We found that there isn't a "one size
Three Universal Principles
Guiding principles for every Corporate Innovation Program to consider
Instead of setting out to build everything at once and hope it works out, the best companies take an iterative approach validating key hypothesis about the idea and only at that point making additional investments to validate more things.
The best corporate innovation programs draw a distinction between failure as a result of not following the right process vs failures that really come from ideas being invalidated. Failure due to faulty process is a challenge that needs to be addressed and invalidated ideas need to be accepted with zero impact on the career trajectory of the people involved.
Unlike other initiatives inside a company, where calculations like a simple Net Present Value can be calculated, corporate innovation programs are more challenging to predict the value of prior to launch. The best organizations look at these investments of capital and employee’s time differently for innovation projects.
Five Dimensions of Differentiation
The following FIVE dimensions are important to consider when
putting together your CORPORATE innovation programs.
Where does responsibility for innovation lie?
In some organizations, through a combination of corporate training, recruiting and executive sponsorship, the goal is to reimagine everyone’s job in a way where they are being innovative (or at least given opportunities to be innovative).
In other organizations, the responsibility for innovation falls on particular subsets of employees explicitly tasked with being the innovators for the company. Innovation is explicitly part of these employees' job descriptions, and in many cases, their entire job is to work on developing and validating new products, services, and businesses.
Many organizations feel that the success of a corporate startup depends on the corporate entrepreneurs sharing substantially in the upside potential of the new innovations and businesses. They see financial incentives and the promise of at least somewhat entrepreneurial returns as essential to attracting and/or motivating the right employees to work hard on validating new business ideas and bringing them to market.
Other organizations feel equally strongly that direct financial incentives are not required, and that innovators are internally motivated by a desire to change the world, to fix problems, and/or to create new and better things. These innovators are more commonly rewarded with increased freedom to pursue and explore as they take ideas and turn them into their jobs.
Both can work, as can models in between. The relationship between risk and reward is inherently different in a traditional startup compared to a corporate startup, but the differences range from moderate to extreme.
This is a dimension along which companies don't pick a point, but rather, define a range in which to operate. On the lower bound, companies have to ask and answer how incremental is too modest or too close to existing products or services. On the upper bound, companies need to answer how ambitious and risky corporate startup ideas can be.
Culture, politics, and management can all play roles in appropriately bounding where companies invest along the spectrum. Small wins may help gain momentum, prove a team, or secure support for more ambitious projects, but the likely upside is often lower. The most transformative ideas have the biggest potential, but they're usually the riskiest as well.
There are many different successful strategies for determining the mix of incremental and transformative innovation investments. The most common obstacle to success, however, seems to be risk aversion causing companies to lean heavily towards the incremental end of their appropriate range (whatever the range may be). This is where it's important for management to align resources with priorities while ensuring that employees can safely take risks.
Despite often having superior resources, large organizations have constraints that simply don't apply to traditional startups. These constraints not only define what type of ideas can be pursued, but how teams are able to pursue them.
When deciding what ideas to pursue, companies may want to define bounds on the types of ideas and customers new business ideas should target. Some organizations tell employees to imagine without limitations, while others give instructions to stick to core competencies, existing brand credibility, and/or their current industry.
There can also be constraints around how the ideas get pursued. For example, a traditional startup can experiment and fail many times before reaching success, but established companies face serious reputation risk when doing the same. Companies often put rules and best practices in place to protect existing lines of business while still working on what comes next.
Some innovation groups are very committed to building new products and services predominantly or even exclusively leveraging internal resources. The obvious advantage to this is that it provides the greatest amount of control over the projects, but often run into constraints.
Other innovation groups have developed fruitful partnerships with other companies, startups or even academics. These partnerships, when implemented correctly, can be an amazing accelerant, but they also add stakeholders. Managing all parties' expectations upfront is critical.
Finally, some groups augmented their innovation activities through a combination of corporate venture or mergers & acquisitions. While expensive, this is a great technique to quickly add technical capabilities (either forward-looking or when playing catch-up). Sometimes this "buy" strategy is about acquiring technology, physical resources, or even intellectual property, while other acquisitions are more about bringing the right team on board.
The largest companies tend to do all 3 of these things with some regularity, but within a company, different groups lean in different directions (sometimes as a function of the objective, and sometimes as a function of the team and approach).