Three Reasons Why Corporate Innovation Is Uniquely Hard
CEOs are increasingly concerned about the threat of disruption from new technologies and business models. With disruptors like Airbnb and Uber shaking up marketplaces, it’s no wonder companies are looking for ways to stay ahead. However, corporate innovation still proves to be a hard nut to crack.
What Makes Corporate Innovation Challenges Unique
Part of the reason corporate innovation is hard is because there is no crystal ball that accurately predicts the future. Management in the face of uncertainty will continue to be a challenge, regardless of a company’s size or age.
While uncertainty may make innovation an uphill battle, it’s not specific to just corporations. Instead, I’d argue the elements unique to corporations that make innovation so tricky are:
1. Finding a product-market fit that is right for the organization
2. Simultaneously driving innovation projects and being organizational change management leaders
3. Doing these two things in a repeatable manner
Startups Need to Find Product-Market Fit
Lean startup methodology stresses the importance of fast, iterative learning to first uncover a problem customers are motivated to solve. From there, it’s about finding a solution a business can built around. For your classic startup, the goal is to pivot as necessary until you find a product-market combination that works.
Finding product-market fit is not an easy process, but new startups have one critical advantage over large companies. Because they are typically starting from a blank canvas, there are relatively few limitations on what that ultimate business model may look like.
But Corporations Need Product-Market-Execution Fit
In contrast, an established corporation needs to think about finding a product-market fit that dovetails with its existing strategies and business units. Simply finding a product-market fit won’t be enough if the business model or solution is a step too far. What is needed is a product the market wants and a solution that the company is well-suited and interested in resourcing and executing.
This is by no means a small challenge. Finding a solution that can reasonably integrate with existing product lines, sales channels, and manufacturing assets is daunting. Within large, diverse organizations simply finding all the internal parties to talk to can be an event. Things get even more complex if there is uncertainty about what fits within the company’s innovation strategy or how resources should be balanced between near-term projects and mid- or long-term innovation projects.
But understanding what innovations your company is willing to pursue is critical for success. Once a compelling story emerges that shows a market need, a product solution, and a path that meshes with the company’s current strategy and capabilities, getting the buy-in necessary hinges on successfully tackling corporate innovation’s next big challenge: change management.
Change Is a Challenge for Corporate Innovation Teams
In parallel to finding innovations with the right product-market-execution fit, corporate innovation teams must also effectively manage change. At its core, the team’s mission is to drive innovation (change) that will fuel the long-term prospects of the business. While change may be desired, in practice the road is not a smooth one.
The type of change-induced hurdles seen may vary from team to team, but there are some general trends that seem to transcend industries. Some examples commonly cited in the industry include:
> Corporate processes that are ill-suited to new innovation projects
> A desire to focus only on traditional, near-term revenue projects
> Concerns around the high-risk nature of innovation projects
This is certainly not an exhaustive list of the challenges innovation teams run up against. But, it should serve to show the variation in change-induced situations these teams must navigate. In some cases teams may simply be working to adapt processes and best practices. In others, it may be introducing colleagues to new technology developments, projects with new risk profiles, or even how to evaluate projects against new key performance indicators.
Change Management Leadership Reduces Hurdles and Drives Progress
In each case, change-concerns have the potential to derail fledging innovation projects. Therefore, a cohesive strategy to manage these change scenarios is critical. As frontline promoters of innovation, change, and adaptability, corporate innovation teams can effectively lead off this process. In doing so, corporate innovation teams can not just push forward innovation projects, but also lead to lasting change that enables long-term corporate viability.
However, if done poorly it can lead to catastrophic failures and strained internal relationships. Being able to manage the nuances of change in parallel with managing innovation projects is necessary. Being able to do this consistently is what sets apart a one-hit wonder from a well-oiled innovation team.
Successfully Innovating and Changing Is Hard. Doing It Continually Is Harder.
Statistics on the success/failure rates of innovation initiatives and change management projects vary. However, it would be unwise to discount the risk of failure for these types of programs. Though the risk of failure for each individual projects may not be overly concerning, the risk compounds as the portfolio grows. Eventually, failure will become a statistical probability.
Even if we assume the innovation team has strong backing from the corporation and a history of success to drive confidence, the team’s mandate is still a big ask with an potentially unpalatable risk of failure.
For corporations and teams looking to improve their effort-to-value ratio and better navigate the risks of disruptive innovation, understanding their unique challenges is an important first step. From there, conversations around best practices and the true role of the innovation team can help refine strategies and drive improvements.
I’m a tech scout, proposal reviewer, and consultant specializing in identifying and developing early-stage innovations. Learn more by checking out my website, experience, or blog.
Thanks for your time! -Julia Allen