An Introduction to Corporate Innovation

Daniel Saunders

Chief Executive Officer

In this introduction to corporate innovation, I’ll take you through some of the essential definitions and models, including;

• A definition of corporate innovation
• The innovation lifecycle 
• Corporate innovation types and models

So let’s dive right in with a definition before we start talking about corporate innovation solutions.

What is Corporate Innovation? 

“Corporate innovation is the process of solving known and unknown problems to remain competitive, gain market share, or capitalise on new market opportunities. Corporate innovation is achieved through incremental innovations or the invention of new products, services, or business models.”

From this definition, we can see that while innovation and invention are closely related, innovations don’t need to be completely new ideas (inventions); they can be advancements made to existing ideas, products, or technologies. An excellent way to think about the difference is that the telephone was an invention, whereas the mobile phone was an innovation. 

Another term you’ll often come across in the corporate innovation space is R&D (Research and Development). R&D forms part of the innovation toolkit and is just one of many approaches to forging innovations. Your approach to innovation will depend on your understanding of the problem and domain, as well as your company structure, resources, and culture. 

The Innovation Lifecycle 

Most innovation lifecycle models provide an oversimplified and idealistic view of the process, often failing to reflect the complexity, iterative nature, and feedback loops we see in real-life programs. However, there are some typical lifecycle phases that most innovation projects progress through. They are; 

• Problem definition
  First, you need to understand if the problem is known or unknown. For example, you might be aware of declining customer satisfaction with specific products, so you can work to identify the problem. Or you might have an unknown problem, e.g., your company wants to disrupt its marketplace with a completely new product or business model that’s never existed before. 
• Solution ideation
  There are many tactics for developing ideas, e.g., employee hackathons and competitions. Your tactics will depend on your overall strategic approach to the innovation project, e.g., open vs closed innovation (that is, whether you are working in collaboration with external parties or internally only.) 
• Prioritisation
  Once you have identified initial solutions, it’s time to prioritise them. Each project will have a unique set of criteria to rank ideas based on what’s most important. Keep in mind that the criteria should be quantifiable and objective. This will help avoid ideas getting to the top of the list, which shouldn’t be.
• Experimentation
  It’s time to validate your assumptions. The type of solution will impact the kind of experiment you can run. E.g., proof of concepts, trials, A/B tests, etc. The experimentation stage sees many iterations and feedback loops. Still, if the iterations continue to fail, you might need to move on to the next highest-priority solution from the previous phase. 
• Development & implementation
  Once you’ve validated your solution, it’s time to invest in its development and integration. Careful metrics monitoring is crucial to ensure the results you observed in the experimentation phase are replicated in real-life situations. 
• Commercialisation
  After seeing positive metrics in a test market, it’s time to fully capitalise on the opportunity of a full market rollout, scaling the distribution, and, in many cases, going back through the innovation lifecycle to iterate and improve on the business case.

Corporate Innovation Types and Models 

Types of corporate innovation are categorised in several ways. Some muddy the lines between innovation strategy/models/ and processes. However, we typically see types of innovation classified by; 

• The driving forces behind the innovation, e.g., reactionary innovation or disruptive innovation.
• Where the innovation occurs, e.g., around the business model or product.  

As our innovation know-how and business environment have evolved, so have our innovation models. According to academic research by Rothwell, there are five “generations” of corporate innovation (so far), from our earliest linear models to today’s open innovation models.

With so many pathways to innovation, how can you work out which to pursue? While there is no one “right” way to innovate, Greg Satell, author of Mapping Innovation, has developed a matrix to help suggest which approaches to consider. The matrix asks two questions; 

1. How well can you define the problem?
2. How well can you define the skill domain needed to solve the problem (or how well do you understand the capabilities required to carry out a successful project?)

Once you’ve identified where you fall on the matrix, you can see the guidance on which innovation approaches might be best. 

An adapted version of The Innovation Matrix by Greg Satell 

Breakthrough innovation 

Breakthrough innovations occur when you have a well-defined problem that’s incredibly difficult to solve; therefore, unconventional skills can help make breakthroughs happen. This is why open innovation is so helpful, as it combines people internally and externally from different disciplines to work on the problem. 

Sustaining innovation

As the name suggests, sustaining innovation focuses on iterative innovations. Typically, more conventional strategies, such as R&D labs and acquisitions, are used. Venture studios (also known as startup studios or corporate venture builders) can work particularly well when you find your business understands the domain and problem space better than anyone. Still, your internal structure isn’t geared towards innovation. Venture studios are places where startups can be created and built, allowing established corporations to capitalise on the agile nature of startups. As the startup initially acts as a separate entity from the main corporation, they have far less to lose by launching innovations. 

Disruptive Innovation 

Disruptive innovation, introduced by Clayton Christensen in his book The Innovator’s Dilemma, “creates a new market and value network or enters at the bottom of an existing market and eventually displaces established market-leading firms, products, and alliances.” A well-known example of disruptive innovation is how Netflix changed the movie rental industry.

Large established corporations often utilise innovation labs to aid their disruptive endeavours. Innovation labs facilitate collaboration between corporations and existing startups, which are scouted to work on solutions to the corporation’s biggest challenges. The chosen startups work with the corporations’ stakeholders, gaining an in-depth understanding of their operations and objectives in order to innovate. 

Research

When you don’t understand the problem or domain space, your focus should be on learning and exploring the topic, but you can’t out-innovate competitors until you have insights they lack. 

This can be achieved through methodologies like Mind of the Community™, which engages a knowledge network to access ‘tacit knowledge’—knowledge that is difficult for individuals to express. This knowledge is gathered via phone engagements or ethnographic studies where people are observed in their normal environment, either in-person or virtually. Such research can be consulted as either “open” (disclosing the principal and nature of the research) or “closed” (where the research is conducted by an external company sharing only the general theme of the research.) 

The Mind of the Community method helps to reveal the forces behind “what might be” to gain a proprietary understanding of ecosystems and their drivers.

Summary

This post should have given you an understanding of corporate innovation’s multifaceted nature. You should be familiar with industry terminology and be aware of the common approaches toward innovation. If you have questions about the topics covered in this post or want to discuss corporate innovation further, please get in touch. 

05/09/2022