During this year’s Super Bowl, Ford aired a commercial showing how it’s working on new ways to solve transportation problems. Many companies are engaged in similar efforts as they strive to remain one step ahead of market-changing startups like Uber, WhatsApp, Slack, and Snap. And when internal research and development efforts aren’t enough, companies turn to innovation programs, which can take many forms, depending on the area of focus.
In a new report entitled “The corporate innovation imperative: How large corporations avoid disruption by strengthening their ecosystem,” authors Jeremiah Owyang and Jaimy Szymanski from the organization Crowd Companies looked at ways brands are adjusting their tactics around long-term innovation and relevance.
Over the course of six months, Owyang’s team surveyed 40 companies, some from the Fortune 500, to understand not only how innovation is defined in their organizations but to highlight these companies’ efforts to “show measurable impact.”
10 corporate innovation programs
We’ve heard about corporate innovation over and over and over and over again, but many of these reports seem to gloss over what the programs actually do. “The corporate innovation imperative” dives deeper into the specific steps brands are taking, from simply putting together dedicated innovation teams to launching intrapreneur programs and innovation outposts to investing in startups and startup acquisition. The report addresses the pros and cons of the 10 types of programs studied, and Owyang acknowledges that some of them could even be combined.
“There are a few times where programs can be blended,” he told VentureBeat. “For example, an innovation outpost may be hosted at an accelerator (as Fujitsu is located in RocketSpace). Or an education program can have an element of an outpost — Lowe’s is conducting experiments out of Singularity University in Mountain View. Advanced companies run multiple programs at once, with overlap depending on internal organizational structure.”
1. Dedicated innovation teams
The first program is centered within a company, bringing together full- and part-time employees with the goal of developing strategy and overseeing innovation programs. But not everyone will be on this team — it requires that participants have expertise in internal communication and proven records as change agents, since impacting a company’s thinking can be an uphill battle.
Owyang states that dedicated innovation teams can see areas of collaboration beyond traditional research and development, thereby deploying innovation into other departments, like operations, customer experience, and even new business. However, downsides include a lack of coordination with the company as a whole, especially when it comes to decision-making.
2. Innovation Center of Excellence
Companies looking for a more inclusive program may opt to establish an Innovation Center of Excellence (CoE) that brings together multiple departments, including marketing, public relations, human resources, information technology, and product. Members of this program are those with responsibility for senior leadership. Owyang said the goal of a CoE is to standardize and scale innovation across entire organizations.
Having a CoE is useful when it comes to getting all business units in alignment and accomplishing “full-fledged culture change.” However, a downside is that the people involved in this program aren’t working on it full-time, so their level of participation can vary.
3. Intrapreneur Program
Another internal program companies can implement, this initiative looks to entrepreneurs already working in an organization for ideas and passions. These are perhaps akin to Entrepreneur-in-Residence (EIR) roles within venture firms. Companies work with employees to invest in their ideas and passions as they find ways to improve customer experience and products and solve other problems in the organization.
Owyang said that these intrapreneurship programs are “an effective and cost-efficient way to surface ideas and share your business.” But are organizations willing to bestow complete trust on these employees, including accepting the possibility of failure and providing the necessary resources to take the idea from concept to productization?
4. Open Innovation (hackathon or internal incubator)
Then there are programs that shift away from internal-facing efforts to include external partners. The first of these is around open innovation, through which companies invite startups to co-work in their offices and provide these entrepreneurs funding, support, and additional resources. Another way this can be used is through hackathons, similar to those implemented in Silicon Valley by Google, Twilio, Twitter, Facebook, and others. In this scenario, hackers gather to test their skills while helping companies solve thematic problems.
The expectation of open innovation programs is rapid prototyping of ideas. After all, internal teams can get stuck in a rut and it might take a fresh pair of eyes to overcome an impasse. Companies can form accelerators similar to those created by Citrix, Citi, Intel, MasterCard, Orange (disclosure: I used to work at Orange), Target, Qualcomm, and many others. In supporting startups, brands can offer some basic funding while employing a tit-for-tat approach — startups build out their product while companies glean as much knowledge about the space as possible over a 3 to 6 month period.
Open innovation programs can result in faster go-to-market times for product launches while reinvigorating discussions with fresh perspectives. However, Owyang warns that innovations from these efforts “are often siloed from the rest of the corporation’s innovation agenda” and are often expensive, since they represent long-term engagements.
5. Innovation excursions
If companies don’t want to bring startups in-house, they can go out into the world instead. With innovation excursions, corporate leaders take tours of startups and businesses that they think are leading the way in a particular market or category. The team will hear from speakers, meet partners, and find inspiration to take back to share with their colleagues.
This type of program will accelerate education among senior leaders while identifying partners that could transform company culture and spur new programs. However, the motivation derived from these excursions could be fleeting, and if little to no action is taken immediately afterwards, it’s back to the status quo.
6. Innovation outposts
Innovation doesn’t necessarily cluster around corporate headquarters, which is why many corporations are establishing “outposts” in regions where things are happening, such as in Silicon Valley, New York, London, and Asia. These offices are dedicated to understanding what the local ecosystem is doing and conveying that information back to the main office. As Owyang states, some outposts host partners, events, and startups, so there is some overlap with the internal accelerator program.
