Can large companies be more innovative than startups?
When we talk about innovation in companies we usually talk about startups. They are small, agile and filled with fearless people who are trying to move mountains. Most of them fail but some of them succeed and disrupt entire markets. Just remember Elon Musk and Paypal story.
It is fascinating that large corporations have much more money and experienced personnel, but still get beaten in innovation game by a couple of guys in a garage. So where do the big players fail? How can a large company be as innovative as a small startup? There is a way. Companies need an innovation culture.
Establishing an innovation culture in a company sounds a lot easier than it is. It is easy to drop the word "innovation" here and there and think that it is enough. No executive in the world will say: "Our company doesn't care about innovation”. However, the reality for many companies is that innovation fails to extend beyond a CEO’s statement or redesigning the office space to be more "inspirational."
How many times did you visit a company that you believed was the most boring in the world and you saw design furniture by Eero Aarnio in the lobby? They are trying to be innovative, can't you see?
In reality, innovation culture is much more than design furniture or a statement in an annual report. If you are part of a large company and you want to boost innovation, this is what you need to do:
1. Commit resources to innovation
With this, I don't mean having a meeting to discuss about innovation. I mean concrete things such as time, money and physical space… Here are some real life company examples.
AT&T has a budget of 100,000$ for innovative projects inside the company and everybody can apply for that money with an idea. If you win, you can use work time to develop the idea. That is concrete. You get money from the company and time to work on the idea.
Similarly, Adobe has trainings for all employees in making quick and dirty prototypes. If you want to test an idea, you’ll get 1000 dollars to try it out. You can, of course, use company time to do that.
Probably the most famous example is Google's 20% of time allocation for personal initiatives. If you don't know what I am talking about, google it.
2. Democratize innovation
It is important to include all employees in the process in different ways. Everybody has ideas and all employees should have a chance to contribute. Some companies go even a step further and include also non-employees in the process. This is vital for the testing stage of the innovation process. BBC testing platform is a good example of including audience in innovation process.
Of course, not all employees can be included in the same way. Depending on your specific company needs, size and market cap, employees can have different roles in the innovation process. Here we come again and again to the innovation process, which is the next point.
3. Create an innovation process and be consistent in following the process
An innovation process is a systematic approach to innovation. People tend to think that ideas are the only thing you need for innovation, but they are not enough. An innovation process has more steps than just ideation and there is a long path from an idea to revenue and from an insight to an idea. All those phases should be designed and integrated in the company's daily activities.
"Innovation that works is a disciplined process. The real frontier is to not think of it as a creative exercise, but to think about it as being disciplined in using the right methods".
Common innovation process usually starts with defining the topics, the next stage is ideation which can be more or less structured, followed by evaluation, then prototyping, testing and it ends with implementation. Each of the phases requires planning, roles, time and money allocation.
4. Accept the risk of failure
The key difference between startups and large corporations is in their risk aversion or lack of it. Startups are fearless. They can fail - corporations can't. If a startup fails, the founding team regroups and tries again. If a corporation fails, it's all over the news. Many lose their jobs, governments fail.
As I see it, there are two ways to look at this. You can accept the horrible destiny and wait for the next startup to come and disrupt the market or utilize your good starting position in innovation game and invest money and resources to make the next big thing. Determine what is an acceptable level of risk for you in terms of money and time and create a safe testing place where you can try out things that might fail. You have smart employees, cash flow and facilities - can you imagine what a startup would do with such resources?
Everybody knows that innovation comes from combining different competencies. Valve was created with the same thought in mind. In order to have truly innovative ideas, you need different points of view. Employees need to get out of their bubbles.
6. Measure - ROI and keep track of ideas and investments
It is a business after all. If it is not bringing in money, it is losing money. Everything that loses money is not a good investment. Today, the technology makes possible to track number of ideas coming, how many get developed further, what is the average value of an idea and so one. It requires investment in the tools and analytics, but if you want to innovate, you need to pay the price. Nothing comes for free. If you want, we can do it for you, but we are not free either.
7. Communicate the culture and process clearly throughout the company
You are doing something cool, advertise! What is the point of having all the tools and processes if nobody knows about it. What happens today is that many companies have some sort of innovation process in place, but nobody knows about it. That is just being lazy.
8. Merge innovation process with other decision making processes in the company
This is the final but equally important step. Innovative ideas should compete for funding inside the company in the same way other projects do. A good idea is easy to recognize. This requires that in the planning stage of the innovation process you make sure that an idea is refined enough to be presented.
"Whirlpool" has a very structured approach to innovation. All ideas, regardless of who they come from, are presented in the same way to the executives. If it creates value for the company, it is a good idea, it’s that simple. The purpose of having an innovation process is bringing value to the company, not just having innovations. Profit, not innovations, should be the ultimate goal.
Only when you have all these points in place, you can say that you have created innovation culture. If you are not ready to dedicate the time and resources to building an innovation culture, there are other options. There is something called coupled innovation model. It means that you join forces with a truly innovative company that drives the innovation of the joint venture. Many design agencies have been acquired by large manufacturing companies in order to bring new ways of thinking into the group. This model works, but it still requires a change of mindset.
You need to be willing to accept new ways of thinking regardless of where they come from. The last model I will present in this post is a so called, inbound innovation model. It means that you are hunting for innovative startups to acquire. Ideas come from an outside place and you bring them in and develop them further. If that is the model you find the most interesting, see you at Slush 2017.