In order to stay competitive in this new business environment, companies need to take advantage of new trends in corporate innovation. Traditional research and development labs and innovation executives are still important, but they must be thought of as one aspect of a larger ecosystem. Innovation is one of the main factors as to whether you will be in business in the next 20 years, as opposed to the next 5. Customer loyalty and solid distribution channels can only take you so far when you are faced with the existential threat of disruptive technologies and new generations of entrepreneurs.
In the last part, we discussed why corporate innovation matters. Now, let’s take a look at the different types of corporate innovation and how each of these models can benefit you.
Business model innovation
Many people think that innovation only happens in the product or service realm, but in reality it can appear in all aspects of business including strategy, culture and organization. Another place it can appear is through your business model. This type of innovation is about rethinking how you structure, position and deliver your offering to the market. This typically takes into account factors such as pricing, distribution platforms (such as the internet or mobile) and licensing. Examples of recent business model innovation include platforms, sharing economies and software as a service. These changes represent a restructuring in how products and services are deployed, but also have an accompanying technological element.
The benefits of business model innovation are:
- Ease of access: This type of innovation is one of the easiest to take advantage of. In many cases, the general structure has already been created in another industry, and it is simply a case of applying it to your one. For instance, you could take the platform model and apply it to any industry where there are buyers and sellers. It is also cheaper and less time consuming than trying to innovate a new product line as you are working with existing tools and are simply reconfiguring how they are deployed.
- More growth: New business models allow you to expand your customer base in a few ways. The first is that you are able to reach customer segments that may have been inaccessible before. For instance, if you change your pricing model to multi-tiered instead of single-tiered, you can offer less features to access the lower end of the market. Restructuring your products for different platforms and use cases also helps expand your reach.
Problem solving is both a creative and logical process. What this means is that there has to be some structure that can guide the creative mind to finding the right solution. This is where strategies and philosophies like design thinking are useful. Essentially, this is a framework for solving problems that uses a scientific approach. Design thinking can be used not only for product innovation, but problem solving as a whole. It is summarized as follows:
- Empathize: At this stage, you want to really understand the person you are solving the problem for. Who is your customer? What does their day to day role or life look like?
- Define: Next, you have to define the parameters of the problem which include technical, functional and behaviour aspects.
- Ideate: Then comes the information gathering and creative process to find a solution.
- Prototype: Once you have a theoretical solution, you will then build out an early version.
- Test: You then use the initial prototype to collect feedback from your customer to help you determine if you have built the right thing.
The benefits of design thinking are:
- Cost savings: What design thinking does is create more efficient innovation processes which results in less waste. The method empathizes doing the rigorous intellectual work first, then building a very simple prototype to test your initial assumptions before making heavy investments. This helps you to prevent costly mistakes such as building the wrong product.
- Focused innovation: Design thinking ensures that you are solving the right problem by creating a structure that guides your thinking – one which is based in logic and evidence. In addition to cost savings, the ideas you produce will be of higher quality because they will more accurately reflect the needs of the customer.
- Speed: Ultimately, this method allows you to maximize efficiency, with the end result being faster time to market for new ideas. Speed is a quality that many companies, especially larger ones lack. With design thinking and other techniques such as agile, you can incorporate the swiftness of a small person startup into a larger organization.
Entrepreneurship is a difficult endeavour that requires creative problem solving, risk taking and resources to get off the ground. The latter two aspects are what inhibit the majority of people from becoming entrepreneurs. However, there are still many people within organizations that have the capacity for creative problem solving. Intrapreneurship is about leveraging these people to drive corporate innovation. It is about creating the culture, processes and infrastructure that allows entrepreneurial employees to go beyond their functional role and either create new products or improve how the organization is run.
Benefits of intrapreneurship:
- Deep insight: Solving problems takes a deep understanding of the parameters and implications of the problem. Intrapreneurs who are on the frontline of your organizations functions are in the best position to innovate as they are working with the problems on a regular basis. As a result, they have developed deep domain expertise, the skills and knowledge to solve it and likely the political capital needed to convince others in the organization.
- Collective talent: Your organization can consist of tens or hundreds of people who have identified problems in their respective function. They each have unique perspectives and insight which can be collectively harnessed into an innovative force.
- Greater engagement: Entrepreneurship is an aspiration of many people, particularly in the millennial generation who are seeking to do more impactful work. Intrapreneurship is a happy medium that provides job security but also the ability to fulfills one’s potential. By creating channels of intrapreneurship you can get the best out of your people.
Internal startups and accelerators
Having realised the necessity of innovation, companies of all sizes are going beyond R&D and innovation departments to create entirely new startups within the organization. These startups are led by a team which could be previous employees or completely new hires to build out ventures that are in line with the companies goals. Typically, equity is offered to the venture leaders and a greater level of autonomy is granted to mimic the processes of a genuine startup.
Organizations are also making use of external startups in the form of corporate accelerators. This involves inviting typically early stage startups to be part of a program that involves mentorship, funding and access to resources which is facilitated by the larger company.
- No constraints: As these startups operate independently of the organization, they have less constraints than intrapreneurs who are running innovative projects on the inside. This means that they can ‘move fast and break things’ in the traditional startup sense of rapidly iterating without bureaucracy to slow them down. They also benefit from not being constrained by conventional ideas and have the flexibility to test existing assumptions which may be holding the company back.
- Support of the larger organization: Startups who are under incubation by a larger organization gain the benefit of potentially unlimited resources which is critical to the success of a new company. Industry information, initial customers and funding flow into promising startups which reduces the variables of failure, leading to the primary factor of success being the solution and the problem to be solved.
- Acquisitions: The close relationship of both the startup and the organization means that acquisitions are a common and expected occurrence with this model. The larger organization benefits from accessing the talent and intellectual property of the startup, whereas the founders get a substantial pay day combined with the safety of corporate incubation.
Crowdsourcing innovation is becoming more prominent due to its effectiveness. It is a model that has proven useful in other aspects of life such as open source projects and the knowledge growth that global science has created. Crowdsourcing involves leveraging the expertise and diverse perspectives of individuals around the globe who either individually or collectively work towards solving a problem. This can be in the form of a competition or a collaborative endeavour where the rewards are shared.
- New perspectives: Organizations are often constrained by a limited set of perspectives. Deep insight is needed, but sometimes it is necessary to rethink the problem and see it from a different perspective to make important breakthroughs. Crowdsourcing allows this to occur as you have a fresh set of hundreds of ideas to look at the problem. These people will not have preconceived notions or bias from looking at the problem for so long and may be able to spot the obvious that isn’t seen.
- Cheaper: By offering a set amount for a solution, crowdsourcing provides a cheaper alternative than paying expensive consultants or hiring in house research teams. It also derisks the innovation process as companies don’t have to make expensive long term investments.
Taking advantage of new trends in corporate innovation will ensure that you remain competitive, get the most of your employees and have a greater impact on the world with your products. In the next part, we will take a look at some of the challenges around corporate innovation and how to best implement this change in your organization.