The importance of building a network in playing the long game

“I started Inside Outside Innovation because I don't believe that any organization should do everything within their walls, nor should they outsource all of their innovation.”

Brian Ardinger is the founder of NXXT, the InsideOutside.io podcast, and the The New Innovators Summit. For over 25 years Brian has been helping entrepreneurs and enterprises navigate and compete in a world of change and disruption. He has led efforts with startups and corporations to engage the latest trends, tools, and tactics to accelerate innovation, launch new ideas, and build better products.

Brian is an active participant in the innovation economy, practicing what he preaches (his best advice is to” build robust network”). His InsideOutside.io podcast features interviews with innovation leaders like Steve Blank, father of Lean Startup Methodology and my friend / colleague Henrik Werdelin of BARK / Prehype.

Brain also runs a conference, The New Innovators Summit, which brings together a diverse set of perspectives on the future. This year he has speakers from Amazon/AWS, Intuit, Google, Bayer, Capital One, Slack, and many others. More information on the conference, being held October 20-22, can be found here: https://www.theiosummit.com/

Whether it’s the conference or podcast or the research and advisory work he and NXXT provide, Brian is focused on helping democratize innovation.

In this talk we discuss:

how internal reflection leads to systemic evolution
why a structured approach is better than a hack-a-thon
how his focus on telling others stories informs his perspective on where innovation should come from (no surprise, inside and outside)
the importance of building a network

Our discussion

Stu Wilson: So, Brian, you have an extensive background in innovation. Can you tell us about your path from Gartner to NXXT?

Brian Ardinger: Yeah. I actually started my career in the Asia-Pacific. Shortly after I got my MBA at Penn State, I bought a one-way ticket to Hong Kong. I started knocking on doors, scheduling interviews, and eventually ended up with Gartner. They were only starting their expansion to Asia at the time, and they were looking for folks to start building out the consulting practice in the region. So I spent about two and a half years based out of Hong Kong, doing work all over Asia Pacific, collaborating with some great companies like IBM and HP.

These were the big tech world names in the mid ‘90s, and they were just beginning to explore and build out tech markets in Asia Pacific. As a result, I got to work in China, the Philippines, Korea, and Australia – all really fun, beautiful places – at the earliest stages of the internet. It was a great time to be out there.

Stu Wilson: Why did you end up leaving Gartner?

Brian Ardinger: After I spent a couple of years in Asia with Gartner, they transferred me to their Silicon Valley office. I spent another year and a half there, but the work I was doing in Portland and Wichita wasn’t quite as exciting as everything I’d done in Hong Kong and the Philippines.

So I decided to leave Gartner so that I could focus my energy on the intersection between startup and corporate innovation. Towards that end, I started InMotion about seven years ago – it was the first startup accelerator in Nebraska, and one of the first in the entire Midwest. After raising a small angel fund, we started investing in early stage technologies and companies that relied on venture support, all with the goal of building an ecosystem that fostered new ideas and innovation. Through that first couple of years, we started spinning out new companies and having some success.

As all of this was going on, I kept being approached by various corporations. They were hoping to learn how to engage with startups and what they could do in order to innovate and build more quickly. So I started consulting more in the corporate space – I would help companies understand the startup landscape and then show them how they could apply the rules, techniques, and methodologies that we had picked up in the startup realm to their own venture endeavors.

Along the way, I spun up a podcast called Inside Outside Innovation, which has quickly expanded over the course of the last four or five years: it already has its own conference, and it’s now being expanded into a newsletter. NXXT is he umbrella that houses all of these enterprises: my podcast, the associated events, the newsletter, and everything else related.

Stu Wilson: Why is innovation so important to big companies?

Brian Ardinger: Stu, you know as well as I do that the world is changing so quickly. The old methodology of building a big R&D team and then waiting three years to launch something and figure out if it works is now obsolete.

As a result, more companies are trying to figure out how they can adapt when there are literally 50 new technologies, each of which could cause major disruption in their industry, being rolled out at once. They’re trying to figure out how to understand this perpetually evolving landscape and how they can build out the muscle necessary to adapt and react.

Naturally, these questions evoke a great deal of anxiety in the people and corporations asking them, because it demands a great deal of introspection and evolution. But each year, more and more companies are choosing to take the leap and navigate this new landscape.

Stu Wilson: What has changed that makes innovation as crucial as it is today?

Brian Ardinger: The continued acceleration of technology and development, in conjunction with the plummeting price of technology, have collectively democratized innovation. All of a sudden, industry tools and markets have become easily accessible to the general public.

