In recent years, there has been an explosion in corporation innovation.
Traditionally, corporations didn't need to worry much about innovating because they could expand their enterprises on the back of a single successful product.
However, the old model no longer works in the age of disruption. As agile startups thrive with the latest technology and talent, established corporations must adjust their business models.
Rapid marketplace changes drive customers toward the most convenient products or services. Instant gratification is paramount now, as they want solutions at the touch of a button.
In this article, we’ll explore the importance of corporate innovation, explain how you can get started, and highlight some corporate innovation programs that may inspire your own initiatives.
Let’s dive in.
What is Corporate Innovation?
Corporate innovation is the process of an enterprise experimenting with modern practices, technology, strategies, and opportunities to make its existing business model more competitive in the current marketplace.
At its core, corporate innovation focuses on encouraging people in corporate environments to think outside-of-the-box. To do this, corporations may create a dedicated innovation team and base them in satellite offices so that they can work in close quarters with startups.
According to Harvard Business Research, the number of corporate investments in startups tripled from 980 in 2013 to 2,795 in 2018, with their total value growing from $19 to $180 billion. Today, 75% of Fortune 100 companies have an internal venture capital department, like a startup accelerator.
A study from Plug and Play Tech Center found most corporations had an innovation team of over 20 people. The main goal of these teams is to devise proof of concepts (POCs) and run pilot programs across the company.
Why is Corporate Innovation More Important Than Ever?
Well-established corporations can get stuck in their ways, content to rest on their success rather than keep evolving. Instead of striving to remain the bleeding edge, they focus on creating new iterations of existing products. The trouble with this approach is that it leaves companies vulnerable to disruption. Lean startups with a modern perspective can quickly turn an industry upside-down.
In 1960, the average lifespan of a company on the S&P 500 Index was almost 60 years. In the fast-paced digital landscape, the average age of companies listed on the stock exchange is under 20 years old.
Since 2000, a remarkable 52% of Fortune 500 companies have either gone bankrupt, been acquired, or ceased to exist entirely. Even the biggest corporations aren't immune to the threat of digital disruption, as seen when Uber and AirBnB irrevocably transformed the taxi and hotel industry, respectively.
For corporations to remain competitive, they must adopt a culture that embraces new technology and actively seek out ways to enhance their business model. With this proactive attitude to corporate innovation, enterprises can remain agile in the face of rising competition. The corporations may even identify new opportunities before any startup has a chance to establish itself in the market.
The message for C-suite members in big corporations is loud and clear: "Innovate and disrupt your own business model or somebody else will."
8 Ways to Get Started With Corporate Innovation
Corporate innovation comprises several key tenets, including problem-solving, leadership, people management, and entrepreneurship.
With the right strategy in place, enterprises can bring these aspects together to create new products in-house, form strategic partnerships through corporate innovation programs, or make targeted investments in promising startups.
Let’s explore eight ways you can get started with corporate innovation in more depth.
Create an accelerator program
Many aspiring entrepreneurs hesitate to take the plunge, even if they have great ideas. When a corporation supports workforce creativity, they offer a platform for new ventures to grow, giving people access to the resources, expertise, and industry connections required to develop a proof of concept.
A corporation can use an accelerator program to go beyond an initial investment by serving in an advisory role or co-developer. MassChallenge has partnered with over 150 corporations in the last decade, helping many leading brands develop a startup accelerator program, including General Electric and Southwest Airlines.
Create a corporate innovation lab
A common obstacle to corporate innovation is that enterprises lack the crucial infrastructure to support new ventures. Even if somebody in the sales or marketing team has a viable proposal, it may not fit in alongside current timeframes and quarterly targets. With no designated staff or budget, many ideas are shot down before they get off the ground.
Companies can counter this issue by developing a dedicated team or office with the sole purpose of developing exciting new ideas. Car manufacturing giant, General Motors (GM), runs a startup innovation lab, called iHub, which assigns company resources to turn basic concepts into game-changing products.
Promote open innovation
If the talent isn’t already in-house, you can bring people into your company. A hosted accelerator or corporate incubator is an event where a large corporation invites startups to come and work at their physical locations, offering them funding, support, and technology.
By collaborating with rising talent, corporate leaders get a chance to learn about emerging technologies directly from startups. This setup helps corporations speed up innovation cycles, which leads to gains in productivity and performance.
The benefits don't stop there, as many startup-corporate partnerships yield new products and often result in go-to-market partnerships or acquisitions.
Develop an intrapreneur program
Intrapreneur programs are similar to accelerators in that companies give their employees the platform and support to work on innovations. These ventures could result in new products for the company itself, or they may act as a springboard for new entrepreneurs to launch a separate company.
