Markets Versus Hierarchies Hierarchies are for allocating resources

Markets Versus Hierarchies • Hierarchies are for allocating resources (protect the core). • Markets are for attracting resources (transform the core). • How to create internal markets for ideas, capital, and talent within the corporation? • Does Shell’s Game. Changer qualify as an internal market creator?

Game. Changer

Six Tyrannies • Served Markets • Established Business Model • Current Strategy • Organization Structure • Financial Hurdles • Language

Radical Innovation and Lines of Business • Innovation Within Existing Businesses • Innovation in the “White Spaces” Between a Firm’s Existing Businesses • Innovation Outside a Firm’s Current Strategic Context

Market for Ideas • Change the risk (e. g. , downsizing)/reward ratio (e. g. , equity) • Increase exposure to more internal (or external) investors • Allow new voices to be heard. Not only the upper echelons. New ideas are less likely to come from the top • Virgin’s Group’s “speak up”culture

Market for Capital • Different financial screening criteria • Different attitudes about investment size • Different risk/rewards assessment (forgone versus lost dollars) • Need alternate capital approval route (to custodians of the current business model) • Create new businesses or business models?

Market for Talent • Holding employees captive -- what encourages this? • Create an open market for talent -- Shell • Design career paths across business -- Disney • Create incentives and rewards for mobility, remove migration barriers

Resource Allocation Versus Attraction Resource Allocation Resource Attraction Incremental Innovation Radical Innovation Risk Averse Opportunity Focused