In this rigorous episode, Jim Verquist, Founder of Engine2 Innovation, shares how he brought the corporate rebel model to tech-based companies around the world.
You will discover:
– Why do successful companies lose their mojo over time
– Why the problem isn’t bureaucracy and what it is instead
– The 3 things you need to create a second engine of growth for your business
Episode Transcript
Scott Ritzheimer
Hello, hello and welcome. Welcome once again to the secrets of the high demand coach and I have a real treat with for you today. That is the one the only Jim Verquist. Now before launching three Silicon Valley startups, Jim served four years in the US Marine Corps, he also went on to earn his MBA and went to work for big corporate as well. Now, he led a turnaround at Millennium and a fast strategy transformation at best doctors. And now he’s launched a very exciting new firm called engine to innovation for businesses that need a second growth engine. His firm uses the corporate rebel model because corporate rebels have created more billion dollar breakthroughs than Bell Labs and Xerox PARC combined. And those are very, very innovative departments. Can’t wait to hear more about that. So Jim, welcome to the show. excited to have you here. Before we get into that, I’d love for you to unpack this this background, you’ve got a very cool mix of different environments. How does that all come together to lead you to make the leap to starting engine to innovation?
Jim Verquist
Well, thank you, Scott. Yes, it’s, it’s a fun background. And like you said, I did four years in the US Marine Corps. I did some pretty cool things there. But what you know, the most important thing the link or taught me is how I don’t want to work and live my life like I don’t want to be a you know, yes, sir. Right away, sir. You know, don’t think just do type of person. So search for a much more natural fit for me. As you said, I did three Silicon Valley startups. I wasn’t the founders, but I was you know, number seven employed digital think which one public you’re number 10 employed at a GeForce, which, which was bought by Dosen. So I did some really cool, you know, kind of, and you really saw how innovation and why startups are so nimble and innovative, right, like they do things differently. Then what happened is I went to got an MBA, and went to work in big companies, and like the culture shock of going from a 10 person startup to a big company is like far worse than the culture shock I experienced when I moved from America to Japan for three and half years. Like that was nothing right. And I’ve always rejected the idea that it has to be that way. And so you could go back to startups and do all kinds of cool innovative things, which is a blast, and I recommend everybody do it. But startups know how to innovate, like, the big, the big challenges, the big problems we need to solve are inside of big companies. And so I’ve really focused on how do you go into big companies, and get bringing that same type of entrepreneurial energy, where it’s not just one or two people using the big brains to to make change innovation happen, but get everybody involved in that. And so that’s what I do.
Scott Ritzheimer
I love it. I love it. So this is something we actually spend a lot of time on at scale architects. And the predictable success model is something that happens when you’re coming out of predictable success into this stage we call treadmill, right? It just we figured out how to do business, we do more rinse and repeat, right? Strategic planning is do 10% More of last year. And and we start to rewrite the script of what made us successful. And we think it’s, you know, strategic planning and budgeting and operations and policies and processes and checklists while they have their role. And I really liked your take on this from the website. But why is it that that successful companies at some point start to lose their mojo?
