The Innovation Show
Innovating Corporate KPIs - Ellie Amirnasr and Charles Vaillant
Ellie Charles Mann Hummel Innovating Corporate KPIs - Ellie Amirnasr and Charles Vaillant Driving Progress with Mann+Hummel's Hunter Strategy In this episode of the Corporate Explorer series, we dive into innovative business practices with Mann+Hummel's CTO/CDO Charles Vaillant and Digital Ventures Manager Ellie Amirnasr. The guests discuss the pitfalls of applying traditional KPIs too early in new business ventures and advocate for non-financial progress metrics. They introduce the 'Hunter Strategy' for pursuing business validation and scaling within exploration-type projects. The conversation covers how to manage resource allocation efficiently, the evolution of their innovation framework, and essential advice for corporate explorers. This episode is sponsored by Wazoku, a leader in creating sustainable innovation ecosystems. 00:00 Introduction to Business Innovation 01:10 Sponsor Acknowledgment 01:49 Meet the Guests: Ellie Amirnasr and Charles Vaillant 02:54 Understanding Mann and Hummel 04:56 Challenges with Traditional Metrics 10:54 Hunter Strategy Explained 17:21 Implementing Effective Metrics 23:59 Resource Allocation in R&D 30:18 Advice for Corporate Explorers 34:47 Conclusion and Final Thoughts Business Innovation, KPIs, Venture Management, Non-Financial KPIs, Innovation Ecosystems, Corporate Exploration, Growth Validation, Hunter Strategy, Mann and Hummel, Wazoku, Aidan McCullen, Ellie Amirnasr, Charles Vaillaint, Corporate R&D, Digital Ventures, Strategic Metrics, Innovative Processes, Resource Allocation, R&D Investments, Corporate Transformation Find Charles: Find Ellie: Find Aidan:
- Duration:
- 35m
- Broadcast on:
- 03 Aug 2024
- Audio Format:
- mp3
A new business innovation in corporations is just like a venture, managing it as an operational business or corporate R&D project is a recipe for failure. One common pitfall is applying traditional key performance indicators KPIs too early as it stifles risk-taking and prevents innovation. Instead, our guests argue in favor of using non-financial KPIs that indicate progress at early stages of any new business validation. These serve as a compass that helps the innovation team, stakeholders and management navigate their way to success, well-defined progress and success metrics when combined with the right understanding on how to build a hundred million dollar business, enable business owners to evaluate the actual performance of their business in almost real time. At Man and Hummel, today's guests used a hunter strategy concept to design growth validation process for their digital ventures focusing on exploration-type businesses. Before I introduce those guests, I want to thank our sponsor of the Corporate Explorer Series, OZoku. OZoku helps large organizations create effective, sustainable innovation ecosystems that accelerate efficiency gains and new value growth. It does this through intelligent enterprise software that connects and harnesses the power of employees, suppliers, startups, universities and the unique OZoku crowd of over 700,000 plus global problem solvers, and OZoku called that Connected Collective Intelligence and you can find OZoku at www.wozoku.com. Now, to today's guests and the latest episode of the Corporate Explorer Series called Validation, managing the journey from concept to scale, we are joined by two corporate explorers who have done just that. Ellie Amirnas and Charles Vayon, welcome to the show. Thank you. Thank you for having us. It's great to have you on the show, guys. We have so much to talk about and you have so much wisdom and scar tissue and arrows in your back to share with our audience because you've been through this many times and I was so intrigued to hear about your story because one of the things we talk about in innovation all the time is how metrics are broken. But we also don't realize that metrics can be broken even for the innovation process because the innovation process changes depending on the size of the opportunity you're going after, whether it's B2C, B2B, what life cycle stage that business is at, that opportunity is at et cetera, et cetera. So there's loads to get through today. But I thought we'd start up first by explaining who man and homel is, who you guys are in that business. My name is Charles Vellaud. I'm the CTO and also CDO of Manhattan also in charge of the technology arm and the digital We are a privately on German based corporation. We have been in business for 80 plus year and our focus is to separate the useful from the harmful in other terms we do filtration. That's what we do. The filters, of course, filters are everywhere in your daily life from the food that you eat, the air that you breathe, the water that you use for your laundry or washing yourself all the way to the way you will work with your car. We do about 32 filter every second 24/7 and we'll be located any location globally when a so-called hidden champion of Germany. I'm Ellie Amrinas, as you mentioned, and I've been with men and homels for a little bit over 11 years now. I studied material science and the Joy-Man Holos Innovation Project Manager. At first, I was more into the innovation process for core business development. Then in 2018, I started the journey of transformational business development and