That’s a lot different from when I was helping companies build out the early stages of the internet in Hong Kong 20 years ago. Back then, the hardware and software required to build out a website would cost millions of dollars. Today, two guys in a garage can spin something up and instantly test it out in the market – and they hardly need any capital to make that happen! So the ability to start, build, experiment, and test new ideas on the market has never been more attainable, and that has given way to a lot of new, burgeoning competition for corporations. Granted, it's still difficult for those startups to scale up and create a company, but the fact that several potentially disruptive experiments are always ongoing has forced corporations to reconsider the role of innovation and adapt to this new ecosystem.

Stu Wilson: So…. is it possible for big companies to innovate?

Brian Ardinger: That’s a great question, because most corporate structures are not conducive to innovation. I mean, think about it – a corporate entity is founded on a business model that’s built to optimize and expand itself. Once the corporation figures out something that works, they double down and start hiring people with particular specializations in order to refine that model. Now, in today’s markets, chances are good that a new business model is not going to last as long as it would have 20 years ago. In the old days, you could be on the S&P 500 for 60 years, and now most companies can expect to stay on there for 12 or 14 years.

So it’s becoming more difficult to sustain a single business model and grow in a linear fashion. And that goes for skillsets, too. Everybody is carrying around all the world's knowledge in their pocket today, and that has a very real impact on the value of each individual’s training and expertise. Now, because of all of that acceleration, companies and individuals both have to adapt.

Stu Wilson: What can big companies do to build structures that serve to cultivate innovation?

Brian Ardinger: A lot of companies are aware that they need to innovate if they want to keep up, but they don’t know how to put that awareness into action. They might fundamentally understand that they need to start doing things differently, but the challenge is in figuring out how to do that. All too often, one company will get all excited because they heard that a competitor held a successful hack-a-thon, and they decide that they’re going to try that.

Now, this is a step in the right direction, for sure, but it can also preclude the kind of internal reflection that leads to real, systemic evolution. Instead of starting a hack-a-thon, I believe it’s far more important for companies to identify why they want to get involved in innovation, what they’re trying to get out of it, and how they can pour resources into it structurally, knowing full well that they've already devoted so much time and effort to their existing business model.

And as they try to foster innovation, corporations have to become ambidextrous. On one hand, they're working, building and optimizing their existing operations, but on the other, they're devoting resources to experiments that are built to fundamentally change those same operations. This will serve as their insurance against the change that's now inevitable in every industry.

Stu Wilson: Have you seen any big companies do a good job at establishing that bifurcation?

Brian Ardinger: I mean, the ones you hear most often about are typically the tech companies that are still run by their founders: the Amazons and Facebooks of the world. Jeff Bezos and Mark Zuckerberg haven’t quit striving to push the envelope.

The company that I work for right now, Nelnet, is doing a decent job of trying to understand and experiment with different models. They’ve gone through a number of iterations in their innovation practice. First, we spun up an innovation lab, where core teams would come up with ideas and then hope that the lab could execute and build something out. We quickly realized, though, that that model didn't work for a number of reasons: we couldn’t funnel enough ideas through the lab, we didn’t have enough people, and, what’s more, the people working in the lab didn’t always have the expertise necessary to push an idea forward. Since then, we've decided to stop sequestering innovation to one part of the company, and instead to encourage and cultivate innovative thought as a core competency for anybody within the organization.

Now that we’re making this transition, we have to figure out how to give everyone, from our line employees to our CEO, the space to identify problems and opportunities for value creation, and the tools required to take action.

Stu Wilson: We often think of corporate entrepreneurship as one of two things: either it’s this giant, disruptive project, like Uber; or it’s a smaller undertaking, like any of the projects that are pushed through incubation programs. But it sounds like establishing a company culture in which risk-taking is encouraged is just as important. How do big companies promote that kind of like entrepreneurial mindset?

Brian Ardinger: Listen, there’s no denying that every organization has entrepreneurially minded folks within their walls. The problem is that those people aren’t always given the space, time, or resources to spread their wings and take action. So one of the first things you can do as a corporation is identify who those curious, restless, adaptable folks are within the organization. Those are the people who are going to think outside the box and try different things; they’re the people most qualified to identify problems and create new value propositions.

Once you identify who those people are, you can start having conversations and giving them the resources, skillsets and air cover they need to start experimenting. And it doesn't have to be, you know, formalized – there’s no need to spin up a lab or toss them into the corporate venture where they can start investing in startups. Each particular person is going to have unique needs, which means that once those innovators have been identified within the company, the company will have to figure out how exactly to support them effectively.

