Ep. 233 - Elliott Parker, CEO of High Alpha Innovation on New Models for Transformative Innovation - Replay

Inside Outside Innovation

On this week's episode of Inside Outside Innovation, we sit down with Elliott Parker, CEO of High Alpha Innovation. Elliott and I discuss why innovation is getting harder and what to do about it, as well as new models for tackling transformative and disruptive innovation.

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Interview Transcript with Elliott Parker, CEO of High Alpha Innovation

Brian Ardinger: Welcome to another episode of inside outside innovation. I'm your host, Brian Arbinger, and as always, we have another amazing guest. With us this week is Elliott Parker. He is the co-founder of High Alpha and CEO of High Alpha Innovation, which is an Indianapolis based corporate venture studio, which partners with organizations to create and launch new ventures. Welcome Elliott to the show.

Elliott Parker: Hey Brian, happy to be here.

Brian Ardinger: I'm excited to have you here because you and I have crossed paths a couple of different times with the stuff that you've been doing in startup and corporate innovation work outside the core tech hubs. And the stuff that High Alpha has been doing. Over the last decade we've seen a lot of changes and innovation, and a lot of innovation has actually come to the work of innovation. Can you give us a brief history of an evolution of High Alpha and this venture studio model?

Elliott Parker: Yes. So High Alpha is a venture studio based in Indianapolis. What that means is we're a combination of a build function with a source of capital. Think about it as a venture capital fund that builds companies. I'll make that small correction to the intro. I'm not a co-founder of High Alpha. I actually joined about three years ago. High Alpha has been around for five years. It was started by some friends of mine five years ago. They'd been working together in a company called Exact Target, that our managing partner at High Alpha, Scott Dorsey, founded about 20 years ago.

They exited Exact Target in 2014 and decided they enjoyed starting companies. And so wanted to go build a studio. Investors said you ought to raise a fund to sit alongside the studio. And this idea of a venture studio came together. That combination of build plus a source of funding. So, our team at High Alpha has gotten better and better at launching new companies over the last five years.

This year 2020 has been kind of a breakout year in many ways for us, despite all the challenges. In the end we'll get, the count 10 or 12 companies launched in 2020, but we will soon launch company number 29 out of the studio. And we've invested out of the fund in another 30 plus companies. All B2B SaaS focused. And along the way, as we've gotten better at this systematic building of new ventures, we've had a lot of scale enterprises, big companies come to us, and say, can you help us do what you're doing in your venture studio?

I mean, there's been a lot of interest just recently in the venture studio model with big companies, either starting their own form of a venture studio or looking to partner with an external studio. And initially that was not part of our approach. We were focused on building startups inside of High Alpha, but it makes a lot of sense to team up with scaled enterprises to do this.

Because although it may take us longer together to build a new startup than it might if we were doing this on our own. You know, we can launch a new startup every four weeks, but Hey, if we can build a startup with a bigco as a co-investor with us and potentially as a first customer or distribution partner for that startup, that startups got to a much better chance of getting to scale and getting to scale quickly.

So, we're very, very excited about teaming up with big companies to do this. So that's the LSD, the impetus behind High Alpha Innovation, which we created earlier this year to focus specifically on applying this venture studio model with partners like university corporation.

Brian Ardinger: So, we've seen this happen where corporations are looking at the startup realm and saying, Hey, how can we move as fast and how can we launch things that we're seeing out in the market that these disruptors and that, why do you think it's so difficult for corporations to get that innovation mojo and to the launch new starts in the way that the startup marketplace actually is doing it?

Elliott Parker: For a number of reasons. I think Clay Christiansen hit the nail on the head with the Innovator's Dilemma at 23 years ago now. And I spent many years working at Clay's consulting firm InnoSight where we tried to help companies overcome this challenge. And one of the things I learned is that to pursue innovation requires a certain set of processes and governance, the right incentives, the access to the right kind of talent.

And when you're building a scaled enterprise, you're not optimizing that scaled enterprise for learning and innovation. You're optimizing that scaled enterprise for execution. So you develop a certain set of governance, talent, process, and incentives that help you execute to do so at scale. And to take that operating model and say, now we're going to try and deploy this model to go learn. It doesn't work.

On the other hand, what we're seeing out in the market is that startups are designed to learn, to innovate, to move very, very quickly and to disrupt. And so what we try to do in the venture studio models, we've created an out of the box off the shelf collection of the right governance process, incentives, and talent that we can deploy to drive systematic innovation and to do so quickly. So, in scaled enterprises. It's very hard to take what they're so good at and to redirect it for something that they're not optimized for.

Brian Ardinger: So, talk through maybe an example of how a company would come to you and say, Hey, we want to innovate. We have some ideas that are on the shelf, but really don't know how to get that done. Why would they come to High Alpha? And how would you walk them through that process of launching or building something?

Elliott Parker: Yeah, most of the companies he's come to us because they are dissatisfied. To some degree with the quality and quantity of their innovation output. Things are moving too slowly or it's not disruptive or transformative enough. It's no wonder, right? Innovation is getting harder inside of big companies for a number of reasons.

And there are certain types of innovation that are both necessary for big companies to pursue. And at the same time, impossible or near impossible to pursue internally, it's a real challenge. And so most of the time, the companies that come to us are saying, Hey, We need to move faster. We need to get some points on the board, some meaningful points on the board.

And over the course of three or four months, we can launch a new venture backable startup and put some meaningful points on the board that way. So, it's the way to do something pretty rapidly at a cost that in many cases is lower than what it costs to do internally or certainly many times lower even than it would cost to go build a proof of concept with an existing st...