Jim Verquist
Yeah, I think that’s, that’s the key, right? So let’s go back to what is a startup because, you know, a lot of your listeners actually founders, but, you know, over time, you kind of almost like lose, you lose something, and you’re not always exactly sure what happened, right? I mean, you did all the right things, you brew like crazy. And now you’re reaching the top of the S curve. And it’s like, now it’s starting to hit you. Like, we don’t innovate the way that we used to, you know, and so I think it’s good back to rewind and say, Okay, what is it exactly? What is the secret sauce of startups have that somehow established companies don’t? Well, it starts with what is a startup? Okay. I love Steve Blanks. Definition of a startup, a startup is a search for a scalable and repeatable business model. And so, you know, startups are all about early stage startups all about rapidly exploring and exploiting an unknown opportunity space, like you don’t know exactly where you going. You don’t know how to get there. So everybody in the company is using big brains to kind of figure it out, right, and you pivot, and you do all kinds of trial kinds of crazy things, all kinds of duplicated work, because one person is trying one thing and another person says, I think there’s a better idea, you don’t argue or arm wrestle about it, you just go try this other approach, right? You experiment with ideas, and maybe your idea worked better. Maybe their idea works better. Maybe they combined in all kinds of interesting and unexpected ways. What happens though, is that eventually, hopefully, the startup becomes successful and you get into the scaling phase. That’s all kinds of fun, right? But the focus shifts now it’s no longer about a search for a repeatable and scalable business model. It’s a it is a it’s all about the reliable and efficient execution. have a proven business model. And that is absolutely 100% necessary. The last thing you want to do is every time you go into a business, or do you try to do something with a business that you’re confronted with completely different bang, right? Like, if I go into McDonald’s, I kind of want the hamburger to taste exactly the same way that it, but I fell in love with that two years ago or whatever, right? Like, you want that kind of that same experience, you need that? It turns out bureaucracy is wonderful at doing. In fact, we haven’t invented a better way of actually doing reliable efficient execution of a proven business model than bureaucracy. Bureaucracy isn’t the problem. The problem is that we’ve lost the the second channel of innovation that startups have. And what happens is that in just a minute, I’ll kind of explain what these two channels are. But really, what happens is that, you know, startup or established companies shut down the channel to have innovation, which is the bottom up stuff. And all the change, innovation becomes top down any bottom up innovation. And when they talk about bottom up innovation, it’s like, you know, step one, get permission, you know, all these all these things that block and tackle every single big idea. And they, they make sure that only the most mediocre, sustaining looking innovations kind of make it through and anything that has big potential is shut down immediately. And that’s what I’d like to change.
Scott Ritzheimer
Yeah. And one of the interesting things I’ve seen that I think contributes to this is that bottom up innovation is, it almost there is no top and bottom. In startups, there’s just so many people to all hands on deck all the time, that it’s just like this kind of amoebic core, if you will, that’s moving. And many times the founder or founding team is an essential part of that. And because the founders are so close to the ground level, it doesn’t necessarily matter if it’s top up or top down. And and the pattern that I’ve seen as you’re adding the bureaucracy in to create the scalability is that that that, you know, innovative team gets smaller and smaller, right? It stays centralized in one or two people, what are some steps that you can take to kind of break that cycle to get back to the bottom up but to to really, for lack of a better term, democratize innovation inside of an organization?
Jim Verquist
Yeah, so let’s go back and just kind of look at how startups actually do innovate, because it’s, as you saw, as you said, it’s very kind of organic. And, and it happens from from every place. And one thing that’s really cool about working at the startups that are good, like the start to get it, right, I mean, they are, the founders are too busy to manage people, I mean, that they are busy solving, challenging and seeing problems, and they give general direction. So this is these two channels of innovation that you find in startups, is that, you know, there’s the first channel is official projects. So this is kind of the official, this is where we’re going. It’s not, it’s really it’s not about big picture, thinking it’s not a detailed plan, like if I’m in big companies, with plenty of room for creative problem solving. They have that right, that’s probably 6070 80% of what happens inside of startups. Yeah, very important. Good stuff, managers need to kind of have a vision and try to get people aligned with that vision, right? That’s important. But they also have this second channel of innovation, which I call unofficial, skunkworks projects. And this is where all the kind of all the innovative activity that fills in all the holes and create surprises and takes you in places that nobody ever expects, this