Corporate innovation allows organisations to sustain growth and business improvements on a continuous and consistent basis.
Since 1955, just 52 businesses from the original Fortune 500 list have remained there each year. Half of the businesses that made the list since 2000 have been acquired, have filed for bankruptcy, or have been eliminated, according to research by Capgemini Consulting.
Companies need to innovate if they want to survive, but as history shows, it’s not as easy as it sounds.
“Companies have to make a strategic decision to innovate and then be strategic about it,” says Phil Budden, a senior lecturer in the Sloan Group for Technological Innovation, Entrepreneurship and Strategic Management (MIT).
“You can’t just leave that to a company’s research department and hope that leads to innovation,” Budden said. “You can’t just leave that to the M&A team, and you can’t just leave it to the venture capital department of the company.”
Here are 5 mistakes companies make in their corporate innovation efforts and how to avoid them.
For innovation to succeed, you must learn to fail. I know this sounds like a paradox, but failure and innovation are closely linked.
In many companies, there is a culture that discourages any kind of failure. If you fail at something, it means no more promotions, no more raises, and maybe even the end of your time with the company. That’s appropriate if the failure is due to gross negligence, but according to Amy C. Edmondson, a professor at Harvard Business School, that accounts for a very small proportion of failures in a company (usually 2-5% of the total). The rests are completely predictable mistakes or even mistakes that can be used for good.
Failure is the key to innovation. For something new to work, a team needs to quickly test different approaches and find out which ones work and which ones do not. They need to experiment and be open about what went right and what went wrong. But when even the smallest failure leads to blame and reduced bonuses, it becomes impossible. People start to hide their failures and all the lessons they learn from them.
Agility may be a buzzword in innovation, but it is still key to a successful innovation program in a company.
You need interdisciplinary teams that can act quickly and adapt accordingly. They need to be able to experiment quickly, run small tests and change and adapt the project quickly based on the results. If a new project fits well with the customer’s needs, it can be rolled out to the whole company.
Yet it is easy for a company, especially a large corporation, to bog down new projects in endless meetings. Innovation is difficult when, for example, you have to wait three months for IT to solve a software problem for a new product, or when you have to ask three different managers for permission when you want to start a new experiment.
This is why McKinsey, for example, has called for large organisations to shift from their traditional model of hierarchy, bureaucracy, and silos (or viewing an organisation as a “machine”) to an agile model where the emphasis is on action and flexibility (where the organisation works as an “organism”).
Innovation may need agile, bottom-up energy, but it also needs top-down help.
Every innovation project needs to be supported by senior management. If it does not, there is little chance of innovation catching on. They end up with pilot projects where new technologies and innovations are tested but never rolled out to the whole company. The result is entertaining experiments with new technologies such as artificial intelligence ( AI) that are nice to show to the public but of little use to the actual business of the company. Eventually, these innovation projects are cut off from funding.
KPMG, for example, showed in its Benchmarking Innovation Impact 2020 report that 45% of respondents in large companies say that innovation and strategy in their companies are “only somewhat connected or not aligned at all”. In addition, 60% of respondents said their innovation projects were “ad hoc or nascent” and had little to do with the rest of the company.
Another mistake business leaders make is assuming that simply being in an innovation ecosystem will open the door to innovation and partnerships within that ecosystem.
To get the most out of an external partnership, business leaders need to think carefully about what they want to achieve strategically. Once leaders have this strategic vision for innovation, they can focus on who they want to meet and who can help them organise those meetings.
Finding the right startup that is at the right stage and has the right technology solution is the best way to move things forward.
Innovation is often equated with technology. Of course, technology is important, and things like AI, 5G and blockchain could permanently change our future.
But that does not mean that every innovation project has to focus exclusively on a particular technology. Focusing too much on technology rather than the market could actually kill innovation.
Innovation is often about meeting customer needs, and technology comes second. If you put the technology first, you might fall in love with the solution rather than the problem.
This is a well-known problem in the start-up world. It is a common mistake for a founder to get bogged down in the technical details of their product and lose sight of what the market really wants. When CB Insights calculated why start-ups failed, they found that 14% failed because they ignored their customers. 17% also failed because their technology lacked a business model.
Innovation is facilitated by technology, but technology is only one part of the interplay of ideas between a problem and a solution.. The act of innovation is figuring out the ways in which technology solutions could actually help with a real business problem.
Innovation in companies often means working with start-ups or sometimes even taking them over. Startups are predestined for 10-fold innovation because they are small, agile and good at applying novel solutions to novel problems. It is harder for established companies to innovate 10-fold because they have old customers, old IT and an existing business to consider.
However, even though nice things can happen when start-ups and companies work together, there can also be friction. A corporate culture can strangle a start-up. Long meetings, risk avoidance, a short-term vision of turnover, and sales cycles slow down the high pace of innovation.
A study by the innovation foundation Nesta found that speed is the biggest barrier to collaboration between start-ups and corporations. Around 50% of start-ups report problems in this area. Problems such as coordinating projects or a mismatch between cultures are also common.
Working well with start-ups is not just about setting up fun projects or even an accelerator, it is also about aligning your strategy and culture with that of an external player and finding a symbiosis that works for both parties. That’s why it is crucial to find the right partner.
Of course, there is no magic recipe for business innovation. It’s not about doing 5 specific things and then becoming the Apple or Alibaba of your industry. But there are definitely some “don’ts” if you want to stay relevant in the competitive scenario, and these were 5 of the most common. Let us know if we missed an important mistake in our list!