Stu Wilson: Now, big companies have a lot of options when it comes to innovation: there's building, partnering, investing, and acquiring. How do they decide which tool to use?

Brian Ardinger: Yeah, great question. I started Inside Outside Innovation as a way to tell those stories, because I don't believe that any organization should do everything within their walls, nor should they outsource all of their innovation.

I wanted to help companies identify the threats and opportunities outside of their walls, and where they should partner, invest or look for new technologies. On the other hand, those same companies still need to give internal folks the ability to create value and the skill sets from within. Now, determining whether internal or external innovation takes precedence will always depend on the industry and the culture of the corporation. It’s not a cut-and-dry issue – not every employee needs to be an entrepreneur or a founder, but having said that, it’s still crucial to build a more adaptive, conceptually versatile organization, both inside and outside of your walls.

Stu Wilson: Why do you think corporate venture is so popular?

Brian Ardinger: First of all, from a returns perspective, tons of new companies are being spun up and attracting tons of capital in the hopes these tiny operations can be scaled into billion-dollar valuations in a matter of years.

And while there's certainly tons of interest in that pure ROI, much of the move towards venture is actually motivated by corporations’ recognition that they can’t do everything themselves. They’ve come to realize that innovation will often happen faster outside of their walls than it will inside. And so, rather than building their own ideas to speed up their evolution, corporations are searching externally for people who are already tackling pertinent issues. Once they find those people, the corporation can invest in, acquire, or partner with them.

Stu Wilson: Do you think new business incubation will ever become a critical part of big companies’ growth?

Brian Ardinger: Yeah. I’m a little wary about this, because I don’t want companies to that think that they can just throw a hack-a-thon and, from that two-day event, create the next Uber within their walls. If you’re expecting instant gratification or payback from these kinds of endeavors, you’re setting yourself up for disappointment.

With that being said, big companies still have to move quickly. They have to adapt, experiment, build, and refine at a breakneck pace over a long period of time. It’s almost like training for a marathon versus training for a mile-long run – you know, a four-minute mile is quite an achievement, but the best marathon runners in the world are running 26 consecutive four-and-a-half-minute miles. Big companies have to look into innovation with that marathon mindset. And the only way to do that is by making sure that employees are adaptable, curious, and proactive, while never losing sight of the fact that no company should be building everything themselves.

Some companies make the fatal mistake of focusing so much on internal innovation that they forget about all of the bright people and projects outside of their walls that they could partner with, invest in, or acquire.

Stu Wilson: What parts of innovation do you think should be outsourced?

Brian Ardinger: The further you get away from your core business, the more sense it makes to outsource. So, McKinsey’s model of innovation separates new projects into three categories: H1, H2, and H3 innovation. Anything that’s close to your core business is considered H1, and should probably be experimented with and built out internally. When you reach H2, you’re a bit further out from the business model, but still close enough that it can be worth tackling in-house. Once you get out to H3, though, your company probably lacks the prerequisite expertise and understanding of the market, which means that you should start looking outside your walls rather than trying to spawn something entirely from scratch.

Stu Wilson: What’s the biggest lesson you've taken from your work in this innovation economy?

Brian Ardinger: Wow, great question. I mean, the reason I love working in this particular space is that it’s always evolving – something that was thriving two years ago probably doesn't work now. And that means that in order to succeed, you’ve constantly got to be vigilant, proactive and open to new possibilities. The biggest takeaway for me, then, has been this understanding that I’ll have to constantly unlearn what I just picked up, and that, if I’m going to keep up with the market, I have to be at peace with the fact that everything could change tomorrow. As long as I anticipate that shift, I’ll be able to devote the necessary resources and attention to adapt once the next big thing arrives.

Stu Wilson: Can you talk a little bit about the innovation ecosystem that's developing in the Midwest?

Brian Ardinger: Absolutely. So the whole venture-backed startup phenomenon is no longer limited to the major tech hubs. In fact, it’s proliferating pretty quickly: there’s a robust ecosystem in the Midwest, and in countries all over the world. With that being said, it's a different kind of environment from the traditional tech hubs. Seven years ago, when I was raising our fund to invest in these early stage companies, angel investors were few and far between. Now, they're still hard to find wherever you are, but quite frankly, they’re especially scarce if you’re not on the coast.

