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Innovation and the Inevitable Break-the-Rules Backlash

If you want to innovate and generate breakthrough growth, you’d better do things differently. At least, that’s the mindset that leaders of high-growth-potential new businesses within established companies usually start with. It’s a mindset that can be inspirational, especially for mature companies delivering disappointing performance — even moreso for those threatened by new technologies.

If you want to innovate and generate breakthrough growth, you’d better do things differently. At least, that’s the mindset that leaders of high-growth-potential new businesses within established companies usually start with. It’s a mindset that can be inspirational, especially for mature companies delivering disappointing performance — even moreso for those threatened by new technologies.

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Thus, leaders of breakthrough new businesses have a simple and intuitive strategy for motivating their teams. Tell them that they will be part of a nimble, entrepreneurial, and innovative new business unit that can create the future and change the world. Tell them that the new business unit will have a different culture — more open, more egalitarian, more empowering. Tell them that they were hired to be part of an elite team because they were the best. Tell them that they were selected because they can think differently, because they are natural rebels, and because they are ready to break out of the traditional mold. Tell them that they are the type of people that can succeed in ways that others in the company can not. Tell them they are going to help save the company from itself.

This approach generally works. In our research, we’ve observed repeatedly that NewCo employees are highly motivated by it. But what is the message for the managers that continue on with CoreCo?

There is indeed a message. It comes through loud and clear, and it is not pleasant. The message is that CoreCo employees are incapable of turning the company around on their own. That they are rigid, lifeless, and stagnant. Closed-minded, bureaucratic, and top-heavy. Relics of the past. Fossils. Conformists. Utterly incapable of thinking outside the box.

The stuff of healthy rivalry? Hardly. Such stereotypes are hurtful, and can easily destroy any chance for cooperation between NewCo and CoreCo.

Unless NewCo has embarked on a fool’s mission, cooperation is crucial. Companies should be selective about the new high-growth-potential new businesses that they invest in. The competition is stiff — privately financed independent startups, and the vast and sophisticated networks that stand by ready to support them. So why should a large, mature company think it can win in an emerging and uncertain market? It shouldn’t, unless there is a convincing story about how CoreCo’s unique assets, resources, or processes can lend a crucial competitive advantage to NewCo.

Leaders of NewCo need a different approach. They must place a high priority not on differentiating themselves from CoreCo, but partnering with CoreCo. This is not an easy mandate. There are numerous sources of tension that naturally develop between the two. CoreCo may resent the resources that NewCo diverts from its own projects. They may be angered by the fact that while they are squeezing every budget line to deliver the best possible margin, NewCo is able to spend freely with only a distant promise of profits. They may fear that NewCo will cannibalize CoreCo revenues. They may believe that NewCo will, out of inexperience, damage CoreCo brands or customer relationships that have been nurtured for years or even decades. They may resent the attention that NewCo gets from the press or the senior management team. They may naturally feel they deserve more respect. After all, they are the foundation of the company’s current profitability, and the architects of the company’s success to date.

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Despite these barriers to cooperation, NewCo’s leader can establish a partnership with CoreCo. It takes a dose of humility, a dose of empathy, and a few moments’ thought about common interests that NewCo and CoreCo share.

Sure, tell NewCo’s staff that they have a chance to change the world and revitalize growth for the company. But only a chance. And only through an effective partnership with CoreCo.

Sure, tell NewCo’s staff that they are part of a special organization. But it is not special because it is anything but CoreCo. It is special because it has an opportunity to extend CoreCo’s legacy into a new generation.

And sure, tell NewCo’s staff to cherish innovative thinking, flexibility, and initiative. But remind them that CoreCo aspires to the same. In fact, there are any number of shared values, from teamwork, to collaboration, to respectful communication, to respect for a shared brand image. Focus on similarities, not differences — particularly in direct interactions with CoreCo.

The fates of NewCo and CoreCo are interwoven. Divisive leadership can only lead to destructive backlashes.

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