Now more than ever, it’s essential for even the most well-established organizations to embrace corporate innovation.
In this article, you’ll learn corporate innovation, two different innovative models to implement, and key terms to know when starting your journey, such as proof of concept and design thinking. In this article, you’ll learn corporate innovation, two different innovative models to implement, and key terms to know when starting your journey, such as proof of concept and design thinking.
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Startups and digitally native companies are keeping things interesting as their new ideas and life-changing technologies are taking over. In today’s age, entrepreneurs are advancing their traditional corporate counterparts, so now more than ever, it’s essential for even the most well-established organizations to embrace innovation.
We help innovate in 20+ industries, actively recruiting world-renowned corporations and the most disruptive startups in the game to bring them together to make magic happen. We pride ourselves in being innovation matchmakers and creating an ecosystem where change not only happens but is encouraged.
This guide will dive into the essentials for corporate innovation, including two different innovation models to consider, key terms to know, and how to get started with your strategy.
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What is corporate innovation?
Corporate innovation is a systematic change designed to help an established organization sustain or find new sources of competitive advantage. Some businesses and organizations aren’t initially prepared to innovate. Innovation, in general, will always be a challenge, no matter the company or industry.
Corporations have traditionally been built upon one immensely successful product and subsequently expanded their enterprise on that existing business unit. R&D teams and departments were solely focused on improving existing products by identifying supporting business models.
However, what was previously successful has now been upturned by an influx of disruptive startups. While corporations tend to be slower at identifying disruptive opportunities, startups thrive in reimagining the past, present, and future. In the current environment, corporations must rethink and reinvent their business models, incorporating internally generated success with externally generated innovation.
How corporate innovation works
By collaborating with startups, corporations increase operational efficiencies, decrease costs, find new product lines, and become more innovative from the core.
The innovation journey typically works through the three E phases:
The exploration phase is a key phase because it’s when you first foster a sense of urgency around innovation. Raising awareness and gaining a better understanding of your company’s goals, priorities, and key challenges are the main focus. During this time, you’ll likely discover or fully define your specific pain points and focus areas.
During the experimentation phase, you’ll want to focus on engagement by creating an ecosystem of supporters and considering external networks. The main activities in the phase will be formulating a consistent innovation strategy, investing time and money, and formalizing responsibilities with an innovation team or roles.
The execution phase is all about scaling. This means implementing all innovation tools and efforts to optimize and standardize efficiency. At this part of the journey, several challenges exist, such as consolidating processes, demonstrating a return on innovation, educating new stakeholders, etc.
Corporate Innovation Models
Everyone loves an exciting idea, but your organization must know exactly what corporate innovation model is right for you before diving into the deep end.
Open innovation and closed innovation are two different ways of developing new ideas, products, and services.
Open innovation is a term coined by Henry Chesbrough in 2003 to describe the concept of companies working with external sources to create innovative solutions. It encourages collaboration between external experts and internal employees, allowing both parties to benefit from each other’s ideas, skills, and capabilities. The benefits of open innovation can include faster product development cycles, lower costs, increased access to new technologies, and improved customer engagement.
Closed innovation is the opposite approach, where all research and development is done internally by a company or organization. All decisions are made within the company itself without any input from external sources. This approach allows companies more control over the creative process but can also lead to missed opportunities for new ideas and collaboration with other businesses. It may also be more costly than open innovation as it requires greater investments in research staff and technology solutions, such as software development.
Open innovation is more suitable for established companies with a track record of success that want to innovate further through collaboration with third parties such as customers, universities, startups, venture capitalists, etc. Closed innovation will most likely be seen in emerging businesses that are still trying to hone their strategic objectives before expanding into the open market.
An innovation team
We’ve seen monumental shifts in finance, retail, travel, and many other industries through our 20+ platforms – where startups are creating technology that is transforming consumer and user behavior. When a company anticipates that startups are gaining market share, a dedicated innovation team should be assembled to work on futureproofing the company.
Common strategies that arise after an innovation team and its change agents have dug into the future needs of their business focus on:
Creating new product lines
Improving customer service
And, improving existing products through new technological advancements
The next step is to work out exactly how the company will transform from having no external connections to a robust and patient approach to finding the right set of startup partners to fuel their digital transformation. This is where other corporate innovation models come in, like an innovation outpost.
Different industries are hosted among different regions across the world. For example, the automotive industry in the US is centered in Detroit, aka “Motor City,” London is Europe’s financial axis, and Silicon Valley is the hub for future high-tech. Your innovation outpost is where you should be positioned in the cities or regions that will give you the highest likelihood of finding advancements in your market.
