Page 85 - Harvard Business Review, Sep/Oct 2018

entirely when two firms are more than half a mile apart. To by combining a relocating executive from the parent’s HQ with
successfully tap into the market, an ad agency requires not a star already working in the cluster. When a foreign company
only a New York address but an address within a few city enters the United States, this local talent is often an ex-pat of
blocks of Madison Avenue. the same nationality as the parent organization.
The good news is that real estate vendors that make it less A final risk with innovation outposts is that the best ideas
costly for companies to launch outposts are emerging. The and innovations will not flow back to the parent company
coworking company CIC, for example, located in the heart of effectively. Studies of patent data show that poor internal
Kendall Square in Cambridge, Massachusetts, offers high-end, transfer is especially pronounced in cross-border settings. This
flexible office space on a month-to-month basis. CIC has may explain why many firms are disappointed with the returns
created packages suitable for the innovation outposts of large from overseas innovation work—if the right conditions aren’t
companies, and its clients have included Amazon, Bayer, set, the output tends to be isolated.
PwC, and Royal Dutch Shell. CIC even houses a “Captains of One effective countermeasure is to promote international
Innovation” program that links corporations to local innovators. knowledge transfer by distributing collaborative teams across
An advantage of outposts is that companies can experi- locations. That way, a company’s innovations are more likely
ment and start with a small team—keeping the option open for to build on the patents filed in several locations. This ap-
investment down the road. Five years before announcing its proach is used extensively when companies first open new
move to Boston, GE launched an outpost in Silicon Valley to international facilities, either as a deliberate hedge to protect
accelerate its digital innovation efforts. The one-person office intellectual property or simply as a needed prop for the
initially housed just Bill Ruh, an executive recruited from Cisco fledgling operations. Cross-border collaborative teams now
to lead a new lab. Over the next three years, he grew the office account for 13% of the patents of large U.S. companies, up
to 150 people, hiring Silicon Valley talent almost exclusively. from just 1% in 1975. Though these global teams need to be
The launch strategy kept initial needs small and allowed Ruh carefully managed (see Tsedal Neeley’s HBR article “Global
to shape the effort to Silicon Valley’s practices rather than Teams That Work,” October 2015), they’re likely to grow in
being restricted by GE’s typical playbook. His group would importance as companies seek more access to talent clusters.
grow to 1,800 employees and ultimately become its own
business unit, now branded GE Digital. Option #3
If outposts aren’t working out, they can be closed, but this
reversibility carries its own risk. Companies often pull the plug Executive Retreats
too quickly, believing an operation is failing because they have and Immersions
unrealistic expectations about how quickly they’ll see results.
Leaders must understand that it takes time to build relation- Executive visits to top talent clusters can be a cost-effective
ships; three to six months is rarely sufficient. What makes way to increase awareness and excitement about efforts to
talent clusters special is an enormous volume and diversity accelerate innovation and reshape business models and man-
of activity. The investment in start-ups housed within CIC’s agement approaches. Though a weeklong trip rarely provides
coworking space alone exceeds the venture investment made the missing piece to a company’s innovation puzzle, it can help
in most U.S. states, for instance. There is much to learn before executives build a grounded understanding of what’s happen-
a new outpost can be effective, and discovery processes take ing at the frontier and how their companies may need to react.
time. This is especially true when organizations invest in a In 2014 executives at the large European bank ING
cluster far from home. Netherlands felt that their organization, while profitable
Another risk is that small teams away from the corporate and seemingly stable, was not realizing its full potential in a
center will be viewed as impotent, rendering outpost execu- financial services sector that was rapidly being revolutionized.
tives less interesting to local entrepreneurs and innovators. So they embarked on visits to Spotify, Google, Netflix, Zappos,
Empowering the local staff to make modest deals on behalf and other innovative companies to explore new possibilities.
of the company goes a long way toward boosting the stature Those trips led the executives to reimagine ING Netherlands
of an outpost’s leaders at the watercooler. as a smaller, nimbler organization with a stronger customer
Perhaps most critical is the choice of initial outpost direc- focus. To fulfill that new vision, the company would adopt
tors. These executives lend their personal credibility both agile team methodology throughout the organization, reduce
internally to the corporation and externally to the cluster. head count at its Dutch headquarters by 25%, and redesign its
One approach is to seek a “best of both worlds” launch team facilities to have open floor plans without offices (even for the

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