The competitive landscape of most companies is changing at rapid pace. Most changes come from technology innovations. Existing businesses in every sector struggle with this digital disruption. The rate can vary, but disruption will hit every sector. And in this digital vortex existing companies are prisoners of their current success. But they understand that they need to innovate. The hardest question is: “How do you organize corporate innovation?”. Many models exist and sure there are some best practices, but it remains challenging. In this post I share 6 tips that I find useful in improving corporate innovation.
#1 Pick Your Battles
It is important to pick your battles if life. This counts for innovation as well. Most organizations don’t have an issue generating innovation ideas. They have issues in choosing the ideas to execute on. So, how do you pick your battles. First you need a clear vision for the future. What are the trends that will impact your business most? You need to look at changes in society, technology and business models. Do some scenario planning to understand the impact. This allows you to set priorities right. There are several ways of prioritizing, but I like the 70-20-10 model for this purpose. Do 70% in the optimization of your existing products & services. This is often called incremental innovation and optimizes your existing offering. This can be either technology or business model. Risk is low here and returns can be high if done well. It capitalizes on existing success and you can reap the benefits in the short term. Then 20% should go into semi-radical innovations. This where you either make a big shift in your technology or business model. The shift from BMW to produce electric cars is a good example on the technology side. A business model example is Gillette that introduced a subscription model for razor blades. Only the remaining 10% goes into radical or disruptive innovation. This is the hardest and riskiest part of corporate innovation. Research has shown that it is hard for incumbants to create disruptive innovations. That why you have to think about the right structure for especially these innovations. You might even want to leave this on the outskirts or outside of your company. In the next tip we will have a closer look at this.
#2 Get the structure right
How do you structure your innovation? The traditional Research & Development departments are re-branded in many organizations. Companies now have structures like Innovation Labs and Corporate Accelerators. When it comes to structuring innovation work the name is just a minor detail. There are many questions to answer here. Do we have dedicated innovation staff, people from the organization or a mix? What do we do ourselves and what parts do we insource? Do we set it up as a project organization or a program? How do we ensure that the outcome integrate well in our existing business? How do we measure success? Make sure you align the structure to the battles you have chosen. Typical setup of an innovation entity is:
- Separate Internal Structure: whether you call it R&D, Innovation Lab or Accelerator doesn’t matter. This idea in this structure is that you create a separate structure for innovation. An R&D department or Lab tend to have a (more or less agile) project structure. An Accelerator or Incubator works more like a program that runs for a fixed time. This program can include internal ventures and relevant external Startups.
- Integrated into the Business Unit: this structural setup makes most sense for incremental innovations. In business units the innovation takes form in improvement projects. These are side-projects that create improvement and innovations in existing products or services. Sometimes also improvement or innovation programs help to create innovations on this level. Balancing innovation efforts with the daily operations is the big challenge here. But, building innovation capabilities at this level is critical for short term business success.
- Outside the company: some companies just rely on outside structures for their (semi)radical innovation. In the organization they focus on exploitation and optimization of their current business. They have outside entities and partners work on innovations. Sometimes this is cooperation with a research institute or university. It can also be scouting for Startups or cooperation with external Incubators & Accelerators. This is an interesting approach to disruptive innovation. Your organization running business at scale needs strict procedures and maybe even some bureaucracy. Outside entities have the speed and flexibility to experiment and learn. Bringing outside innovations in is something Philips does. The Dutch electronics manufacturer picks up innovations of the nearby Hightech Campus. Startups and researchers can work there in freedom on technological innovations. But, they remain on Philips’ radar screen whilst doing so.
The structural choice depends on your battles. It depends on what kinds of innovation you are seeking. Disruptive innovation is hard within the existing business units. Incremental works best when it is close to the existing business. Most organizations need a mix of structures, but make sure you have enough focus.
#3 Stimulate Intrapreneurship
Innovation comes from people and their cooperation and creativity. Existing organizations tend to limit freedom and creativity of their employees. Sometimes for good reasons, because they need stability to perform existing processes at scale. The innovation power of your organization aligns to the freedom and creativity you allow. This has to do with the culture, leadership and structures of your organization. But it also depends on the people you hired. What is their mindset and do they have the skills to be innovators. For innovation you need so called Intrapreneurs. People in your company with a sense of competitiveness, autonomy, creativity and result orientation. These people thrive in an environment of freedom. Freedom to come up with new ideas, try new things, freedom to make mistakes and learn from them. And, freedom to challenge exiting business models and their underlying assumptions. For innovation you should stimulate intrapreneurship in your organization. By creating a climate that is intrapreneurial and by hiring intrapreneurs. You have to have both to get somewhere with your corporate innovation.
#4 Be where the action is
Be sure that your company is present at the hotspots of innovation in your sector. Get inspired by mingling with other innovators at events, startup hubs and co-working spaces. Nowadays I see corporates sponsor Startup and Technology events. Places of technological creativitity are the places you want to visit. Sometimes it is a physical place, where you meet Startups, Entrepreneurs and Thought Leaders. But, also online communities are interesting to follow. Lean Startup Circle has a well used Slack environment. It serves as a great source for innovative ideas and feedback. Also platforms like Growthhackers.com and TechCrunch are key sources of innovative ideas. Be sure you and your band of Intrapreneurs and Innovators are where the action is. And don’t only get stuff. Be sure to also bring stuff, as everyone will benefits from this learning and sharing.
#5 Try Lean & Agile Innovation
There are some powerful theoretical concepts that you want to apply for innovation. Nothing is as practical as a good theory you know. Not all are evidence-based in the scientific sense. But you should definitely try some of them to see how they work for you. Agile is the flexible and iterative way of doing projects. We apply it to the projects we do on Squads.com. Delivering results in weekly or bi-weekly sprint increases speed and results. Lean Startup also is a powerful approach to building and learning in short cycles. This approach advocates build, measure, learn loops that you know from the Deming Cycle. Next you have Customer Development. This is about testing your assumptions by doing proper discovery and validation with customers. It is all about validating your idea, value proposition and business model. Customer Development also has you think about your Funnel. You might now this as the AIDA model, but nowadays we call it AARRR. This refers to Pirate Metrics and is a different way of looking at AIDA. It breaks the funnel up in Acquisition, Action, Revenue, Retention and Referral. This funnel is the specific study subject for Growth Hacking. This is the new marketing and focuses on optimizing your funnel. New here is the experimental approach in short cycles. Also new is the fact that the funnel nowadays is for digital products part of the product itself. This requires close collaboration between product (software development) and marketing. That is exactly where Growth Hacking comes in. Explore these theoretical concepts to understand them. Start working along the lines they provide to experience what they can do for your innovation.
#6 Execute like hell
You won’t learn by sitting still. You have to take action when it comes to innovation. Get out there, test new things and learn at the speed of light. Speed, dedication and talent are critical. From the projects we do at Squads I see that the successful ones start with a great team. You have to get you innovation team right first. An A-team with a B-idea is still better than the other way around. Second it is important that the team gets to a rythm of weekly or at least bi-weekly deliveries. This not only increases the speed of execution, it also increases speed of learning. And, it increases flexibility as you can steer per week or two weeks. Of course you need to have a grand vision for your innovation, but don’t forget that it is all about action. So, make sure you have the execution power for innovation. And think how flexible, on-demand teams can help you. With Squads I see that we outperform internal design and development teams by far. Not that we are brilliant, but internal teams have to cope with a legacy and context that exists.
I hope these tips will help you to improve your corporate innovation. Please share this article and add your tips and/or comments!
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