digitalization. Since then, I've been dealing with corporate metrics for startups and startups behavior for corporate and currently I'm managing the digital ventures and digital business for men and homel. Let's get stuck in. We have so much to get through. Many of our audience are corporate explorers, they're changemakers, transformation artists inside organizations and also startup founders. We know that traditional metrics and measurement are the bane of so many of our listeners. Let's share why that is from your experience before we get into solutions and I'd love you then, Ellie, to take us through the Hunter strategy. But maybe, Charles, we'll start with you and what's so broken about these metrics. Naturally, when you do innovation, you are investing quite a bit of resources, which is manpower, but also financial investments that, at the firm level, you're competing against all those sorts of investments and your top management, you see a full one to make sure that those investments are good use. Naturally, the way you run your core business is very efficient in order to measure it. You measure your ROI on project, you measure your return on investment, your time to market, and you're able to do this in a very efficient way. We typically tend to call this the exploitation type of business. The market risk is very limited or in existence. You want to enter a new market with a product, but you have to work on the technology. So in my view, it's pretty straight line. You know what the objective is, you know where you want to go, and then you go there. The typical metrics that people use are okay for that, but then when you go into more breakthrough innovation, transformation be, depending on how you call it, it's a new market, new business model, this type of exploratory type of innovation becomes a bit more nebulous. Why? Because the market may not exist, the technology doesn't exist, and this is not straight line. In fact, we know and we have experience that you never end up with what you start with. The purposes of today is not what you will deliver. And as you go through the journey, you progress, you learn, you pivot, you change your action, you stop, and once in a while you succeed. So I like to say that innovation in general, in my view, cannot be efficient. Okay, so that is a big statement, radical. But then I quickly enhance the sentence, says, but it needs to be effective. So our job as innovators, our corporate explorers, are really for us to find the most way to be effective. And we know we have to design solutions and process where waste is okay, and learnings are okay, and for those, the metrics of today, they just don't work. So you need to find another metric, because having no metrics at all is also not an option. And the reason is because you create a huge amount of frustration, the team is anxious because they know the top management can pull the plug at any second for any reason. And there is no transparency and disability when they can do this. Management is frustrated because they feel the team is running in circle and not delivering any results and they're wasting money. So you create that situation where it's unhealthy. So we try to, we are German companies, so we like metrics. So we're like, okay, how can we break this paradigm? How do we design a system and metric that enables us to provide that transparency, the disability without pulling into the trap to measuring the wrong thing? And Charles, before we come to Ali and talk about punter strategy, I just wanted to ask about the reporting structure, because obviously your executive leadership team understands the metrics need to be different, but one of the big challenges in so many organizations I talk to and many guests that we have on the show is that perhaps the corporate explorers reporting to a CFO, and the CFO by their very nature is not going to agree to the fact that we're inefficient here, we're going to create a lot of waste, and they're going to be going, oh my God, and panicking all the time, and how to deal with that. So you obviously have had to evolve over time to get that to be the mindset of the organization. But there has to be education of that for the senior leadership team, particularly if it was a stable exploitation business in the past. Yeah, absolutely. I think it's the natural evolution. I mean, the senior management and the mandate of the CEO, the CFO, the C-suite, they need to understand that. And they all smart folks, and they all went to visit the school, and they studied strategy, and lead startup, and reading the book, so typically they are, well, a form of water. In fact, the sole concept of exploration and exploitation really was started with our CEO bringing that concept and public discussion that he has had. So I personally reported the CFO of Manhamu, and she understands that, in fact, she has a very concept of innovation herself, particularly we tried this. So we have it with dialogue, not for sure, globally we have to deliver our numbers, and we have to be profitable, and so on. The world is changing at such a rapid pace, transformation, big digital, big AI, everything around us is changing at such a rapid pace that the C-suite cannot ignore those type of changes and direction, and therefore they rely, and they are requested and required by their shareholders to innovate