Cognizant: Disruption is an Inside Job by CDT

How has one of Forbes “25 fastest-growing technology companies sustained its compound annual growth rate of 30 percent for the last 20 years?

“By continually challenging ourselves to bring new offerings to the marketplace and find new ways to help our customers,” said Sean Middleton. He’s COO of Cognizant Technology Solutions’ emerging business accelerator.[i]

“Digital disruption is a great opportunity for us,” he said. “The risk is the inability to capture it.” Automation is a great example. “Our executives are forward looking enough to know that, if we don’t do automation, someone else is going to do it to us. We’d rather do it first in a controlled way than let someone else do it.”

That means investing in internal disruptors. Cognizant’s approach to cultivating resident entrepreneurs is designed to keep disruptive big ideas in house, away from venture capital. Beyond seed funding, Cognizant provides incentives that venture capitalists can rarely offer.

The first is access to Cogizant’s 1,000 customers. “VCs have good access to money, but…they won’t necessarily have access to clients,” he said. “At the end of the day, we look to our customers to validate the ideas.”

The second is an advisory board. “For each of these we’re incubating, we create a board of directors to govern it,” Middleton said. “That board of directors is comprised of somebody from my team and someone from our core business.” To foster collaboration between the two, both teams get credit for success.

For example, if it’s a banking venture, an individual from Cognizant’s core financial services vertical sits on the new venture’s board and gives its entrepreneurs credibility in the banking market space as well as entrée to Cognizant’s banking customers. If the new venture delivers a mobility project through a banking vertical, the vertical also gets credit for it.

Too often, new ventures get killed because they get compared to established business lines. Cognizant asks each new venture to define the right measure of success. “Should it be in traditional terms of revenue and profitability?” Middleton said. “Or should it be the number of customers you get access to, the amount of data you collect, or something different?” The advisory board governs the start up accordingly.

A fourth incentive is reduced risk with commensurate reward. “There is a set of entrepreneurs who are willing to sacrifice the long tail risk at the high end (e.g., those $16 billion payouts) for a truncated low end (e.g., ‘I mortgaged my house and now I’m homeless’). These entrepreneurs want some variability in their payout. We provide profit sharing structures and restricted stock units to reward them.”

The fifth is autonomy with support. “We empower individuals to get started with such self-service tools as prototyping capabilities, education around how lean startup strategies work, and education around business model canvases. We give them the ability to take the first couple of steps on their own because, often times, that’s what they’re really looking for: guidance on how to get started,” he said.

A sixth is an accelerated career trajectory. “If you’re among Cognizant’s 200,000 employees, you may not have a lot of visibility. If you get your venture funded, you’re pulled up into the emerging business accelerator,” he said, and that means direct access to Cognizant’s CEO and the senior management team.

A final draw is the culture of experimentation, where it’s OK to fail as long as valuable lessons are learned. “We try to separate the entrepreneur from the venture,” Middleton said. “It’s not a ‘one and done, you’re out.’”

Middleton believes Cognizant’s approach is working. “We say, ‘If you do the right things, if you demonstrate that you’re willing to take risks and be a star, we’ll figure out how to make sure you’re whole at the end of the day.’ And we’ve done that every time.”