is where that happens. And how it works is that employees explore their own big ideas. And alongside of what they’re officially responsible for, right? Like I’m, I’m in charge of this, and I’m kind of doing that. But alongside that I’m actually working on this other project exploring this other idea that I’m not ready to open share with anybody inside the company, right? Like I’m not knocking on my managers door, the founders door and say, hey, you know, what do you think of this? I know, you just explore that idea. And they’re not officially sanctioned. And against the sort of founders are so busy that they’re actually not paying attention to and they actually want, you know, when you go into big when 10 person startup, you got 10 people using their big brains to do what they think is right, you can’t tightly manage that. Right, right. You go into 1000 person company, you’ve got one, two, maybe three people at most, using their big brains, and everybody else is supposed to be kind of just doing what they’re told. And so that’s the second channel of innovation that gets lost along the way. And everything becomes tight, top down tightly controlled, as he said, Okay, now we’ve got to go create this new growth engine and we’ve got a crate, you know, we’re our business. We’re reaching the top of the business. We got to do something new, but we’ve got to keep employees focus on what they do because As you know, that’s, that’s how we pay the pay the paychecks. Right. We so we get a select group of people that are supposed to go out and create the next thing. I haven’t found a single example of inside an established company where some innovation team or some visionary kind of project leader comes along. And they, let’s go create the next breakthrough and actually go create the next breakthrough. And they do lots of cool project. If you listen to innovation, podcasts, read innovation books, they’re mainly about lots of cool project. Well, what happened two years later, will ever sit down, it didn’t didn’t quite work out or, you know, management didn’t get it or you know, the company stuck in this out there, there’s always an excuse. Meanwhile, when you go back and look into big companies, big companies do occasionally create big breakthroughs, right? And looking at where the billion dollar breakthroughs come from is very instructive. The Sony PlayStation, the Xerox, laser printer, BlackBerry, messenger, LED lighting, all these things can be dollar breakthroughs inside established companies. They came from corporate rebels, which is people who, the employee, regular employees, not the Select superstars, but the regular employees who actually do channel to innovation, even though they’re not supposed to. And they normally get harassed and bad performance of us and threaten to be fired. And they are so committed to doing it. They’re not rogues, corporate rebel, or not rogues that are trying to get fired. They’re not trying to destroy their company. What’s funny is that they’re the hardest working people in the entire company like they are taking all of their work, that, you know, everyone is spending 40 hours to do something that they could do in 30 hours, right. And we’re very good at doing that the corporate rebels, like I don’t have time for that, because I don’t want slack time, I want time to work on an unofficial skunkworks project. So I’m going to do my 40 hours of work in 30 hours. Can’t do that every week, right? Sometimes there’s crunch weeks and just crazy weeks. And you know, so that week, I can’t work on my project at all. But they if you can get your work done in 30 hours by restructuring be more efficient, whatever, not screwing around, then I’ve got 10 hours that week, to work on something. And they work on this unofficial skunkworks project. They don’t announce it, they don’t broadcast it. They don’t go around and saying you guys are idiots, and I’m gonna prove you wrong, or I’m gonna destroy that it’s not about that it’s the goal is always, how do I get this project far enough along so that other people inside the company can see what I see. Because the big ideas sound crazy. The breakthroughs always sound crazy until someone proves that they work, right. As Einstein said, if at first, the idea is not absurd, there is no hope for it. This is where the breakthroughs come from, they come from the people in places that nobody is paying attention to right, I like to say that you can learn more about innovation by watching Dorothy in The Wizard of Oz, than you can by reading 90% of the books on innovation out there, because it’s from the people that you just aren’t really paying it. They’re great employees, but it’s like the manager seasons, like stop screwing around and get back to work. And it’s like, that’s exactly what startups don’t do. And we need to get if you want to create a new growth engine, you’ve got to get this channel to innovation back on line. If you want to just do sustaining innovations and hohem. Next things, then your top down approaches work perfectly.
Scott Ritzheimer
Yeah, I want to go back to a point that you made earlier, because I think it’s really, really important. And that is that bureaucracy isn’t the problem. The problem is that we haven’t decentralized innovation alongside bureaucracy. So how do you get both of those working simultaneously? Because one’s job is to protect and be efficient and reliable the others is to kind of explode and try and innovate and change. How do you get those from running side by side? And why does that? Why do companies rarely achieve that?