beyond the core, because innovating only on the core will not guarantee success. In fact, it will probably guarantee long term failure of the core for it. Amen. I'm your brother with all of this. So Ellie, let's talk about your approach and using the hunter strategy, and I'm going to share on the screen, and I'm not going to give anything away to different animals and how you approach those different animals over to you to take us through this. Sure, absolutely. Before I start to explain the journey of hunting in a corporate environment, I just want to second what Charles said, innovation by nature is an decision for corporate, standardized process, I would say, because for a good reason corporate is coming and standardizing their processes and everything, and innovation requires faster iteration and understanding of what the learnings are and then building on top of that. There's not much standardization that you can actually put on that because you're changing direction quite often. Moving to the hunter strategy, it's exactly what it is. And if you're looking at an animal, how it's going to move, how fast it's moving and everything, this is changing your strategy as well. So imagine five different types and size of animal. Imagine a fly, a mouse, a rabbit, a deer, and an elephant. So the size of each animal represents the size of a deal that you can get out of a business. So fly, for example, represents what I would say a consumer market, for example. So it means that the deal size is around $10 or less. The mouse is representing the size of one deal of $100 or less. The rabbit is around $1,000 or less for one deal. And then the deer is 10,000 and goes up to elephant and you can go to dinosaurs and any size of the animals that you want to actually put in there. This concept coming from Kristof Jann says, "If you want to build a $100 million business in this world and you're going after fly type businesses, which is $10 or less, you require to acquire about 10 million customers to actually get to that point. And if you're going to an elephant size customer, it's around 1,000 customers and you have to acquire to get to a $100 million business." Okay. What does that tell us? When you have somebody that has to make a decision for a $10 or less, they usually make that decision in an hour or less than that. It's either a click of a button or something like this. So your business type and the decision-making process is completely different. When somebody has to make a choice for spending $100,000, they usually take their time. They do more evaluation. So the sales cycles are different for these type of animals and these type of businesses. Why am I explaining it like this? Because at Man and Hummel, we actually work backward. We look at our targets where we want to be in 10 years, 20 years. And then we reverse engineer that business process and come back for KPIs and today's world. Okay. But it means that if I'm trying to reach to a $100 million business for an elephant type business, it means that I have to acquire 1,000 customers. My sales cycle, most probably, is between 3 to 6 months. So how many customers in what period of time do I have to acquire? And we start working backward ourselves. Like, what is the pipeline that we have to build? How long does it take to actually get from the time that we launch this product to acquire the first customer? What is the growth curve and all of these things? And then we develop the KPIs based on that instead of jumping in and putting like, okay, so we want to get $100 million in 10 years. We divide it by, I don't know, 10. We create this hockey stick and we're good to go. And then we constantly get frustrated by not hitting our sales target. Few astronauts, he will tell you that we constantly, at the beginning, use the set targets and not reach it and set targets and not reach it. If you show them in the CFO, of course they get frustrated because they plan for every single dollar that you're planning to bring in and if you're not bringing that, it doesn't make sense. For investors, it's very important to show their return on their investment. Not necessarily right at the beginning, the return on investment is in dollar that you can bring in. It's actually about the customer base that you're building, the outreach that you will have, the market that you are creating. And we started putting KPIs on those at the beginning, especially when we were doing exploration. And if you cannot hit those targets, you definitely cannot get sales. If you cannot even get one customer to talk to you, if you can't even create a proposal or quote for 10 customers of the size that you're talking about, you will never actually get to making any sales anyway. And then we communicate these with the stakeholders and the management so they will see the progress. And it's actually, I would say, a business practice to go through these efforts that you have to actually deliver or close a deal. And that's basically the concept of Hunter's strategy. Now, if you want to do a fly, you're not going to go and sit with the customer and talk to them. Most probably it's an e-commerce platform. The metrics for e-commerce platform, the way that customer here from you is completely different. And then we change our approach for each business based on that, which sometimes it might not