Fragmented Innovation; Why Corporate Innovation Fails

Corporate leaders are increasingly investing in innovation as a strategic priority; however, fragmentation of innovation within the enterprise often results in poor strategic and financial return on innovation investments.

In an attempt to become more agile, innovative and competitive against industry disruptors, corporates are increasing their innovation spend and rapidly scaling their innovation capabilities.

We’re regularly approached by corporate leaders seeking ways to enable their organisations to ‘innovate like startups’. These corporates are increasingly investing in a range of internal and collaborative innovation initiatives including:

• Design thinking and lean startup programs

• Brainstorming/ideation workshops

• Dedicated innovation teams

• Customer experience/innovation labs[1]

• Hackathon events and innovation competitions[2]

• Innovation intranets, portals and processes

• Corporate accelerator programs[3]

These initiatives often fail to deliver tangible ROI due to lack of strategic alignment[4] and lack of coordinated management with other innovation activities within the enterprise. Common effects of fragmented innovation include[5]:

• Budget and resource wastage due to duplication

• Innovation fatigue and disengagement by employees

• Focus on tactical initiatives, often with limited strategic benefit

• Lack of transparency in innovation spend

• Elitism and cultural barriers between innovation teams and other staff

• Missed opportunities to realise innovation gains

Unsurprisingly, the majority of the corporates that we’ve engaged with have been unable to calculate their total innovation spend due to the fragmented ‘ownership’ of innovation initiatives within the enterprise. Even Chief Innovation Officers of relatively innovative companies struggle to keep track of innovation investments happening outside of their own P&L.

Company culture is a critical success factor in achieving innovation objectives

Many corporate leaders acknowledge that despite the abundance of resources at their disposal, enterprises are at an innovation speed disadvantage and must drive cultural change, which is often slow to crystalize within large enterprises. For many organisations this means embarking on a major initiative aimed at changing the nature of their workforce to embrace innovation through the adoption of lean startup principles[6].

Corporates are now recruiting internal entrepreneurs, or ‘intrapreneurs’ to inject an entrepreneurial culture into their organisations. These intrapreneurs may be assigned to dedicated innovation teams, embedded into business units as innovation coaches, or encouraged to work independently from the rest of the organisation as ‘Entrepreneurs in Residence’[7]. Whilst intrapreneurs can be recruited from the existing employee pool, there is an increasing trend in acqui-hires, the practice of acquiring a company mainly for its talent rather than its product.

There are several programs designed to train intrapreneurs by teaching the principles of lean startup including Lean Enterprise Accelerator Program (LEAP); a series of experiential workshops designed to develop lean startup skills, co-developed by lean startup thought leader Brant Cooper, author of New York Times bestseller The Lean Entrepreneur[8].

Whilst lean startup can help corporate innovation teams discover new business opportunities, and innovate on internal processes; without strategic alignment and coordinated management with other innovation activities within the enterprise these initiatives will likely not succeed.

“Rather than hoping that their future will emerge from a collection of ad hoc efforts, smart firms manage for total innovation” [9]

Corporates must take an integrated approach to innovation portfolio management in order to achieve both strategic and financial return on innovation investment.

We’ve identified the following 5 Principles to an Integrated Innovation Portfolio:

• Strategic alignment of all portfolio activities including all Build, Buy, Partner & Invest activities across the enterprise with C-suite and Board level endorsement; drive top-down endorsement with bottom-up adoption

• Enterprise portfolio level investment management and asset allocation across Core, Adjacent and Transformational innovation ambitions; innovation budgets must address multi-horizon innovation needs

• Centralised Innovation Management Framework utilised to communicate the innovation goals and strategy, set and communicate the innovation principles of the enterprise, and develop and manage innovation capabilities

• Transparency and visibility of all portfolio activities is crucial to solve the growing problem of fragmented innovation; all business units within the enterprise should be enabled to contribute to the innovation portfolio

• Integrated acquisitions and investments across all investment stages from funding internal ideation and execution, to investing in seed stage startups, through to growth stage investments and acquisitions

— — — — —

Venturetec is an investment and advisory firm based in the Asia Pacific region; We have developed a range of integrated enterprise innovation tools, frameworks and services that draw on our expertise in startups, innovation processes, venture investing and corporate strategy. We provide innovation advisory services to corporates including enterprise innovation strategy design, innovation management, innovation capability development, corporate venturing and Accelerator as a Service.

— — — — —

Trey Zagante is the Founder and Managing Partner of the Venturetec Group; Trey has over 15 years experience in strategy, technology and consulting across the Asia Pacific region. He advises corporates on enterprise innovation strategy, corporate venturing, innovation management, and corporate-startup collaboration.

— — — — —

[1] Barouch, J. 2015 ‘Corporate innovation lab turns giants into start-ups’ The Australian Financial Review, 23 February <http://www.afr.com/technology/enterprise-it/corporate-innovation-lab-turns-giants-into-startups-20150223-13jjuq>

[2] Newton, R. 2015 ‘The hackathon enters the corporate mainstream’ Financial Times, 9 February <http://www.ft.com/intl/cms/s/0/88212d8a-a716-11e4-8a71-00144feab7de.html#axzz3bmdgB9He>

[3] Brigl, M., Roos, A., Schmieg, F. and Watten, D. 2014 ‘Incubators, Accelerators, Venturing, and More, The Boston Consulting Group

[4] Almquist, E., Leiman, M., Rigby, D. and Roth, A. 2013 ‘Taking the measure of your innovation performance’, Bain & Company

[5] Owens, T. and Fernandez, O. 2014 ‘The Lean Enterprise, John Wiley & Sons, New Jersey <http://www.leanenterprisebook.com>

[6] Reis, E. 2011 ‘The Lean Startup’ Crown Business, New York <http://theleanstartup.com>

[7] Paul, f. 2013 ‘What Is an Entrepreneur in Residence and Why You Need One’ CIO, 9 October <http://www.cio.com/article/2381875/leadership-management/what-is-an-entrepreneur-in-residence-and-why-you-need-one.html>

[8] Cooper, B. and Vlaskovits, P. 2013 ‘The Lean Entrepreneur’ John Wiley & Sons, New Jersey <http://leanentrepreneur.co>

[9] Nagji, B. and Tuff, G. 2012 ‘Managing Your Innovation Portfolio’ Harvard Business Review, May 2012 <https://hbr.org/2012/05/managing-your-innovation-portfolio>

One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.