The British insurance company, Aviva, runs this type of corporate innovation program with great success. Employee, James Russell, proposed a plan to create tailored insurance products for small businesses using machine learning technology.
While Aviva didn't want to back the project internally, they sent James to a startup builder, Founders Factory, to work on the idea while remaining an employee of Avvia. Within eight months, he launched a 6-person company called Brisk. Since then, Aviva has become a customer, and Brisk has raised £300,000 (~$390,000) from external investors.
Create a VC arm of your corporation
Another type of corporate innovation is venture capitalism (VC). This approach is popular with many companies that prefer to take a backseat to the initial creation side of innovation.
The VC arm of Stanley, Black, and Decker use this model, assigning small venture teams to identify promising startups for pilot projects. When the project is ready to scale, the main corporate team will leverage its distribution networks, funding, and marketing experience to bring the product to market.
Dina Routhier of Stanley Ventures explains that "the best corporations realize they can't go at it alone." Rather than go head-to-head with some of the brightest minds in modern technology, corporations can back startups with game-changing products to form mutually beneficial relationships with would-be competitors.
Sometimes, companies find that the best type of corporate innovation comes from someone that has nothing to do with the company. As people on the outside have a unique perspective and can remain objective, many corporations look for new ideas at hackathons. These events serve as highly concentrated R&D sprints, which also present valuable networking opportunities.
The multinational pharmaceutical and life sciences company, Bayer, hosts its G4A Generator hackathon in London. Applicants compete for the opportunity to pitch to a panel of industry leaders, and winners receive a Letter of Intent to secure a deal with Bayer.
Umar Aziz is the Chief Innovation and Technology Officer of the CIC-based innovation delivery agency Creative Chaos. He explains that hackathons are “a great opportunity for large organizations to take advantage of these founders and visionaries.”
According to HackerEarth, 80% of Fortune 100 companies conduct hackathons for corporate innovation. Also, over 50% of the hackathons are recurring events, which shows they are a reliable catalyst for sustained innovation.
Form a mastermind group
A mastermind group is a type of corporate innovation model that brings together stakeholders from multiple businesses in an effort to derive valuable insights and new business opportunities.
The old mantra is true, in that it's not just what you know, but who you know. By networking with key players in your industry—and other industries—your company can get the support it needs to succeed.
One caveat of this model is that mastermind groups can provide theory but may struggle to implement ideas due to a lack of resources or practical capabilities.
Merge with other corporations
While many companies would like to be involved in the actual innovating, sometimes, the easiest approach is to simply merge or acquire an established competitor.
In doing this, a corporation not only nullifies the competitive threat but also opens up new avenues for growth. By merging with a smaller startup, your company can penetrate new markets and take ownership of intellectual property rights, trademarks, and key executive personnel and talent.
3 Examples of Corporate Innovation Programs
We can see many examples of corporate innovation in 2020, as leaders in all industries seek out ways of tapping into the power of the latest technology.
Here are three corporate innovation programs that drive evolution in modern industry:
Procter & Gamble
Procter & Gamble (P&G) wanted to forge relationships with startups that needed help with physical product design. By collaborating with these new companies, P&G would lend their experience and financial power in return for help to optimize the corporation’s engineering workflow.
MassChallenge worked with P&G to host the Fortune 100 company's first global demo day. There, eight MassChallenge startups from cohorts in Boston and the UK make presentations to 20 senior executives from P&G's global management team.
Johnson & Johnson
We can see more corporate innovation in Big Pharma from Johnson & Johnson and GlaxoSmithKline, as they each contributed US$50m into a US$200m venture fund to support early-stage biotech firms.
J&J also has four innovation centers in Boston, London, San Francisco, and Shanghai, which exist to fund early-stage life-science research and accelerate production cycles on new products.
In the sports world, Nike and TechStars combined forces for a three-month accelerator program to mentor ten start-ups. With $20,000 investment from TechStars, the companies built technologies for activity-tracking devices and got the chance to pitch investors and Nike.
Become a MassChallenge Partner
Corporate innovation is not just a buzzword. Nor is an option anymore.
The COVID-19 pandemic has brought digital transformation and innovation to the foreground. McKinsey reports that 90% of executives believe the crisis will fundamentally change how their company does business within the next five years.
The MassChallenge platform gives partners the tools to meet this moment head on while realizing results that make the difference for their businesses. See how companies like MassMutual, Barry Callebaut, Columbia Threadneedle, and Elta Systems have partnered with MassChallenge to drive their innovation.
Join the MassChallenge program today to give your corporation the edge in the startup era.