be the same practice that today, for example, a man in a homo is using. So we avoid the standardization of the process that they have and try to test these ideas with this strategy. I wanted to lean into something you said that is so important. And it links to what Charles said earlier on is that you have created some type of relationship with a CFO or whoever you're reporting the metrics to. And we, and I've been guilty of this, miscommunicate or just go finger in the air and guess what those metrics will be, not being sure of when you'd be able to deliver those. But in the past, and I'm sure some people still do this, we blame them. We kind of goes, those dinosaurs, they don't understand, et cetera. But when you point the finger, there's three pointing back to yourself and you got to realize that, well, I didn't even do my homework here to understand what are the right metrics, how to your point, different businesses in different business models all have different metrics, and then to be able to capture those and then use them the next time. That's not something that is even interesting to many, many people who work in innovation, because it's not the fuzzy ideation stage. And what I'm so struck by by you, by Man and Humble, is that you guys have created a process. But even that process evolves consistently and constantly. And I'd love you to tell us a little bit about that, because you use your processes to actually innovate your processes. Yeah, we do. You can't stand still, otherwise it doesn't work. Because the last thing you want is to have a very academic process. And I think everyone probably have the listeners, I mean, that situation, you come with somebody that's already rolled there, I was like, yeah, but it's very academic. It's not the real world. We have to make money here, right? So it's okay to have those type of hypothesis and concept, but they have to work for you. And what works for us probably doesn't work for other firm, right? So you have to adapt. I think any type of framework that you're using, being the horizon one, two, three, the dual transformation, you have the veins framework, it doesn't matter. All of those, in my view, they need to be adapted. And the way you measure this needs to be adapted as well. But we have done over the last 12 months. So you understand now that especially for exploratory type of business, we are actually forcing us. We do not measure financial metrics, we measure progress metrics, gross metrics. So we're looking at customers are acquired systems we're delivering the usage of the platform. So depending on the type of business, we disconnect the numbers. Now we do have, we track sales because we also track cash flow and we try to replicate for our corporate data, the same type of focus on the cash. So we look at pre-cash load on the multivacers and then the owner of that business or that team needs to understand how much is getting from its customer, how much is investing. So that's really from a pure cash flow perspective, making sure that they understand that cash is limited and cash is precious. But regarding the patience that we want to put on the project and to avoid the discussion about how many zombies we have in the organization, this is where we have a progress metric. Right. So, and here over the last years, we really, we thought about a method where we look at the five dimensions, the product market fits, which is very important at the very early stage over the initiation, then we look at scalability of the business, we look at profitability of the business, but much later on, so depending on the later stage of the role, we look at ultra-advantage. Are we leveraging the capability of the organization to give us this ultra-advantage and the market size? Are we attacking the one that Ellie was mentioning with the animals? It's nice if the subject business is 10,000 for every, for every acquired business, but if there's only five in the world, you have dinner, so the question is, do you even want to get this? So let's make sure we don't end up with the niche business. And the reason why this is so important that the target addressable market is significant is because the chance of success are very low and we have to be honest and let's go back to my adaptation is that need to be effective. So I got to make sure that if I place my bed into the quadrant, I need to do the best job possible, but if I get there, you need to provide huge reward. Because otherwise, when you make the numbers game, it just doesn't have to. So that is, and that's talked about the evolution, so adding this new type of metrics that we are just correctly deploying, and it's really helped the team to really speak the language that people speak about product markets, and they'll just then, okay, next six months cycle, we will focus on demonstrating and validating and our product has a good product market state. In the past, we used to ask the question, do you have a product market? Yes, we do. We have one paid customer. Now we asking, okay, show me evidence that you have a product market. Show me evidence that you can scale out. So I'm not, I appreciate a discussion, but I don't take it for base value. You need to demonstrate with data that you have a product market, that you scaleable, that you profitable, and that you leverage the company capability. So