Emerging Trends in Turkey’s Corporate Innovation Landscape
As the lean innovation culture takes hold in Turkey, companies are growing up and doubling down on financial impact. This is how they will do it in 2020.
Core Strateji has been the leading lean innovation partner for dozens of large corporations in Turkey and the neighboring region over the past 5 years. While corporate entrepreneurship and startup engagement were just emerging buzzwords back then, those concepts have now come to the forefront of management consciousness, backed by personnel titles, budgets, and corporate programs.
2020 is poised to be the year when these buzzwords go mainstream as corporations start seeing returns on their lean innovation investments and double-down on these investments to further increase their rate of transformation. On this note, I have highlighted six emerging trends in corporate innovation that I believe will take hold this year.
- Transition to Self-Service, Continuous Innovation
- Spotlight on Corporate Startup Spin-offs
- Innovation Support Embedded into Performance Scorecards
- Creation of Startup Partnerships for Growth, not just PR
- Emergence of Non-Traditional Partnerships
- New Doors Open to Co-opetition
Transition to Self-Service, Continuous Innovation
For the most part, corporations have engaged with outside consultants and startup accelerators to help them launch and run lean innovation programs. However, budgetary constraints and the necessity for scale, i.e. you can’t run a full-scale program for 1 or 2 ideas/startups, have limited the velocity and impact of those programs, restricted to defined cohorts once or twice a year.
This year, corporations will start shifting away from their dependence on consultants and seek to run programs on their own. Furthermore, they won’t be constrained by program start dates and pre-determined cohorts, but rather will support and finance business ideas as they emerge throughout the year. Companies such as Koç Holding and BriSa have already started training their own internal innovation mentors to work with internal corporate startup teams, and other companies will be quick to catch on to start their own internal mentoring programs.
Spotlight on Corporate Startup Spinoffs
In the past 5 years, most successful corporate innovation projects, i.e. those that have returned a positive ROI, have been more incremental rather than radical. Management has only been willing to bet on predictable and measurable financial results, and likewise employees have been reluctant to dream too far outside of their company’s defined areas of activity.
However, the murmur of high-flying spinoffs has been growing, and there have already been several high-profile attempts in 2019. This year, management and employees alike will take another step outside their comfort zones and start betting bigger on high potential ideas that could disrupt their sector. While incremental innovation is necessary and important, companies are also feeling the need to reach into the radical, creating actual startups that serve the core business and the market at large. Already, Doğuş Holding has two corporate startups ready to spinoff this year and I’m positive we will hear of many more as the year progresses.
Innovation Support Embedded into Performance Scorecards
As the lean innovation trend was first emerging, it was perceived as a “nice-to-have”, a hobby by most employees within the company. While exciting new projects generated good PR and fulfilled board-mandated requirements, they had little impact on the core business and annual profitability. Furthermore, contributions to innovation efforts were purely voluntary, whether that be as a project founder, a startup champion, or a management mentor.
Companies are starting to realize that if they don’t take innovation more seriously, they will get left behind in tomorrow’s markets, and are thus working to match incentives with performance on innovation efforts. Companies such as Otokoç have already added innovation performance expectations into scorecards for its middle and top management, and other companies are exploring the possibility of a performance bonus system to incentive managers mentoring and supporting internal and external startups. Corporate innovation will only work when goals are aligned with execution and incentives across the organization; 2020 will be the year that companies start codifying that alignment.
Creation of Startup Partnerships for Growth, not just PR
In the past several years, it seemed like every major corporation in Turkey was either launching a startup accelerator, sponsoring a hackathon, or running a demo day, or even all the above. Everyone wanted to be perceived as a supporter of startups, which was considered an indicator of innovativeness. However, while those efforts have been expansive, they have also been expensive, and management has started to ask the question of actual financial impact.
In 2020, corporations will take a step back from simply sponsoring startup events and ecosystem activities, and focus their efforts on developing actual win-win partnerships with carefully curated startups, matched with results that can be measured and multiplied. Already companies such as Tüpraş and Pfizer have started scouting the ecosystem based on specific internal technology needs and problem areas, with the goal of creating value-added partnerships and co-creation opportunities with local startups. Other companies have launched Corporate VCs (CVC) that will allow companies not only to leverage their physical resources but financial ones as well, enabling startups to adapt and scale quicker.
Emergence of Non-Traditional Partnerships
Traditionally in Turkey, large corporations have been grouped under even larger holding groups, with those holding groups creating self-sufficient internal silos where one holding company would serve the other. This featured most prominently with tech companies, where every holding group seemingly had a single enterprise tech company that serviced everyone else within the group.
Today, the economics of retaining dependent tech companies has been disrupted, and while group companies still hold an advantage, corporations are beginning to look outside their holding group for partners in facilitating programs, developing new technologies, or co-sponsoring events. For example, Doğuş Technology (Doğuş Group) and Softtech (İş Bank), both traditional group tech companies, have both set targets in 2020 for increased revenue diversification away from their holding group, and thus have actively sought to serve as innovation tech partners for major sector players, whether that be through creating prototypes to test ideas, or even co-creating innovation projects at scale.
New Doors Open to Co-opetition
Corporate innovation efforts, having taken their cues from traditional R&D practices, have generally been held close to the vest. Companies don’t talk to other competitors and don’t share information regarding new ideas, projects or potential partnerships until they can be legally protected or have achieved scale. The business environment in Turkey has always been marked by distrust and suspicion, and most businesses see competition as a zero-sum game.
However, even in traditional, regulated and highly competitive industries such as pharmaceuticals, banking or insurance, companies that would never share practices with one another are now open to discussing best practices when it comes to innovation, or passing interesting startups forward to their competitors. Oftentimes, companies across the sector are struggling with the same issues, whether that be reaching doctors with information regarding new medicines or reducing the level of fraud in insurance claims, and thus could realistically collaborate on developing joint solutions. In 2020, examples of co-opetition in innovation will take center stage as mutually beneficial projects and investments will help companies achieve new breakthroughs.
As with all predictions, especially in Turkey, you must take them with a grain of salt. Anything can happen that could radically accelerate or halt corporate innovation efforts. However, across all these trends, the initial seeds have already been planted and now I believe in 2020 they will begin to take root and start to flower.
Make Innovation Work
Core Strateji is a strategy consulting firm that specializes in supporting leading companies to transform into ambidextrous organizations. Are you ready to move your innovation activities forward?
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