Consider a place like Nebraska, where there's quite a bit of capital, but almost all of that capital came from Berkshire Hathaway and Warren Buffett, who primarily focuses on value investing. Nebraska – and the rest of the Midwest, for that matter – doesn’t resemble your traditional tech hubs for two reasons: first, the investing philosophy is different; and second, most of the companies that make up the hubs of Midwestern cities have been around for decades. Those companies work in markets like core infrastructure, core logistics, things like that. And so it's hard for a lot of investors who are used to serving in mentorship roles to figure out how, exactly, they can support startups when the landscape is still largely comprised of older companies.

Very recently, though, we've started to see the rise of startups in the Midwest. Investors in the region are recognizing that if they invest in a company early on, and get them mentors, capital, and customers, those startups will have a great chance at scaling up. And this development is giving way to an array of exciting startups that are in our backyard. Hudl, for instance, is one of the leading video analytics companies in the sports space, and they’ve gone from being three college kids with an exciting idea to 2,000 employees in a matter of nine years. So a precedent is being set, and these companies are serving as beacons for early-stage investing in the region. Investors can now feel confident that this model works even outside of the major tech hubs.

Another major factor in the Midwest, along with any region outside of the major tech hubs, is that companies are expected to create value in the marketplace or achieve product-market fit faster than companies based in Silicon Valley. Companies in the Valley can wait to reach that point, because there’s enough capital for them to patiently experiment until they achieve that product-market fit, but out here, investors expect a revenue stream sooner rather than later.

Stu Wilson: What cities in the region are emerging as fertile grounds for entrepreneurship?

Brian Ardinger: Yeah, there are a bunch of Midwest cities where activity seems to ebb and flow. In Lincoln, Nebraska, for instance, a bunch of companies like Hudl popped up on the scene a couple of years ago, but since then, the city’s startup landscape hasn’t really taken off. And maybe that’s because the market density reached its limit, at least for the time being. In a city like Lincoln, the well of opportunity is only deep enough to support a certain number of entrepreneurs at a time. And as a result, entrepreneurial opportunities in Lincoln kind of look like rolling admissions – once the threshold is reached, it’s very difficult for the next wave of entrepreneurs to emerge in that landscape. It's just very inconsistent.

The same goes for other Midwest cities. Kansas City, Minneapolis, and Indianapolis are all doing fairly well, but none of them is consistently thriving in the same way that Silicon Valley does. Even Chicago, after going through a phase of uninterrupted growth, kind of slowed down a little bit, and only now are they beginning to come back up again.

Honestly, I think all of this is part of the process of cultivating new local and regional ecosystems. Growing new companies inherently requires a great deal of patience, because you're always forging into the unknown. The only certainty is that some, if not most, of your ideas are going to fail. What matters is persistence – you’ve got to keep swinging.

Stu Wilson: Yeah. And what big companies in the Midwest are most aggressively investing in innovation?

Brian Ardinger: I mean, obviously there are some big insurance companies, like American Family in Madison, that are doing a lot of work in the innovation space. TD Ameritrade, which was just acquired by Charles Schwab, was also spearheading a ton of initiatives in the fintech space.

There are also plenty of up-and-comers in Indianapolis who are attracting attention from former startups that have grown into big businesses, like MailChimp. Those businesses are hoping to invest back into the startup ecosystem so that they can reach their next stage of growth.

Stu Wilson: Is there anything else you want to talk about?

Brian Ardinger: Yeah, thanks for asking. All too often, I think there’s this expectation in corporate innovation spaces that new projects will return fruit and generate revenue practically overnight. Now, the best piece of advice I can give is that building a robust network, which is an essential component of any new project, will almost always take a great deal of time. Working in the innovation economy isn’t just about investing in one company and hoping it works – you’ve got to provide the capital, sure, but it can’t stop there if you’re truly looking to support that company.

To maintain a strong long-term outlook, you’ve got to invest in the deal flow, focus on your follow-on rounds, and identify which people will help those companies achieve their goals. Now, all of this is really hard, if not impossible, to do when you're focused on chasing quarter-to-quarter profits or traditional quarter-to-quarter metrics of any kind. So in order to get anywhere in the startup space, it’s vital for investors to establish a longterm, collaborative approach to innovation rather than focusing on short-term ROI.

Stu Wilson: How can people reach you?

Brian Ardinger: Yeah, folks can e-mail me at brian@insideoutside.io or reach out on Twitter at @ardinger.

Stu Wilson: Cool. Thank you so much, Brian.