The open marketplace will always innovate faster than any corporation. Maxwell Wessel, general manager of SAP.io, an innovation arm within SAP, outlined a few reasons why in an article for Harvard Business Review (HBR):
- When corporations reach maturity, their measure of success is profit
- When a business learns how to tackle customers' pain points in a scalable way, organizational structures and processes emerge to guide efficiency
- As pressures to reach quotas grow, managers redirect their employees' attention towards the status quo—doubling down on existing resources, distribution channels, and shareholder objectives
This type of systematic growth is a double-edged sword: While scalability is one of the ultimate signs of success, it also runs the risk of creating tunnel vision and stifling creativity. To innovate, employees must feel free to venture away from what's safe, tested, tried, and true. But internal pressures can stop innovation in its tracks.
In his article, Wessel recounts a story from Gerber: At one point, the company created an adult-focused product that used the same sourcing and distributing processes as its baby formula. From a manufacturing and efficiency standpoint, the idea appeared to be a win. But paradoxically, their commitment to following their existing processes is what held them back—they needed a model that was more closely aligned with their target market.
"This was their biggest barrier," writes Wessel. "The idea had merit, and the trends the executive team noticed were real. Just look at any smoothie section in your local grocery store. Naked, Odwalla and Innocent sell hundreds of millions of dollars of product addressing the same problem that Gerber identified with a very similar solution."
Gerber's challenge was internal pressure to deliver billions of dollars in growth each year. What the company perceived as an obvious answer to growth was a red herring—enticing signals towards a wrong direction. It was a tough lesson learned for an otherwise thriving company and household name.
Traits of Enterprises of the Future
So what's the solution for companies like Gerber with big ideas but less-than-straightforward paths to execution? They can take a lesson from a new breed of companies — what at RocketSpace we call "the enterprise of the future." This group includes newcomers to the global stock market such as Shopify, Google, Amazon, AOL, Apple, and Facebook. Their approach to innovation? It's rooted in their abilities to pursue innovation from the outside world — and remembering that they themselves were startups a short time ago. In other words, they work like and with startups.
Here are the traits that they share in common:
1. They're Relentlessly Adaptable
To stay aligned with fast-changing markets, enterprises of the future are reinventing themselves on a continuous basis. As an example, take a look at AOL — a company that evolved from providing Internet access to becoming one of the world's largest advertising and media brands. Or, take a look at Facebook's investments in immersive virtual reality experiences that enable closer personal relationships.
What these companies share in common is that they're using startups as catalysts for change — working like and with startups to accelerate their velocity as organizations. They keep a pulse on the future, and at any given moment, they're ready for change.
2. They're Willing to Challenge Boundaries
Every company needs a unique formula for innovation. Even within organizations, every R&D team needs its own blueprint for success.
The key is to structure your operations for versatility and flexibility. Take Google, for instance, which recently restructured its organization under Alphabet. According to a recent USA Today article and interview with Larry Page, Alphabet's CEO, "the new corporate structure gives moonshots from driverless cars to glucose-sensing contact lenses the room they need to experiment and grow."
Alphabet gives its individual innovation programs a chance to flourish and thrive through startup partnerships, internal innovation programs, and otherwise. All the while, uncertainty becomes less risky, with Google maintaining its position as a mature, standalone entity.
3. They Know the Risks of Inaction
By definition, corporate innovation is risky. Failure is both a natural and essential part of the journey to success. Even the strongest partnerships will encounter hiccups and potential points of friction. But the bottom line is that the risks of inaction outweigh any other risks of corporate innovation. If your organization can't adapt to a market that moves faster than your business, you'll risk getting left behind.
What's important to keep in mind is the power of perseverance. As Martin Reeves, senior partner at the Boston Consulting Group wrote for the Harvard Business Review, "The goal of most strategies is to build an enduring (and implicitly static) competitive advantage by establishing clever market positioning (dominant scale or an attractive niche) or assembling the right capabilities and competencies for making or delivering an offering (doing what the company does well)."
That's why companies with established R&D programs, like Lufthansa Cargo, are committed to testing new waters with new corporate innovation models. Facing a golden age of change, with new technologies flourishing, the company is committed to innovating its own intrapreneurship models.
The Big Opportunity
Every corporation, whether 20 years old or 200 hundred years old, has the potential to be a corporate innovation leader. The question that enterprise leaders need to ask themselves is to how to get the most that they can from their industry's innovation ecosystem—how to break free from perpetual ideation mode. As far as organizations like Google, Facebook, and Lufthansa Cargo have come, there is still plenty of opportunity to learn, grow, and execute.
Here's my question for corporate leaders: Are you ready for the risk that comes with lagging behind?
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