Small companies are all about innovation and great ideas. It’s not so easy to bring a sprinkling of that start-up stardust to a global organisation, where success inherently lies in the processes that enable the commercialisation of existing products and services. That said, there are corporates which are purposefully setting about creating a culture where inspired thinking can blossom.
David Hollander, Managing Director for GB & Ireland at household products designer Dyson, comments: “Dyson's focus is on new, better, technology. James Dyson drives this by investing our profits back into Research and Development and having faith in the ideas of our fresh graduate engineers. The best way to achieve long-term growth is to invest where it matters – in technology and future ideas. Ultimately, people want machines that work better than anything else out there and which make their lives easier.”
Nurturing such a mindset takes time and effort. Costas Markides, Criticaleye Thought Leader and Professor of Strategy and Entrepreneurship at London Business School, comments: “Large corporates struggle with major innovations that might be disruptive to the existing business. They might cannibalise [it], upsetting distribution outlets or managers.
“That’s why new business models are commonly introduced by new entrants and start-up firms, because they’ve no existing business model to cannibalise. That’s a major obstacle for large corporates and a significant advantage for start-up firms.”
David Plumb, Director at mobile phone network operator Telefónica Digital UK & Ireland, comments: “Where corporates struggle is if they don’t understand the importance of empowering people; the ability to test and learn and take risks. If you’re too prescriptive about ‘show me the business case’ and ‘we’re not going to invest a penny unless we see this and this’, it’s not the way that innovation works. If you go back to a corporate business case, or project management-based approach, certainly in the early days, it will just kill innovation.”
It’s necessary to make room for some lateral thinking. Aimie Chapple, Managing Director of UK and Ireland Client Innovation at Accenture, says: “There’s a need in a large corporation to create structure and direction – what’s the vision? How do you get everyone to follow it? – and put governance, processes, standards and values in place in order to get there. When you have all that aligned it’s a great way to get an organisation to move at speed but, at the same time, you also run the risk of stifling creative ways of doing things and discouraging people to come up with better or improved ideas.”
The ‘new internal’
The search for a touch of creative destruction has led some companies to reassess how they set about their R&D, with many looking externally for inspiration. “In today’s world, your employees, the general public and your customers are willing to give you all kinds of ideas that make their lives easier,” continues Aimie. “It’s then about how you implement those ideas.”
An example of this in action can be seen with Shell’s ‘Gamechanger’ programme.The company's Executive Vice-President for Strategy and Planning, Ruth Cairnie, explains that the idea is to stimulate connections between energy challenges and solutions from both in and outside the organisation – even beyond the energy industry.
“In essence, it provides expertise and funding to help nurture innovative ideas through those critical early stages where things often get dropped. It’s a kind of incubator to allow things to get to a stage where we can make a judgement on whether they are worthy of further investment, development and eventually, commercial deployment,” says Ruth, adding that so far ‘GameChanger’ has led to over $300 million (£196.6 million) being invested in over 3,000 ideas, with some 250 ideas already commercialised.
Bryan Marcus, Regional Director of the South America Region for Volkswagen Financial Services, comments: “In financial services, you have to get out of your comfort zone and connect with as diverse a group of partners and customers as you can… I’m not suggesting you put a 22 year old on the board but you certainly need to understand the cultural and social themes that are going on outside the business and have that input into your business decisions.”
There are plenty of instances in recent times of hermetic organisations going the way of the dinosaur because they had forgotten how to anticipate and react to emergent trends. David Plumb says: “If you look at some of the truly innovative businesses like Amazon and Google, they are constantly testing, listening and learning through social media to get immediate feedback… Real innovation is a product of lots of people putting ideas together and that circle of innovation has to widen as more people have input.”
What’s the big idea?
A tried and trusted path for innovation in large companies is through M&A and corporate venturing. Costas says: “[It’s] a useful way for established firms to test and explore radically new markets and move in totally new areas. Take Nestlé and how they grew Nespresso; it was like a separate venture outside the organisational hierarchy. They couldn’t grow Nespresso internally because it would cannibalise the existing business…
“In other examples, companies like Cisco and Google do joint ventures or equity investments in thousands of new start-up firms. These firms are experimenting with technology that may or may not grow to be relevant to their business. They put managers on the board and take a view a year later as to whether the technology has developed or not and whether or not they need to still invest in the idea or buy it.”
Martin Grieve, Global Managing Director at Unilever Corporate Ventures, the Anglo-Dutch consumer goods company’s corporate venturing unit, comments: “Many large corporates are highly successful in innovation, but the culture of the organisation should reflect the importance of innovation to the company strategy. Having a separate part of the business focused on long-term innovation ensures the right balance and focus of resource versus other short-term priorities.”
The activities of the corporate venturing unit range from backing early-stage to later-stage deals through being a limited partner in externally managed funds. Martin says: “We invest in start-ups and provide development capital for more established businesses that require funding to accelerate growth, pooling management teams from talent which will typically originate from outside Unilever, and which may use Unilever’s intellectual property or brands…
“We also consider buy-outs as a lead or co-investor in businesses with a capitalisation of up to €50 million (£42.7 million)… Essentially, we’re looking to fund great ideas: corporate venturing is long-term investing that should ultimately yield financial return and a strategic benefit.”
In a well-oiled corporate machine, innovation can be easily destroyed – deliberately or inadvertently – without a clear strategy for integration. “The best companies commercialise their R&D and ring-fence it with a cost-envelope, so that innovation can be allowed to continue,” says David Plumb.
At Colt Technology Services, the whole business model was in need of an urgent shake-up. Chief Operations Officer Andrew Powell explains: “In the telecoms industry, unless you do something very different you could be a dying breed and we’ve had to innovate into the IT services space in the last three years, re-introducing innovation in a very aggressive way.
“For example, we’ve had to take 200 of our best people out of their day job and the existing process and governance-based environment, and set them up on their own in a virtual incubator to build the service model of the future. These people aren’t constrained by existing process and historic thinking and we’ve lifted innovation out of the traditional business. It means they can develop solutions much faster and this has enabled us to make the massive transition we needed to thrive in the new world.”
The bulk of resources in the majority of businesses will be geared toward providing the best quality services and products for customers in the here and now, but it’s increasingly vital to have an eye on the future. Bryan says: “Innovation wouldn’t have been part of the board agenda 20-years ago, but everybody now recognises the speed of change and how companies can go from something to nothing very quickly, so it needs to be as much a part of the leadership discussion as financial performance or sales targets.”
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