this and more clients have been reaching out because I think they’re, I think, you know, again, I was early as the innovation guy for a lot of companies that we run, like the first swing of building those innovation labs years ago you know, around more digital technologies, I’ll say there’s certainly labs that existed before that. But Xerox Park, one of my favorite on the planet to walk around in, if people don’t know that story, I mean, that is like the definitive example of a group of people who were tasked with imagining the future. And then it went nowhere and Steve Jobs and Bill Gates showed up and stole everything. Which, which is amazing to me. But lately, yeah, that, that article has been getting more and more attention and more relevance because I think organizations are starting to see that there, that there is a, you know, and it doesn’t necessarily have to be our solution, which is like an entirely new team and set of resources, but they are realizing there is this droped baton between new ideas and new technologies and implementing the day to day business.
Yaniv Corem (28:06):
Fantastic. Bud, just before we wrap up, if people want to learn more, obviously I’m going to link the article in the show notes and all our listeners should just go and read it. How can they learn more about you? How can you learn more about NOBL?
Bud Caddell (28:25):
Yeah. So great. I appreciate the question, appreciate the links. You can visit our website it’s nobl.io And then if you click the resources tab, we have a site called Academy, which is where we kind of, we publish everything we learn. We’ve always had this, this idea as an organization that you either like outspend or you out-teach your competitors. And also it’s like the best onboarding tool for every new hire we have just like, go read the, go read our greatest hits. It’s, it’s free, it’s open a lot of our IP is just free, freely available. Yeah. And, and we’re working to even scale that even further, like we’re working on a project right now to try to, to take like management as an idea from an oral tradition to an actual craft which is a whole other project called Work Hub that we’ll talk about sometime someday later on another podcast.
Yaniv Corem (29:16):
On the next podcast. Yeah. Let’s leave something for the next one. I I’m so glad that you put up Academy because it has so many great resources and I often go back to it. So really thank you for that.
Bud Caddell (29:29):
That was very kind to have me. Thank you so much.
Yaniv Corem (29:31):
Thank you for being on the show.