How to Avoid Innovation Theatre
Corporate innovation is hard . You must balance the efficiency engine of your operating model with the experimenting activities at the edge of your business which challenge the very operating model. Innovators inside organisations not only have to tackle complex problems, they also have to fight the immune system of the mothership that will instinctively attempt to kill them off.
That's why we've seen many innovation units appear over the past decade separated from the core business. The idea is that "protecting" the fragile and nascent ideas, not to mention those small teams, will provide time and space for creating value through new business models.
The truth is that innovation labs and corporate garages have a mean lifespan of less than four years before they're shut down. In Denmark, prominent examples are Danske Bank's MobileLife, ISS' Corporate Garage, and TDC's Startup Factory. Globally, only about 10% survive.
The main reason is lack of alignment with the core business.
This ultimately leads to innovation theatre, a stage where the actors perform something that looks like innovation but actually isn't. The teams are designing business models, running design sprints, and making speeches about disruption, but they are in fact not generating new revenue, which is why they were hired in the first place. Not a pretty sight.
Aligning with the core means two things:
First that corporate innovation is regarded as a must-win battle in the corporate strategy for long-term growth, not a nicety that can be axed when profits go down.
Second that the core business genuinely provides market access and investments into the most promising products emerging.
The effective instrument for alignment is strategy. Just a VC has an investment thesis, a long-term corporate strategy should contain an innovation thesis that simply states where the technology and markets will provide future opportunities that are relevant to pursue, and where innovation is part of the answer. Such a strategy is not a plan that is delegated and executed. It's a hypothesis. It it an outlook on the future that inspires to make bets. The success or failure of those bets will assert or negate the hypothesis and enable improvement and refinement over time.
To orchestrate a thriving collaborative interplay between innovators and the core, some adjustments need to be installed in the business. One is that executives should have genuine incentives to make investments in their area, and to allow new initiatives to grow, even though they are speculative and not part of the short-term business plan. Another is that the organisation as a whole should be in motion and able to act as the "receiving end" to be able to scale new initiatives.
So, at the end of the day, it's about strategic alignment and organisational capability. And going ahead building an innovation lab doesn't build in itself.
• Thanks for your interest.
Photo by Joel Filipe on Unsplash