Jim Verquist
It’s a great question. And it’s one of the hard things to kind of understand and, and one of the things is just so surprising. I mean, until you’ve actually experienced these projects, they’re really hard to understand. And so the first thing to think about is that innovation happens where the work happens. And so who’s best to see the problems and opportunities inside of your company. What’s your regular employees, right? Not the people off on some, you know, we’re all the ping pong tables and and beanbags are that the innovation team right it’s not that the top of the of the mountain, were bringing ideas like bringing a pop it down below, they’re like, Oh, gee, this is never gonna work. Right, right. And so the problem is, is that in an established company, you’ve got managers who manage and you’ve got a blockchain and all of that is very important. And so what has proven to have to work and because this this, this model has taken off, like you can go inside an established company, and you can get 10 20% of your employees doing this stuff right now in nature wrap, you know, naturally, there’s not more than 1000 employees that’s a Gary Clawson or are a one of these corporate rebels who’s literally willing to risk their careers or their jobs to do what they think is right for the company and girls, people are like, Okay, you want to call the shots? You know? I’m crossing my fingers. But I’m not very hopeful, right? Yeah. And so the problem is, is that managers cannot be two people at once. If you’re a manager, and you see an employee working on something you think is crazy. You just you can’t hide your kind of disdain for that idea. You can’t hide your frustration with, you know, why in the world, would we ever put a laser inside an office machine that that makes no sense. Like, I want you to be innovative, but come on, like, do not just do stupid, idiotic things. And then Gary Starkweather, proves it works. And it becomes one of the biggest breakthroughs of any product we’ve ever had an American, right. So the way that it works is, and what we do at into innovation is come in with a, we launched what’s called a skunkworks program for corporate rebels. And it’s really three easy components, that honestly doesn’t change anything inside of your company about how it works, or, or what managers do, or how much time employees spend working on their regular work, it’s, you need three things. First, you need the executive at the top of the hierarchy to say, we want this to happen, like we want to actually have this kind of engine to channel to innovation going. And so we’re going to explicitly allow it. Second, you need a catalyst, somebody that is outside of man and woman, to actually be the person that is providing dedicated support. It’s almost like employees, and all of us, we kind of need permission to do things. And the problem is we can’t get it from managers. And if we do, it’s going to come out across with all kinds of baggage and constraints and, and things that we don’t want to kind of burden our young fragile idea with, right? Yeah. And so the catalyst is that person, they’re there at the invitation of the the top executives. So it’s not like, you know, this is a rogue movement or something like that. It’s official, officially unofficial, right. And then so you need that, because employees need somebody that can kind of protect them, you know, the thing with the catalog, the thing with the way these works is that as long as you don’t create risk for the company, and you do not let it interfere with your assigned duties, you can work on any big idea you want for the company. They’re self regulating, because employees are not trying to get fired, they’re not trying to blow things up. They’re trying to get it far enough along to eventually win official approval for this. So you don’t need to worry about why are you working with no, I’m not going to just waste my like, I’m not going to work my butt off. I’m working. I’m like the hardest working employee in the company pretty much. I’m not going to do that just so that I can kind of waste time and eventually be denied, I want to eventually get this approved. And so the third and most important feature of this really is that managers have one new rule, which is that you cannot kill projects. This isn’t Google’s 20% time, Google’s 20%. Time was a complete failure. Why? Because managers could kill ideas that they didn’t like, right? And employees actually knew that if you’re my manager, I probably better not work on something that is going to kind of cause you angst. And anxiety. Because you’re the one that’s going to you’re the one that decides if I should get promoted or not, you’re the one that decides if I could get rewarded. If I look like an idiot in front of you, I’m kind of toe, so I’m just gonna play it safe. And I’ll do you know, Google’s 4% Time did all kinds of good sustaining things. They didn’t create the next big thing. So those are the three elements you need. And the goal is you’re not getting everybody to be an innovator. You don’t Innosight in this average company you don’t need it’s not a 10 person startup, where you know, you’ve got lots of people that can focus on reliable, there’s no excuse and premise. That’s awesome, right? But you can’t predict who these people are going to be. So you basically open it up, people opt in, the goal is to get 10 to 20% of your employees doing that once you do that, it becomes a totally embedded part of the culture. You don’t need a catalyst anymore, because you’ve got catalysts all over the place. You and that’s how it works.
Scott Ritzheimer
That’s fantastic. I love it. I love it. Alright, so here’s a question. I like to ask all my guests. And it’s, it’s this what what would you say is the biggest secret you wish wasn’t the secret at all? What’s that one thing that you wish everybody listing particularly those that are leading organizations in this place? What do you wish that they understood?
