November 28, 2016
Drowning In A Saturated Market? Your Employees Hold The Life Preserver

It’s not uncommon for CEOs of medium- and large-sized companies to find themselves in the middle of competing agendas that threaten the long-term viability of their businesses.

They have one or more products that are cash cows for them — that generate significant revenue and perhaps got them to the scale they are — and they feel shareholder pressure for successful short-term quarterly performance. But they also know a day of reckoning is coming: Those cash cows are going to lose their luster, and numbers are going to fall.

The traditional answer to this problem, of course, is to innovate. But how do you do that? Some companies do so through acquisition, while others funnel resources into R&D. But there’s another way that is far cheaper and will put you in a position for systemic innovation that will continuously drive long-term results.

To Differentiate, Look Within

No one understands your market, customers, and competition more intimately than your employees, customers, and partners. So who better to suggest products, features, enhancements, and services that can take your business to the next level?

Rather than rely on a small group of executives to make decisions about which ideas should be implemented, you can tap into the collective wisdom of the organization and its surrounding ecosystem.

To do this in practice, many companies are now using an internal VC model based on crowdsourcing, where money that would have normally gone to traditional innovation activities is instead earmarked for individual employees to act as investors and fund ideas they believe would make a difference.

If you want to explore how this could work in your organization, here’s a road map for getting started:

1. Create a seed fund.

Redirect a percentage of your budget to a seed fund for employee ideas. This might come from R&D, marketing, or another department that can afford to free up some cash. Distribute the money to employees, empowering each of them to act as internal investors. They’ll then use their allotments to vote for the ideas they think are winners.

2. Call for ideas.

Issue a request for ideas that align with the company’s strategic initiatives or long-term goals. Perhaps the business is experiencing slow growth, and you’re unsure how to stimulate it. Invite input from employees. Once they put forth ideas, give them a set amount of time to contribute and collaborate on the proposals. Each team should specify a funding goal to which employees can contribute their investment capital.

3. Aid the successful projects.

Announce which ideas have met their funding goals, and commit to backing those. Keep the initial investments small — enough to increase the number of experiments, but not so large that you’ll take damaging losses on those that fail. The majority of concepts won’t pan out, as any investor knows. But a few will succeed, and you’ll want to nurture them.

4. Award additional funding.

Incentivize further concept testing and development by offering additional funding equivalent to the traditional series A and B rounds. The ongoing support will eventually generate lucrative new products, services, and features for the company. Instead of making a few large, risky bets on innovation, the internal VC approach allows you to make many more bets that improve the business incrementally. You can scale them as they prove themselves without risking much capital.

Internal funding and crowdsourcing generate wins for the business, its employees, and its customers. You can use the ideas employees put forth as reliable signals of where to focus your efforts, and you’ll earn goodwill by engaging workers from all teams in product development.

When people feel connected to how the company is spending money and making decisions, they trust it’s a credible organization. Most importantly, you’ll be inspiring passion in the company’s products and services.

Adam Siegel
Adam Siegel is the co-founder and CEO of Cultivate Labs, an innovative tech company that has created a unique platform to help guide businesses’ strategies and inspire innovation through internal crowdsourcing. Follow Adam and his team on Twitter @cultivatelabs.

Other Articles by Adam Siegel:

Five Ways To Kill Your Startup's 'Office Politics' Before They Start

Do It Like Doritos: Use Crowdsourcing Inside Your Company To Find Your Best Ideas