it's a little bit more in depth and getting the game type of things, a little bit more difficult about the discussion. And the perfect provide that transparency between the team and the management, because at the end, the management, in my view, the management does not have the capability to render your business, right? So what got you here won't get you there. We don't have to run the core business, but as a CTO, I don't know how to code. I don't know how to design sort of the chemistry that we're working on. So I have to trust that my associates are competent. But I can do is provide the framework and time bugs, a space for them to innovate, for them to show progress. But we are very clear on that time frame and what are the objective to achieve. And then we get at the end of the cycle and we can look at the data and say, are we happy with the progress? Are we not happy? We give it out of the chance that we don't. We've talked about managing different businesses, how to hunt businesses like Ellie talked about, but one of the things that consistently comes up is resource allocation. The way I think about what you're doing is you have many businesses like plates on sticks and you have to give them different energy, different resources over time, different money allocation, people allocation, energy allocation, time allocation of leadership energy. But one of the things that I see a lot is businesses, mature businesses, do not invest or in D money like proper or in D money versus incremental or just business as usual improvements that they label as innovation that aren't so far away from or in D. So even when they get government grants, this happens where that money doesn't go to where it really needs to do to your point, Charles, what got you here won't get you there in the future. How do you manage that resource allocation to be able to protect funds to go that's proper or in D money that's not to be used for incremental innovation or business as usual improvements. We like the analogy now and Ellie told us about the onto strategy. So if you think about going hunting, you have the best equipment, right, if you go hunting with a slingshot and three starting your pocket, it'll be hard to feed yourself with a family. So you need to have enough resources if you think about the universal metric corporation by using to look at the capability of an organization to innovate is a very simple one. It's R&D investment with a percent of net sale or sale. So this is what is reported. The most innovative company has not spending over 50% of their sales on R&D. And then you can go through Google, you can look at all this company. But if you think about this, this R&D budget is needs to be now distributed between different types of R&D work. And corporation like Manhattan, we are an industrial company in the B2B space. We spend and we use a lot of that financial resources into incremental time. So some people call that incremental innovation fact that Manhattan, we don't call that innovation, we call that on the work. So what are those? Those are material cost reductions to get a little bit more gross margin on your father. It's the change of label on the product. When you're selling a product to a customer, you make a private label tomorrow, the same product that the box is to be different and so on. You get an engineer to create a new partner over loading the systems. It's very incremental, help you to survive. Very important to your business is not going to help you break tomorrow on the map. So then if you look at the percent of sales, and you start to bucket what you're doing. So you look at incremental span, you can look at core innovation, true innovation. What are those? Innovation that drives USP, differentiation, brand equity, where you can go into the market and get market share because your product is so much better than whatever exists today. Either in your core business or maybe some adjacent business that you have. And then you have the breakthrough or breakaway type of business, which is the revolutionary type of things that has a high chance of return, but also a low chance of success. So you need to look at this because today, and it's the way we look at it, we spend the majority of our new span on this incremental path. Therefore, we are indirectly starving the true investment. Our CEO, I was with him last week, and he was saying, if we would have a better way to use that investment, there's so many more innovation we can break the market, right? The ideas and the potential project is not the problem. The problem is how do we finance all this while keeping the incremental business as well. So now you think about digital transformation that we are all talking about, right? AI-generated designs, how do you core the products without having a human behind the keyboard and so on. So you can now take this majority of your R&D span and through internal transformation, how do you drive better processes that you can really take the majority of the human tasks out? So that process, still needs to take place, designing a new label, changing the color of a product, but that is done basically almost automated. You have few people controlling it, and so you read drive, now you talk about efficiency. Now you drive the efficiency of this as much as possible, so the amount of R&D resources and dollar