Did you know that 55% of C-level executives feel unfulfilled towards their organisation’s approach to innovation? One of the biggest reasons organisational leaders are unsatisfied is because corporate innovation can seem opaque and intimidating. Knowing which innovation activities to prioritise can be daunting.
As a starting point, organisations should first align their strategic direction for transformation with current capability levels and the opportunities identified on the market. Once this is achieved, business leaders can more fluidly move into the execution mindset for their chosen innovation process.
Breaking the corporate innovation process into three individual ‘building blocks’ may help organisational leaders decide a way forward with more clarity. These three ‘blocks’ include building innovation internally, buying another company to innovate through acquisition, and partnering to facilitate corporate innovation.
Regardless of which approach is more suitable for your company, it’s important to recognise that each path has its own advantages and challenges. Continue reading to discover three key ways to build effective strategic transformation, and find out which model is the right fit for your organisation’s needs.
Build: Creating An In-House Corporate Innovation Strategy
‘Building’ corporate innovation involves using talent and resources from within your company to assemble and implement internal innovation.
This is where entrepreneurially-gifted individuals, known as ‘intrapreneurs’, who use their creative problem-solving skills to capitalise on innovative and valuable business opportunities can really shine. To properly encourage intrapreneurship and develop your ambitious ideas into scalable solutions, you’ll need to create an environment that both inspires creativity and experimentation.
Challenges of Building Internal Corporate Innovation
Creating the right environment is essential for innovation, but it doesn’t come without its obstacles. Even if you already have employees who know how to rapidly validate new ideas, there’s no automatic guarantee your people will have the opportunity to deploy them by systematically reducing risk through experimentation.
Stifled experiments and failed innovation are often a direct result of the internal organisational structure. It’s one thing to upskill and help develop your employees’ capabilities, but it’s another to activate intrapreneurial talent to achieve the strategic outcomes your organisation desires.
To build corporate innovation with in-house skills your organisation needs to have:
- The right governance structures.
- Effective decision-making mechanisms.
- The correct level of control to properly measure growth.
On top of that, organisations also need to identify the right talent both internally and when hiring new employees. According to a study conducted by the Society for Human Resource Management, 75% of HR managers agree that the top soft skills missing in workforces are: creative problem-solving, the ability to deal with complexity and ambiguity, and sharp communication.
Modern organisations looking to acquire and retain talent must pay attention to these soft skills to equip their employees with the tools, methodologies and mindsets to successfully develop corporate innovation strategies and create a culture of transformation. Without properly harnessing intrapreneurial talent, your organisation’s innovation efforts are unlikely to make a meaningful impact.
Advantages of Building Corporate Innovation In-house
If an executive or board members have past experiences of unsuccessful innovation ventures, they may be hesitant to adopt a similar approach in the future. That said, 84% of executives still agree that the future success of their organisation is tied closely to innovation.
As many as 50% of senior executives consider creativity and entrepreneurial spirit top priorities in prospective employees. The benefit of building corporate innovation in-house is the opportunity to unlock existing entrepreneurial capabilities in your workforce, minimise risks and reduce reliance on external stakeholders.
Typically, intrapreneurs are the driving force in leveraging existing resources within your organisation to launch new ventures. Incremental improvements to enhance value propositions and experimenting with transformative ideas to differentiate products or services from rivals can help businesses find their edge in an increasingly competitive marketplace.
For example, when the satellite pay-TV broadcaster Sky was looking for ways to increase their footprint in clients’ households by embracing online content consumption, they launched an internal tech project from scratch, hiring hundreds of developers, designers and product managers to launch the multi-award-winning set-top box Sky Q. This project eventually stemmed into the world-leading in-house Osterley Innovation Centre. Actively dedicating resources to pursue innovation has strengthened Sky’s technology expertise, allowing them to provide consumers with the latest innovations such as virtual reality and media streaming platforms.
Applying your best intrapreneurial talent to work directly on innovation projects also helps to nurture this talent through hands-on experience or ‘learning through doing’. One of the best ways to upskill talent within your company is to select promising individuals to lead real initiatives as part of innovation portfolios.
Moreover, without reliance on outside stakeholders or providers, you will have complete control over your products and services, ownership of intellectual property, and the greatest opportunity to achieve profitability.
