Sramana Mitra: When the team comes forward, is it required to present a business case analysis or a hackathon style development first?
Max Wessel: They tend to do a very light back-of-the-envelope business case – nothing substantive. We teach people to think by analogy. If you’re building a tool to get into the recruitment services market or start to automate what recruiters would otherwise do for a large organization, the question is, “What’s the scope of the businesses that have been launched like that before?”
You don’t have to develop an in-depth business plan but you have to have some conviction. We hope that you have some conviction that this is actually a big opportunity. Once they have that, they go into build mode. We invest a lot in teams. We believe that teams that don’t over analyze the world before making decisions tend to perform better, in part, because there’s so much to do and test that the more we can encourage our cross-functional leaders to get into the market and learn by doing, the better.
Sramana Mitra: Who owns the intellectual property of these projects that come up through the ranks?
Max Wessel: The IP is owned by SAP. We don’t have any desire to retain the IP control or keep people from doing things should we not invest to move a project forward. We’ve regularly allowed employees the right to go use that should we not invest.
Sramana Mitra: Interesting. Just a few comments, our platform powers the intrapreneurship program at one of your top competitors. I see a couple of differences in the way we are doing it versus the way you are doing it. The first one is actually in the topic selection and business case analysis issue.
In our way, it’s a complete grassroots democratic invitation to participate in an intrapreneurship challenge, which I imagine is similar to your way. Then after the applications have been submitted by the organization, we evaluate which ones are going to be receiving the training on how to take a product to market because the hypothesis we have is there are many tens of thousands of engineers who are very smart but they just don’t have the experience of how to take a product to market and the nuances of how to do that.
They’re given training to do that and that’s something that we participate with them in. Then they’re asked to submit their idea. They’re given a broad topic like cloud for example but not more specific guidance on that. As a result there’s a diverse set of projects that are coming out of this process and being fleshed out including a very extensive customer validation, pricing model, business model analysis, and TAM analysis.
Max Wessel: We have about 10,000 employees who engage in our educational content. We have all sorts of e-learning associated with this, which we’ve been developing with Stanford. As someone who’s founded multiple venture-backed startups, what we have found at SAP is, there is a tendency to over analyze and build very in-depth business cases based on a number of assumptions that generally don’t prove true.
I started my career at BCG. The BCG is famous for having wonderfully intelligent business-savvy people who develop models that are filled with false precision. One of the reasons that we encourage this process and not just to go through continuing education and have a loose hypothesis is because when we make a major capital commitment, you want to move from an academic understanding of the market to really validated assumptions.