How to get entrepreneurial mojo without breaking your company

Digital disruption can be devastating.

More than half of Fortune 500 companies have disappeared since 2000, mainly due to the disruption of traditional industry models by digital technologies.

But it can also be an exciting opportunity. In the next three years, 28% of large companies’ revenues will be generated from digital products and services, up from 16% today.

Last week we looked at some of the digital capabilities that companies can develop to become more innovative — and digitally-enabled open/collaborative innovation came out tops as a quick, cost-effective way to tap into an innovative goldmine right under your nose.

This is because digital collaboration can help large organizations create ecosystems of relationships within their industry, the venture community, start-ups, technology providers and business schools. It forms a “sensory network” that, by extension, lets organizations detect disruptive forces in the market.

“Ecosystem collaboration” is also good for entrepreneurs, as it can help them leverage the scale of enterprises to bring innovations to market more quickly. As such, digital collaboration overcomes the problems of traditional “bilateral” modes of collaboration such as corporate venturing or incubation of innovative start-ups. Like ecosystem collaboration, funding gives access to scale, but too often it is used as a way to exert control in partnerships, to get the newcomer to help the enterprise do what it already wants to do, which misses the point of innovative partnerships altogether.

A research report for the G20 Young Entrepreneurs’ Alliance shows that companies that ditch funding-led models for ecosystem collaboration platforms become more innovative and grow their revenue.

Why is that? Well, that is the interesting part — open innovation will not only let you access entrepreneurial ideas, it will also let you easily leverage entrepreneurial cultures. And entrepreneurial culture is the secret sauce to sustained innovation.

What is an innovative or entrepreneurial culture? As the name suggests, entrepreneurs have it in spades and enterprises want it. But before we rush to get some of it, we need to be pretty clear about what exactly it entails.

An innovative culture, in my view, is simply a mind-set focused solely on solving customer problems — not the jeans-and-t-shirt dress code, ponytails or funky work environment of the Silicon Valley cliché.

For example, entrepreneurs are likely to embrace risk in their innovation process. They look to prototype ideas quickly and fail fast if necessary as a means of clarifying the best path forward. Large companies, by contrast, are more risk averse and generally proceed more slowly and incrementally to test ideas and avoid failure whenever possible. In governance terms, entrepreneurs have more informal structures and decentralized decision making, while large companies are more hierarchical in structure, with centralized decision-making processes.

That seems easy enough to bridge, so why collaborate? Legacy, that’s why. Large organizations’ business processes, organizational structure, technology footprint, staff and everything else they’ve built up as a successful business are keeping them from making quick and cost-effective decisions.

So now you’re in a bit of a quandary. In short, you want to solve customer problems in an agile way, unencumbered by a culture of compliance and deference to authority, but you can’t afford to ditch the legacy — the corporate identity, risk audit and control functions and everything else that has made you successful. So how do you incorporate an entrepreneurial culture without breaking the business?

Digital disruption has caused many companies to sit up and respond in different ways. The common realization is that there has to be strategic change in the ways companies respond to the market — far more fundamental than past technology waves. The following are examples of how ecosystem collaboration has imbued enterprises with entrepreneurial kick — alongside, in augmentation of or as part of the business.

Open source is a great example of a digital collaboration platform. The Open Automotive Alliance is a global organization of technology and auto industry leaders focused on bringing the Android platform to cars. Using an open development model and a common platform, the five automakers in question can more easily bring cutting-edge technology to drivers.

Another example of open development is Philips’s partnership with Salesforce to offer a cloud-based platform that allows the Philips developer ecosystem to reshape and optimize the way healthcare is delivered, with healthcare applications that range from self-care to wellness.

Banks are actively piloting flatter structures, grouping the different process components of new product applications together to make decisions on the fly, thereby overcoming the siloed functions that keep them from competing with more agile fintechcompanies.

To buy into digital services, a flurry of technology companies have been buying digital agencies. While some absorb the new business into the old one, others maintain the new brand within the business to offer engaging customer experiences backed by their own scalable, industrialized technology and operations.

I could go on, but there really are myriad ways, and only some of them will make sense in your unique circumstances. The literature quoted liberally above is required reading for large organizations and entrepreneurs, in my view.