Innovation Processes

Recently, I re-read an interview with Richard Rumelt, a professor of strategy at UCLA’s Anderson School of Management. During the interview, Rumelt contrasted the relatively unproductive result of large company strategic growth and innovation plans, which he characterized as nothing more than “three-year or five-year rolling resource budgets,” with the exceptional success of Steven Jobs at Apple, whom he said was geared to wait “for the next big thing,” and then moved rapidly to take advantage of it.

The “next big thing” does not usually announce itself as such. It appears often in small, barely perceptible, blips on a radar screen. If I think about the businesses that started and grew successfully during my tenure as a senior line officer and then as CEO, each started in very undramatic ways and none looked as big when we started as they ultimately turned out to be.

The business in which we began with the financing of postage and shipping costs, our Payment Solutions business that today is a critical competitive differentiator with our Purchase Power line of credit, was triggered by a realization that many customers needed emergency cash advances to pay for postage. We were making about $6 million a year in fees in the mid-1990′s, but we sensed that there was an untapped market opportunity.

To make this into a big business, we needed more formal marketing programs, products, and operational process controls, all of which we put into place over the next two years. We also needed to own an industrial loan bank, which we acquired in Utah in the late 1990′s. Over time, this business grew to be over $200 million, and helped us win competitive business.

We got into the mail consolidation business because we saw UPS initiate a pilot project with 10 Merrill Lynch offices to pick up their letters, as well as their packages, and deliver the letters to a presort vendor. While UPS’ initiative failed, it prodded us to look at what could work and led us to start a business that now exceeds $500 million in revenue.

Our fee-based offerings in Financial Services grew because I attempted to lease an automobile from BMW in the 1990′s after seeing lease ads in the Sunday New York Times.These ads would boldly quote a monthly lease charge, but disclosed in the fine print additional fees that often added over 1/3 to the monthly cost. People paid these fees and others because they felt that whether they would owe the fees was within their control. For example, late charges are very profitable for marketers, but consumers and businesses can avoid them by paying on time. Once we looked at what was possible, we started with value-added fee-based services than are significant and proftiable.

Sometimes, a new business initiative would come about because we would discover a profitable niche in an existing business on which we could build. In February, 2005, when my daughter and I were traveling from Vail to Denver, Colorado, we stopped in Boulder to visit a subsidiary of newly-acquired software operation, which at the time brought in only $10 million in revenue. It was a location intelligence software business. I got so excited about this small niche business that, over time, our team looked at it more closely, grew it, and eventually acquired MapInfo in 2007 to give it greater scale.

None of these initiatives started out as big corporate-wide programs. Each started small and with a small group of champions who were determined to take these business opportunities in whatever direction the market led them. The Pitney Bowes leaders responsible for the successes of these new businesses triumphed because they were flexible, passionate, and intelligent in analyzing market responses to their actions. In some cases, they needed significant capital, but, in others, particularly the fee-based services, there was a relatively low capital investment.

It is very hard to be entrepreneurial inside a big company for a variety of reasons: the competition for mind-share from established businesses, a corporate culture that wants to load too much overhead on a start-up business, and a lack of flexible, innovative thinking, among them. However, it can be done, and I am proud that we were able to do it at Pitney Bowes.

In this much more difficult economic environment, this is actually an even better time for entrepreneurial thinking because new processes, technologies, and ways of thinking are needed. Those who can start small, be flexible in learning about market response, and grow organically have potentially great opportunities ahead of them.