spend on that is as low as possible for the same output. And every dollar you save, now you reinvest into creative type of work that requires experimentation, that requires creativity, that requires innovation, because that process to the majority of its work, you cannot digitalize. Creativity is still to this point a very much a human function that that's really people to do. Fantastic. So one last question for each, and this is just Donald, I mean, it's probably a question I should ask most of my guests. It was, you've obviously been through a huge evolution with this journey, you've probably trialled lots of different tools and tactics, you've landed on the Hunter strategy as one to use for yourselves as a framework. And through doing the show, and for those people who are watching us, all the books behind me, there are tons and tons of strategy and tactics and different ways of doing this. But choosing one and then making it work for you is actually really, really important, but also then having the willingness to throw it out and try something new and evolve it and make your own types of frameworks. I think that's so, so important. But the question I have, Elio, comes to you first is going back to your earlier self when you started off on the innovation or the corporate explorer journey. What would be the one piece of advice that you'd give yourself if you had the time machine to go back to yourself and go, hey, Ellie, don't do this, don't do this thing that you were about to do because this will not pay out well for the future. I'd love you to share that. The piece of advice you'd give to an early version of Ellie in a corporate explorer sense. There will be coming multiple things, but one of the things is, I would say- The book coming. The version of the book is coming, yeah, I'm going to put a book on that. Be courageous, really. I think I self-douted a lot at the beginning and put myself a little bit in a quiet seat and start observing some of the things, but be courageous to try and show evidence. I would say a lot of tools are available, people will talk, but two things that actually helped us with evolving to where we are is having top management who are good listeners and they allow or they actually trust and empower and then also courageous employees that are willing to try and bring evidence and lead up. We met somewhere in the middle together and right at the beginning, I would say, I would have started much more with God, but I also didn't know much back then and it's like, is it true? Am I going to sound stupid? Yeah, but you will learn only if you just sound stupid and then observe and then come back and reflect and then go back again and correct yourself. I would say out of a lot of other things, I would be just more courageous to try different things and then just come up with this practice as in less awareness, as much as I can. Brilliant advice. Charles, what's your piece of advice for an earlier Charles? Interesting. How much time do we have? What? That's a whole different series. I would start with, time is the only resource you don't control. Because of this, there's maybe two things that come to mind when you have this question. The one is, I would start much earlier partnerships. We tend to be a little bit naive that we are the only smart people on the planet and you don't wear the business card of the company, then the work we are doing with the corporate venture capital and working with startup and try to leverage their tech and to combine it with yours. We started that quite late and I wish we would have started earlier. We still not that great at it but we are really working to try to leverage it because if you can access a tech that exists already IP and then you license it and then you build an adjacent product with it and you speak to market is phenomenal. That's number one. The second is the shiny toy here in the breakaway innovation, this new business one that everybody is talking about and very cheap people are able to do. When you do this, you keep your eyes off the core business and the core business is so valuable. You have customer relationship, you know what you're doing. The problem is, when we talk earlier, you're consuming so much of your R&D on this incremental. If you can have the discipline to really say, "I'm really innovating on my core." This is in terms of, and now that will be the first time I talked about functional metrics, return on innovation as the best chance into that middle segment. We tend to go to the extremes of focus on the one where the return is the best because you have the capability, you have the brand name, you have the experience, you have the brand in your company, so don't try to go too far out. It's okay to put some bets on the future, but leverage where you are and then evolve that business with initial services, smart education, IoT, whatever it is to make that core business even more valuable to you. I just want to finish up by thanking our sponsor. So Wazuku, Charles mentioned partnership, good way to partner is with the Wazuku crowd of over 700,000 plus collected, collective, intelligent people that are out there on the planet, and you can find out more about Wazuku at www.wazuku.com. And finally, thank you to our guests, Ellie, Amir Naz, and Charles Vion, thank you for joining us. And keep for having us.