How to apply your Intrapreneurial talent to drive higher Return On Innovation?
Buy: Driving Innovation in Large Corporations by Investing and Acquiring
‘Buying’ involves acquiring or merging with another business that complements your organisation and helps you gain assets, expand reach or build on your existing strengths. Joint business ventures take place for a variety of strategic reasons, but the most common driver is linked to the economic and financial circumstances of both parties.
While acquisitions are popular amongst organisational leaders, as many as four out of five large companies fail to properly innovate post-acquisition.
Corporate Innovation Challenges When Acquiring or Merging
Large companies often seek to remedy a lack of innovation through acquisition. However, problems occur post-acquisition when company cultures clash and unstructured innovation strategies place limits on ways of working. Acquisitions also run astray when the primary goal is to gain assets, rather than directing focus towards innovation and mutually-beneficial growth.
Consider the Risk
Taking a gamble on the success of another company is an inherently risky exercise. While an acquisition can significantly affect a company’s growth potential and long-term outlook (practically overnight), two businesses combining together always comes with a degree of risk. Once you’ve made a commitment it’s very difficult to offload the acquisition onto another company if things don’t work out in the way you hoped.
Beware of the Costs
On top of that, acquisitions rarely come cheap. The main expenditure in any merger or acquisition tends to be the cost to acquire the smaller company and its assets. If an emerging startup has a strong value proposition, acquiring them out-right can be extremely costly for the larger company. The challenge lies in ensuring that any money spent is put to best use in order to achieve the best returns.
Acknowledge Culture and Compatibility
Significant differences in company cultures can also present integration challenges when two or more businesses join forces. Blending two company cultures without appropriate consideration from both sides is often met with friction and disruptive conflicts. For example, due to their scale, large organisations often struggle to offer the same level of intimacy and creative freedom as lean startups.
On one side, large organisations have well-defined processes and policies, set up to generate the maximum profit from a well-established model. Sometimes these processes favour accuracy as opposed to speed.
On the other hand, startups come from a background of experimentation and exploration, more closely related to the way entrepreneurs work. Their founders and teams are often a tightly knit set of people who work fast and are accustomed to rapid changes in approaches in order to identify a solution to a customer problem and explore avenues to make sensible profit out of that.
If not properly prepared to deal with a new set of values and culture, acquisitions are often bound to fail to deliver successful corporate innovation because of an internal rejection in a similar way as the immune system identifying the transplanted organ as foreign, triggering a response that will ultimately destroy it.
Advantages of Acquisitions for Corporate Innovation
One of the biggest advantages of mergers and acquisitions lies in the increased capabilities of a joint venture. Not only does buying open doors to new innovation opportunities, but it can also present wider market opportunities that were previously inaccessible.
Disney’s ex-CEO, Bob Iger famously transformed what is now the world’s second-largest media company through four historic acquisitions. While Disney had already established itself as a global giant in the entertainment sector, Bob’s foresight to acquire Pixar in 2006, quickly followed by Marvel, Lucasfilm and, most recently, 20th Century Fox in 2019 helped the franchise grow to new heights.
Disney’s story shows how succeeding at innovating through acquisition requires a fine balance between aligning the goals while keeping the original culture of the acquired company alive and well. One notable example is the acquisition of the animation studio Pixar operated by Disney in 2006 for £7.4 billion.
It took several tours of Pixar studios for Iger to realise that the real asset he wanted to buy was the company’s creative culture, and he had to make sure that was kept intact to generate the return on investment expected.
Acquisitions may be also quicker than building a team from scratch. Instead of going through the motions of cultivating the right group of employees, an acquisition could provide a fully-functional and innovative team instantly. That said, between company culture, organisational structure, and having the right metrics to measure innovation, acquisitions require much more than a purchase if a business is expecting tangible results.
Could an Acqui-hire be the Middle-ground?
Acqui-hire models serve as a balanced medium between acquiring and partnering. Both parties in an acqui-hire gain access to key assets while retaining their familiar company cultures — both key ingredients for the continuous generation of innovative ideas.
Rather than opting for a full-blown business acquisition, acqui-hire models can also prove efficient and effective for companies looking to find new talent to drive corporate innovation. According to Deloitte, acqui-hires can help larger organisations access talent in smaller companies and startups at the same time as mitigating the competition.
