Innovating Beyond Corporate Walls

Mike Logozzo

Managing Director, Americas. 

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I’ve spent the majority of my professional career working for a large global corporation. One of my responsibilities was the establishment of an innovation program that brought in startups from around the world to help address key focus areas for the business. Now that I am part of a team that powers these corporate innovation solutions for other global corporations looking to innovate, I can share some perspectives on innovation looking from the inside-out (corporate perspective), as well as from the outside-in (external perspective).

The Yin and Yang of Corporate Innovation

The majority of innovation in large corporations tends to be more incremental, by making gradual, continuous improvements on existing products and services. At times, a significant improvement is made to sustain their position in an existing market. In my experience, incremental innovation is often easy to sell because you don’t need to explain the key principles of your product or service – people are already familiar with the way it works. However, incremental innovations do not necessarily make a huge impact because they’re often just slightly better than what’s already out there.

Corporations that rely on incremental innovation must be cautious of overcomplicating their products and services by adding too many features no one wants to pay for. Also, the market will eventually change at some point because of disruption. If that is the case, relying on just incremental innovation will not be enough to keep up with the changes.

I believe that it’s important to focus simultaneously on improving the core business while also looking for new ways to create value by searching for new business models and disruptive innovations. Disruptive innovation is a concept, product, or a service that creates a new value network either by entering an existing market or by creating a completely new market.

What makes disruptive innovation challenging, is that many corporations struggle to adjust to the new competition because they’re mainly focused on optimizing the existing offering or business model that has proven to be successful in the market so far. Thus, the market is generally disrupted by a new entrant rather than an incumbent.

This is where the beauty of working with startups comes to life.

Startups can be the perfect fit for a corporation’s disruptive innovation gap. However, it must be done correctly. In concept, startups and corporates are the yin and yang.

• Startups offer a fresh perspective to address corporate challenges via disruptive innovations, while also having the ability to quickly move/adapt without the traditional infrastructure and at a fraction of a cost.
• Corporations offer real-world insights/experiences to help commercialize the startup solution and the resources to help scale it.

In execution, the differences between startups and corporates can create some issues if they are not proactively addressed. For example, corporations tend to move slower and are less agile than startups (e.g. cruise ship vs speedboat). This is simply because of the way that large corporations are structured – more hierarchy typically results in a longer time to make decisions; more departments typically result in a higher number of stakeholders to get involved… you get the point.

In my opinion, both parties must be willing to come to the middle in order to for the relationship to work.

• Startups need to understand and respect the corporate culture, policies, and procedures, and be willing/able to adjust.
• Corporations need to create a “fail fast, fail forward” environment to enable the startup.

Success Starts from the Top

I have worked in/with corporations to develop disruptive innovations and move with increased speed and agility when they put their minds to it. It all starts with executive sponsorship. A C-level sponsor needs to stand up in front of the company and announce this is part of a strategic innovation direction and a top priority for the company. Otherwise, the probability for success will be much lower. Here’s why:

• It is rare that corporations will create “dedicated” resources for innovation initiatives. Most of the time, they will assign existing resources with day jobs and other responsibilities.
• Executive sponsorship will enable them to prioritize their responsibilities accordingly. Perhaps some of their lower priorities can be reduced, reallocated, or dropped to free up the necessary bandwidth.

For those of you who have worked on projects within a corporation, think about all of the internal hurdles that may have tripped you up or slowed you down along the way – purchasing, legal, compliance, finance, IT, etc.  An executive sponsor will bring all stakeholders together and ensure their alignment. Think of a cross-functional team containing a representative from each of these areas. Call them “the Enabling Team” – They know where all of these hurdles exist in their area of responsibility. They are tasked to proactively identify these hurdles and offer their insights to successfully navigate them. They will serve as advocates for your innovation initiative and be the points of contact their departments.

Remember, culture eats strategy for breakfast! You may have the perfect innovation strategy on paper, but these other factors are the true enablers that allow it to happen.

Finding the Best Startups

L Marks scouted over 10,000 startups from over 80 countries last year, so I can attest that finding the best fits for corporations is not a simple task. It takes a combination of art, science, and networking. The key is to identify innovation focus areas that align with the corporation’s strategic areas of need. You do not want to innovate for the sake of innovation. It should solve a problem, address a challenge, etc. If you are simply finding solutions that are looking for problems, that defeats the entire purpose.

It is also important to understand if the corporation is trying to address a short, mid, or long-term need. This will be your guide to determine whether to look for early-stage startups (where a corporation can influence the development of a non-commercialized solution), later-stage startups (where a commercialized product already exists), or somewhere in between.

Finally, when evaluating startups, do not just evaluate the innovation itself. I’ve met some startups that had brilliant disruptive technologies, but also had some significant deficiencies internally that were red flags and ultimately prevented them from being a good fit.

In Conclusion

Done well, collaboration with startups leads to the rapid development, implementation and adoption of new products, services and solutions. Corporates can move forward quickly while expanding in new directions. Now working at the forefront of the sector, the corporate business comes to play a key role in shaping the future of the industry. Just as important, this type of collaboration cultivates an entrepreneurial mindset within corporate teams. Indeed, generating both trial-proven innovations and a dynamic culture, it may be the closest thing we have to a sure-fire strategy for growth!