The Innovation Pitfall
Organizations need to be superior in innovation to survive in today’s challenging business environment. New technologies, processes and business models emerge in ever shorting cycles. When we imagine innovation, in most cases breakthrough technological innovations come to mind. Hunting for these innovations is a risky adventure that rapidly soaks up Research & Development funding. In most technology companies up to 80% of the R&D budget goes into the search for breakthrough technological innovations. Surprisingly most business value is generated from other types of innovations. Business model & social innovation tend to account for up to 80% of the innovation value for companies. A classic 80-20 or Pareto principle pitfall? Of course investment in both technological and social innovation are needed, but the focus needs to change.
The Quest for Social Innovation
Recent Dutch research RSM and Panta Rei conducted at 1.500 companies has shown that innovation success is determined for up to 77% by what they call ‘social innovation’. The technological innovations contribute 23% to this innovation success according to the researchers. ‘Soft innovation, has hard impact’, according to innovation professor Henk Volberda: ‘but most companies don’t have strategies for social innovation in place’. The researchers indicate that there are four types of social innovation: new ways of management, innovative organization structures, smarter working, and external cooperation. Supporting entrepreneurship within companies is one of the strategies for supporting social innovation (and for customer focused technological innovation it might help as well). Dutch electronics giant Philips aims to foster entrepreneurship via its Accelerate! program. In the Finance sector ABN AMRO organizes Startup Friday to mix employees with the outside challengers and Startups in order to create and pitch new ideas. Just some examples of first steps fostering Intrapreneurship. This Intrapreneurship is not just about a program or initiative. It is a change in corporate culture, employee behavior and innovation tooling that needs to make large corporations more successful in innovating their technologies, social structures and business models.
Lean Startup meets Corporate Innovation
It is not surprising that the Lean Startup Methodology attracts quite some attention in the Corporate world. The approach first described by Eric Reis is all about short cycles of building, testing and measuring. It combines the best of entrepreneurship, co-creation with customers and the Deming Wheel of quality management. A Golden Formula for innovation as more and more Corporate Organizations are finding out. But it is not easy to get the Entrepreneurial spirit and Startup approach embedded into the innovation processes of corporate organizations. It requires a different mindset managers and employees apply to innovation. The need to take ownership of the innovation process and apply a Lean approach to managing innovation projects that is not intuitive for most of them. Following Lean and Agile ways of working within the boundaries of their organization is still a struggle. In most cases Lean Innovation is limited to specific programs, contests or initiatives. Embedding it into wider innovation practices and the organization as a whole is challenging. A good starting point for adopting Lean Startup or Lean Innovation are all Internet related innovations. This is where the approach comes from and build-measure-learn cycles for validation can be easily monitored and supported by good data. Besides the approach this should be the area where corporate organizations need to release or foster the Entrepreneurial spirit.
Bringing the entrepreneurial spirit in
So, besides the Lean Startup Methodology it is required to bring the Entrepreneurial spirit into your organization. To have employees and managers experience what it takes to work from pitching ideas via restrained budgets to innovations that have the traction to be successful. Have them work together on the Challenges and Must-win-Battles of your organization in a Pressure Cooker style. To learn and fail fast and use innovation accounting to capture this learning. At StarterSquad we help organization towards application the Lean Startup Methodology for building successful innovations. This includes working on the skills and mindset required to put this methodology to work. We support innovation programs that go from Idea Pitching, via intensive Bootcamps with teams, all the way through to the actual launch of Startups. On the execution level our Distributed Development Teams help build the actual web-based solutions that can be taken to the market. We have experienced that bringing the entrepreneurial spirit into organizations is extremely rewarding for employees and business results, and besides the hard results it is a lot of fun!