The benefit of innovation outposts is that companies can better observe and exchange knowledge with startups while establishing partnerships and experimenting with ideas. On the other hand, a big downside of these (usually expensive) outposts is that companies often fail to fully consider their goals or the responsibilities of the employees before moving forward.
7. Technology education/university partnerships
Startups aren’t the only sources of inspiration for companies. Some organizations are tapping academia to help with innovation. But it’s not just universities; technology training centers like Galvanize and General Assembly churn out graduates who can infuse departments with young blood and motivation.
By teaming up with an educational institution, companies are able to get a sneak peek at technological breakthroughs that they can incorporate right into their offerings, maybe even discovering the next Siri or self-driving software application. The institution also becomes a river of potential new talent that can be brought on board. However, developments from this partnership may not necessarily favor corporations, because the intellectual property belongs to the university, not the brand.
8. Accelerator partnerships
Companies can launch their own incubators and accelerators, but sometimes it can be difficult to bring in the right ones, especially when starting out. How do you pick those that will definitely impact your organization while ensuring you do right by the startup? This is where accelerator partnerships can come in, and companies can use services like TechStars or Orange Fab for help in setting up programs.
The downside of outsourcing accelerators is that corporations are limited in terms of the direction of the program and the types of startups it includes.
9. Startup investment
When in doubt, one clear way to understand innovation is to have a stake in companies doing what you’re interested in. The report finds that plenty of companies place bets in the startup ecosystem as a way of gathering research and development. Such arrangements help companies understand the space startups are in, and their ownership stake guarantees that they’ll receive dedicated updates.
“It’s a strategic way to guide the development of a technology, product, or service that could eventually be added to the corporation’s offerings through acquisition,” the report explained.
This program’s drawback is cost, which can vary immensely by number of investments and the stage at which funding is provided. And let’s not forget that startups aren’t guaranteed to succeed.
10. Startup acquisitions
Of course the final method identified in the report is startup acquisition. Companies might carry on with business as usual and hope that bringing in a disruptive startup will be enough to spur innovation inside the organization. This synergy could signal a specific focus organizations want to make around products, services, or how to engage customers.
But bringing startups in-house can also be expensive and can be complicated by resistance or culture clashes. The better-known a startup is at the time of acquisition, the more difficult it might be to fully integrate that startup into the corporate fold.
“Corporations are struggling to keep pace with technology trends, but the real challenge lies in their internal culture. The ‘tech issue’ isn’t an issue,” explained Owyang. “Successful companies focus on setting a foundation with the right people and empowering them, as well as [on] governance, before large investments take place that lack direction, resources, or goals.”
Leading the charge for change
Setting up these programs is one thing, but who’s ultimately responsible for leading the charge? According to Owyang’s report, that comes down to seasoned employees, those who have been in their current role for an average of 3.2 years and who tend to have nearly 20 years of experience overall. This latter statistic serves as a reminder that expecting younger employees to lead the way won’t always cut it.
At the same time, having an advanced degree is not a prerequisite for being an innovator, because only 46 percent of the 140 LinkedIn profiles surveyed by Owyang and Szymanski have a master’s degree or higher.
It’s important to identify who your innovation leaders are going to be — not everyone has the right skills for the task. According to Owyang, this is not like the social media professional many companies flocked to when social networks first became mainstream. “A few years ago, the social media professional really shook up the corporate communications/marketing/customer care programs, influencing the CEOs of every company to look at work differently, and we saw that while that role was becoming operationalized, a new internal champion was emerging.”
He added: “The persona is a bit different; these folks may be more product- or strategy-grounded, with a lot less focus on media or comms. However, they want to launch new business programs that can often be in conflict with the existing revenue models of a company.”
It’s one thing to select a change agent or implement an innovation program; it’s another to know whether those efforts are working or not. With that in mind, the report lists the top metrics companies assess performance by.
Not surprisingly, revenue is a top indicator of whether an innovation program is a success. Sixty-six percent of those surveyed for this report said that increased revenue generated by new products and services was a top key performance indicator.
Other metrics include improvements in customer satisfaction, faster time to market for products or features, additional projects in the innovation pipeline, more adoption of innovation, improved operational efficiencies, additional education, and more ideas around innovation.
“Return on Investment (ROI) is a fallacy metric of innovation,” Owyang claimed. “Basing program success on ROI too early, rather than dedicated innovation KPIs, will not yield an accurate representation of progress.”
“The corporate innovation imperative” is more than just a report by Owyang and Szymanski. It signifies a pivot of sorts for Owyang’s Crowd Companies organization, which has spent nearly three years helping brands work with those in the sharing economy, including Airbnb, Uber, Lyft, and Postmates. Owyang realized that the market has begun changing, shifting toward autonomous technology, and it’s here that he sees companies struggling to keep up.
The 40 companies Owyang interviewed for this report include AXA, ADT, GE, Comcast, HP, Disney, 500 Startups, Accenture, WDGB, Pilot44, Rocketspace, and dozens of others.
An abridged version of the report is available online today, but the full version is restricted to members of Crowd Companies.