Jim Verquist
I wish they understood whitespace because this happens in the whitespace of work. And this is something that managers tend to be very uncomfortable with. We always tend to think that our teams are operating 100% efficiency. The The reality is, is that if you have schedules and deadlines, you’ve got whitespace managers can’t see it. It’s like watching our kids do homework. Right, they’re sitting at the computer for six hours. Like, I know that if they just sat down and buckled down, they could get this done in an hour or two, right? But they’re, you know, why? Why do that when you know, mom and dad may ask him to clean the room, right? It’s like, I’d rather just sit in front of a computer. And sometimes I’m working, and sometimes I’m not. And you know, mom and dad have no idea. If we go in and try to micromanage it, we, you know, we actually cause more problems, now, they’re going to spend 10 hours instead of instead of six or eight. So whitespace is hard to understand, in in a lot of ways, but it’s also actually very easy to understand most of us understand that look, when I’m an employee, and I’ve got the work that I need to do, no matter how its assigned to me. Most weeks, I don’t work flat out all out every, you know, as hard and as efficiently as I could to get it done as fast as possible. Because that would actually burn me out pretty quickly, right? Like, yeah, this type of work is kind of draining. And so at least if I embed even if I’m embedding slack time into my, you know, the height, I’m like, you’re doing 30, but I do in 40, cuz that’s how many hours I’m supposed to be at work. That is somehow kind of it kind of nurses, the soul. And so, but there are weeks where there’s no, there’s no slack time at all right? There are weeks where you have to work flat out just to get everything done, there’s works. Like there’s the crunch weeks where you’ve got to work 48 hours, that way, you kind of work 10 hour days just to get everything done, that sucks. But you’re willing to do that. We’re never rewarded with the idea that if you actually want to do your 40 hours of work in 30 hours this week, because it’s possible. You don’t have to just pretend you’re busy and you know, do things three times when you could do it once the right way. We no longer have to pretend now we’ve got a second channel of innovation that lets us work on these unofficial skunkworks projects. You know, the only exceptions where you don’t really see this are in companies where they already do they have this temps I can tell of innovation lightly. You know, if you if I can take on extra work, and it’s going to earn me a promotion, it’s going to it’s going to create a new opportunity for me, it’s going to make me rich, or it is just so challenging and exciting that I I just have to do it. Once you find in early stage startups, right, you, you, people are more likely to say, you know, I’m gonna get this done as fast as I can. Because, you know, not every not every minute of work is fun, even in a startup, right? But this stuff totally nurses soul, it’s like, it’s like plugging into a super juiced outlet. It’s like, whoa, you know, this is energizing. You can do that inside established companies, but you can’t like have managers try to figure out what’s going to make me energized and excite what project I’m gonna love. You got to let them figure it out for themselves. So if if managers could understand whitespace, and how it works, and get comfortable with the idea that actually, most employees want to solve challenging problems and make a difference in the world. They’re not really they’re not trying to screw around. That will change everything.
Scott Ritzheimer
Wow. Well, yeah, I would second that one of the things I’ve been seeing a lot is this kind of culture of busyness that almost is whitespace is bad, right? Like, what if you have it, fill it? And and it just doesn’t leave the margin to think like you’re talking about here. So I love it. It’s just it’s a fantastic concept. For anyone who’s looking to really scale innovation is absolutely the way to do it. On that note working folks who are saying yes, this is what we need. Where can they find out more about you and your work?
Jim Verquist
Well you can look at Engine 2 Innovation website is engine2.us And I’m also easy to find my name is Jim Verquist, I think I’m the only Jim Verquist on the planet. So LinkedIn is a good way to find me and I’m here. Fantastic.
Scott Ritzheimer
Well, Jim, thanks so much for being here. fascinating conversation. I love the idea of of engaging and liberating our corporate rebels. And I think you’re right. We can we can’t afford to leave it to the startups we have to do it in larger organizations as well. So thanks so much for being here for everyone watching listening. You know your time and attention mean the world to us. I hope you got as much out of this conversation as I know I did, and I cannot wait to see you next time. Take care.
Contact Jim Verquist
Before launching 3 Silicon Valley startups, Jim Verquist served four years in the U.S. Marine Corps. He then went on to earn his MBA and went to work for big companies. He led a turnaround at Millennium and a Fast Strategy transformation at Best Doctors. Now, he’s now launched Engine2 Innovation for businesses that need a second growth engine. His firm uses the corporate rebel model. Corporate rebels have created more billion-dollar breakthroughs than Bell Labs and Xerox PARC combined.
Want to learn more about Jim Verquist’s work at Engine2 Innovation? Check out his website at https://engine2.us/
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