We host innovation outposts across 50+ locations for many of our corporate partners to help them keep an ear to the ground, react quickly to new connections, and roll out partnerships with startups. Establishing a successful innovation outpost involves:
Identifying the location
Leveraging networking opportunities
Accelerating, piloting, and building your global reach
Setting up the outpost alone shouldn’t be considered a success, as it is merely the start of the process. An outpost must be tied to other corporate innovation models to truly be beneficial.
We help you build your global reach
Working with startups
Considering one of the main intents of corporate innovation is strategically implementing new technology, sourcing for startups is key. Some important innovation models include external accelerators, innovation programs, and corporate venture capital — basically, working with startups. An innovation team must closely evaluate startups by using a concise set of criteria. Three major questions to consider when vetting include:
Where does it fit in the market?
What is the quality of management?
What is its competitive differentiation?
If the startup proves to be a good fit, the innovation team should then run a PoC or Proof of Concept. This allows startups to test their product in a low-risk environment before fully integrating it with the corporation’s business model. The overall objective of a PoC is to find solutions or improvements to a corporation’s existing technologies and products.
Working with startups
We’re more than an external accelerator — we’re a global innovation platform. With us, you’re picking a level of engagement that works for your company and reaping the rewards of a vast and carefully curated network. You also have “voting rights” in our programs – i.e., an active say in which types of startups are sourced, accelerated, and introduced. Our corporate partners also go on this journey alongside other corporates, whether in the same industry or not, and have the opportunity to work side by side on innovative best practices.
Closed Innovation: Intrapreneurship and R&D
Research and development is a common approach to modernizing your company. By keeping innovation strictly internal, “intrapreneurs” are provided resources to improve existing products and even launch startups within the company. Unlike most open innovation models, this requires much more capital even to start. Immediately, this increases the risk level of the internal ventures because they’re being built from scratch, have no guarantee of product-market fit, and could be a very public way to fail. For a corporation trading publicly, this can be potentially devastating to the market cap and very unpopular with a board of directors.
For decades, we saw industry titans build huge research and development labs to find the “next big thing” from within their own companies. In simple terms, this is the epitome of closed innovation.
In some cases, it results in huge success: the Volkswagen Beetle, the iPhone, and even popular pharmaceuticals on the market today. However, it can also result in monumental failure: the Ford Edsel, the Facebook phone, and Apple’s Newton MessagePad.
Nonetheless, it’s important to not get discouraged as some of the brightest minds in the world don’t all take the entrepreneurial path. They could very well be within your organization currently (we would assume you hire only the best of the best).
An intrapreneurship program will help identify these great minds and give them the tools they need to realize their big ideas. This can be a great way to create a substantial competitive advantage and new product.
Key terms of innovation
Design Thinking: A creative approach to problem-solving that utilizes an iterative process to explore multiple solutions.
Business Model Innovation: The disruption, creation, or revision of a business model with the purpose of increasing revenue or improving operational efficiency.
Lean Methodology: A methodology used for streamlining processes by eliminating waste and introducing efficiencies into operations.
Disruptive Innovation: A type of innovation that creates a new market space by either creating entirely new demand (market creation) or usurping existing competitors (market disruption).
Proof of Concept: A proof of concept, or PoC, is how startups demonstrate to a corporation that their technology is financially viable. It’s essentially an experiment or pilot project.
Corporate Venture Capital, or CVC: A form of financing where companies invest their own funds in external startup ventures.
Fostering your innovation culture
Fostering an innovative culture in an organization can be a powerful way to drive growth and success. An innovative culture encourages creativity, imagination, and risk-taking among employees. It can help organizations find new solutions to old problems and develop new products or services to meet customer needs.
To foster an innovative culture, organizations must create an environment that encourages collaboration, communication, and experimentation. This means having policies and practices in place that support these values while also allowing room for failure.
Organizations should also provide opportunities for employees to develop skills related to innovation, such as problem-solving, creative thinking, and adaptability. These skills can be developed through mentorship programs, training sessions, hackathons, workshops, or other events focused on learning new technologies or processes.
Leaders should also set the tone by encouraging employees to think outside the box and develop new ideas. They should also recognize employees’ efforts toward innovation and reward them for successful ventures.
Finally, organizations should ensure that their teams are diverse regarding backgrounds, knowledge sets, and ways of thinking so that different perspectives can be brought into the conversation when it comes to solving problems or creating new products or services. This diversity of thought will help ensure that innovation is generated from all areas of the organization.