Updated: Jun 2, 2021
In the past few years, 'Corporate Innovation' has become a rallying for large enterprises in pretty much any sector or geography. Skeletons of Kodak, Nokia, Blockbuster and dozens of other examples are endlessly analysed with the diagnosis being 'Not innovative enough'.
At Blue Lake, we cross path with innovation, R&D and product teams of some of the largest corporate players in the world, and I wanted to share some ideas I have picked up along the way. All that follows is highly subjective and should be treated as such.
They are not stupid
There is a particular kind of narrative that I personally find very grating. It is the one about a stupid incumbent corporate and a plucky innovative startup that takes over market share. The buzz usually used to describe the incumbent are 'slow', 'arrogant', 'short-sighted', 'greedy'.
The question that was bothering me is, how do these firms then become this large and, by most measures, successful in the first place? Speaking with high-level executives, engineers, sales, product developers of some of the largest corporates from across the world, I was rarely left with the impression that they are a bunch of idiots with no idea what they are doing. These were professionals at the top of their game, very aware of their business environment, market trends, and long-term vision. So why do established corporates seemingly persistently lag startups in the innovation game?
Corporate Innovation vs R&D
In many cases, it comes down to branding. Many large enterprises we spoke with are doing just fine on the innovation front. In fact, they have been on the cutting edge of their respective fields for decades. Significant research budgets, new product development, moonshots, all supported by top-notch engineers, scientists, researchers. These activities often fall under the umbrella of R&D, the unsexy twin brother of the 'Innovation' getting little public attention.
It does not always mean that Corporate R&D = Innovation = Startup. Corporates are great at incremental improvements but can rarely match a startup's speed and agility when it comes to the more significant changes.
However, we found this is not due to a lack of understanding, arrogance, or failure to see the big picture. The issue is that..
..Being a Startup is Different from being a large corporate
It is a truism that is so obvious to be borderline silly but bear with me. Working with early-stage startups, we have a front seat to the regular features in any startup life, including:
The rollout of a semi-finished products
Screwing things up and adjusting on the fly
Dramatically changing features, product, the business model in the progressive search of the market fit (pivot)
Rapidly expanding or contracting teams
Finding a rapid success when they hit gold
Plunging into the wall and shutting everything down, scraping the product and dissolving the team.
The above is another day in the office part of high-risk high-pay off strategy that almost defines what it means to be a startup. Founders, investors and clients are (in most cases) all aware and accept the risks.
Any of the above would spell dramatic negative consequences for a large enterprise impacting hundreds of thousands (some times millions) of customers and employees. Large enterprises can not behave as a startup anymore than huge cargo ships can not pretend to be a racing yacht. In turn startups that have gained sufficient mass will inevitably morph into large corporations losing their momentum and agility.
Everything I wrote up to now may sound a little fatalistic. Corporations are what they are, and nothing can be changed or learned from the world of startups. Of course, this is not the case. It is never black and white. Improvements can be found in careful adoptions of certain startup features within corporate environments. In my opinion, these include.
1. Creation of an internal culture of Innovation. This, in my opinion, is by far the most critical factor for large international corporates looking to adopt the best features of the startup world within their organisations. Nothing can happen unless there is a true innovation buy-in at almost all levels of the organisation.
2. Creation of a bridge for external startups to access internal Business units via a dedicated Innovation department. In practice, this is a highly complex proposition and entirely depends on point number 1. You can not graft on Innovation or startups onto existing business units without their active participation. A specialised internal innovation department can however help to facilitate this process
3. Setting up innovation skunkworks, internal startup development or a VC activity as an utterly separate unity. This more of a risk mitigation approach. If there is a new market-shattering solution destroying the incumbent players, it may as well be your solution.