We’ve come a long way from the humble suggestion box and top down decision making long synonymous with corporate innovation. Today, more and more companies are sourcing ideas from not only the entire workforce but also getting outside their building and engaging partners, customers and members of the general public.
While ideas are plentiful thanks to idea platforms and open innovation, what often hinders a company’s ability to innovate is its internal policies, values, regulations, infrastructure and political structure.
You can run all the hackathons you want and preach lean startup and design thinking 'til you've run out of st, but unless an organisation’s landscape effectively supports the behaviours required to innovate - think risk taking, taking long-term views, lots of small bets, challenging the status quo, sharing ideas, and so on - then it will all be in vain and amount to little more than innovation theatre.
More and more companies are waking up to this fact and as a result of that they are beginning to follow in the footsteps of companies such as Telstra, Barclays, BMW, Samsung, Verizon, Nike, P&G, GE and Disney, who have all set up innovation outposts, or corporate incubators away from the mothership, usually in the middle of innovative startup hubs and ecosystems.
Typically, organisations who create outposts do so for one of the following reasons:
- to partner with startups;
- to invest in and acquire startups;
- to incubate their own project teams; or
- a hybrid of the above
Partnering with Startups
This form of the model typically involves synergy and alignment between the strategies of both parties - think target market, infrastructure, data and so on. For example, a peer to peer lending startup might partner with a large commercial bank who would give it access to domain expertise, operating licenses, networks, brand and customers in order to develop better solutions, gain exposure, build trust and perform customer testing to help find that elusive product market fit. Ultimately, everything a startup desperately needs but often finds in short supply.
Equity is not typically not exchanged however the supporting organisation may have an option to invest, have access to the startup’s technology and/or data and/or be otherwise rewarded for its support of the startup.
Diageo Technology Ventures partners with startups to solve specific business problems. "We want to explore opportunities beyond Diageo’s current business model and ways of operating, that we think could result in growth for Diageo in the future” says Helen Michels, Global Innovation Director at Diageo which is home to popular alcohol brands such as Bailey's and Guinness.
Diageo initially invests $100,000 seed funding to support project teams as well as a Diageo team. Successful teams work collaboratively withw orld-class marketers, brand leaders and mentors.
Investing in Startups
As the name suggests, many large organisations are diversifying by investing in not only startups whose strategy aligns with their own, but all manner of startups tackling all manner of industries.
Telstra’s muru-D accelerator has invested in startups from fields as far from its core business of technology and telecommunications such as surfboards, agriculture tech and children’s education. The accelerator invests $40,000 seed funding into startups in exchange for 6% equity.
muru-D is held at a co-location or coworking space away from Telstra’s mothership offices where startups come together under one roof, receive training, mentorship, and access to corporate infrastructure, and are encouraged to share ideas, network, challenges, solutions and so on.
Incubating Project Teams
As indicated, processes, values, infrastructure and corporate systems of a large organisation tend to inhibit the very behaviours that are necessary to support innovation. This is why there’s a growing trend towards setting up corporate innovation teams in coworking spaces away from the mothership where they are not bound by the same rigid structure that serves only to support the delivery of what is, not the discovery of what if.
Often, post an initial incubation period, should there be sufficient evidence by way of innovation metrics and learnings, to suggest that a concept is worth exploring further, companies are setting up independent organisations in which they take some equity to pursue the idea. The organisation may be made up entirely of external people, internal employees or a hybrid of the two.
AT&T Foundry innovation centres, which collectively represent a US$100m investment from AT&T, Ericsson, Alcatel-Lucent, Amdocs, Cisco, Intel and Microsoft have started more than 200 projects and deployed dozens of new products and services.
It's becoming clear that in order to stay relevant in an era where one in three listed companies faces delisting in the next five years alone, companies are now doing what Steve Blank, father of the lean startup movement, has been telling startups to do for many years now....."get out of the building".