Partner: Corporate Innovation Models with Build-Buy Partners
A growing approach to corporate innovation involves large organisations partnering and collaborating with small, high-growth startups. Joining forces with another company can help organisations create a culture that embraces innovation and allows for constant experimentation.
We recently sat down with Adrian Wong to discuss corporate innovation and the power of a partnering model. Adrian is the founder of Moxi AI, an AI-powered chatbot that performs the role of a social butler, and Chief Innovation Officer at Venture Agenda, who develops programmes to help forward-thinking businesses gain a competitive edge by identifying and engaging with emerging innovators in their target markets.
Challenges of Partnering to Drive Corporate Innovation
Adrian explained that both parties involved in the partnership must understand that corporate innovation can’t simply be instructed or commanded. Rather than telling employees how to think, partnering companies must establish a cohesive culture of innovation that empowers employees on both sides of the equation.
Adrian used the metaphor that large companies working with startups can be like “elephants dancing with mice”. As a result of poorly aligned company cultures and diverging business objectives, the larger organisation “steps on” and “crushes” the smaller.
Navigating internal processes, roles and professional values is an important challenge for executive leaders to overcome on both sides of a partnership. Unclear goals, unrealistic expectations, and unattainable timeframes will likely harm relationships and sabotage corporate innovation.
To ensure both partners see positive outcomes, companies must embrace experimentation and use the outcomes of these experiments to actively drive innovation. When businesses accept and understand the lessons from failed experiments, they have the opportunity to learn from the shortcomings and work to improve their product or service without the need for expensive investments.
Much like an acquisition, partnerships run the risk of companies losing control of their own decision-making as dominant partners try to cast their influence on smaller organisations. Typically, startups have their own growth agenda and look to explore multiple opportunities. Smaller partnering companies don’t just exist to build innovation for the larger corporates, and can even pivot entirely if they discover new use-cases for their product or technology.
Advantages of Partnering to Facilitate Corporate Innovation
According to Adrian, partnering can be a mutually beneficial way of nurturing corporate innovation in both large organisations and startups.
Beverage company Diageo and Thinfilm, a Norwegian tech-innovation startup, partnered together to create the first-ever “smart bottle”. The goal of the partnership was to improve the beverage supply chain, customer experience, and anti-counterfeiting efforts with Thinfilm’s proprietary OpenSense electronic sensors that can tell whether or not a bottle has been opened. The partnership was both a successful opportunity for Thinfilm to trial their technology and helped Diageo collect data to improve consumer satisfaction.
Large corporations have the scale, reach and industry expertise that can be an important asset to startups. Access to valuable assets, such as intellectual property or state-of-the-art technology, can be hugely beneficial for the growth of a smaller company. On the flip side, startups are known for their speed, which means they can help large organisations experiment more rapidly with innovative ideas and work quickly to build unique solutions to customer problems.
Partnering has the real potential to drive intrapreneurship, but in order to successfully build corporate innovation, the professional environment and company structure must be right. Finding a right-fit culture, setting clear objectives, and allowing opportunities for hands-on experience are all key ingredients for achieving the best results in a partnership.
When a team member from the larger organisation works within a startup for a period of time it’s much easier to combine company cultures as well as share practical experience and insights. Forming blended teams with a fresh perspective is an effective way to boost motivation, collaboration, productivity, and an intrapreneurial culture.
How Do You Choose the Right Corporate Innovation Strategy?
Now that you’re familiar with the different types of corporate innovation strategies, you need to pick the right one that aligns with your organisation and overarching objectives.
Whether you’re looking to build new innovation projects from the ground-up, identify the right buy opportunities for a speedy go-to-market strategy, or to collaborate through partnering with small, high-growth startups, none of the options is likely to successfully deliver the expected corporate innovation outcomes unless the internal culture is aligned with the latest innovation practices and methods, and crucially, to how entrepreneurs work.
At Studio Zao, we specialise in assisting organisations to execute innovation and transformation by empowering intrapreneurs and internal teams to master innovation and entrepreneurial culture. In this way, activating intrapreneurial talent and initiating transformational cultural change will ensure a meaningful impact on your organisations’ growth.