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In the current situation, many corporate innovators face a dilemma: In most companies, they are asked to refocus activities to support the core business while at the same they hear that they should prepare for post-crisis growth.
So how could you and your peer corporate innovators solve this dilemma?
To answer this question, I ran two (virtual, of course) workshops with some of my clients. These are some 20 European or even global leaders from various industries as diverse as Aerospace, Energy, Automotive, Logistics, Banking, Insurance, MedTech, Postal Services, Construction, Technical Services, Medical Products, Railways and Payment Processing.
We put two issues in the centre of our discussions: (1) What are the lines of action that corporate innovators take?; (2) How to select the right corporate startups for post-crisis growth?
Line of action 1: Understand the New Normal
It is quite clear that after the first wave(s) of the pandemic have goner, a “New Normal” will emerge. Social life and business life will be different. Hence corporate innovators (and their colleagues from Strategy, Corporate Development and Business Development) need to challenge the current business assumptions to see if they still could be the basis for business models in the New Normal.
Take the airline industry as an example. A European airline sees a fundamental, tectonic shift in the New Normal regulatory stack. Up until 9/11, the airline industry had to ensure safe planes and safe operations. After 9/11, the industry needed to ensure that also passengers were safe, i.e. did not propose a safety risk. After Covid-19, it is expected to ensure that passengers are not only safe but healthy, i.e. do not propose a public health risk. This fundamental shift will, of course, change customer expectations and journeys, opening up new innovation opportunities for industry incumbents and new players.
Three other examples for shifts of this magnitude that will be the New Normal are (a) supply chains being re-designed from global to near-shoring, (b) the increasing importance of resilience in the business and operating models, (c) new value chain/supply chain configurations, e.g. Amazon building the globally first virus-proof supply chain.
Line of action 2: Kill the zombies, prune the portfolio
In many companies, corporate innovators are being asked to have a cold-eye look at the portfolio of corporate start-ups and ventures. They are expected to make a call on which ones should be nurtured (or even accelerated and scaled) and which ones not.
Most corporate innovators start with killing the “zombies”. These are projects and corporate start-ups that have been around for quite a while but are not making significant steps towards business impact. To identify zombies, three questions can be helpful: Upon reaching market traction,
- is there technology-fit, measured against current tech trajectories?
- is there strategy-fit with a readjusted “New Normal” strategy?
- how much does it contribute towards increasingly important sustainability goals?
After killing the zombies, the rest of the portfolio can be investigated. Five questions provide guidance:
- Level of business criticality
- Level of the unfair advantage
- Level of uncertainty
- Level of value creation (where the majority of companies have now installed minimum thresholds)
- Sequencing (First A, then B)
Line of action 3: Adjust the growth strategy / Accelerated Digital
Prior to the current situation, non-incremental innovation activities were often run with the goal of building new businesses. In light of the current situation, many companies have set a “Core First” priority. Corporate innovators could do this in two ways:
- Change the growth strategy. Deploy and roll out the innovation firstly internal for top-line or bottom-line impact, mature the product along the way, then build an external business
- Align to create short-term solutions. By partnering with Core’s Sales / Business Development and Digital units, new, short-term solutions to existing customer problems can be developed. “Move quickly, perfecting later” is the mantra for this type of approach
Some of our clients call this approach “Accelerated Digital”, i.e. a significant uptake in Digital Transformation efforts.
Line of action 4: Seize the opportunities
The current situation and the post-crisis bounce-back allows corporate innovators to seize opportunities. Our clients see four opportunities to be of highest relevance:
- Capitalize on new, Covid-triggered trends, e.g. “Low-touch economy”, “New socializing” or “New work”
- Buy startups and recruit Top Talent at a discount
- Position your company as a post-crisis partner-of-choice. This could be done by e.g. (a) supporting and retaining the external innovation ecosystem, (b) installing approaches to fast-track Business Unit/startup collaboration and/or (c) accelerating proofs-of-concept for external startups.
- Forge new partnerships. Other companies from other industries that are working in the same transformational challenges (e.g. transitioning from a hydro-carbons to a low-carbon business) are facing the same issues as you
And … How to select the right corporate startups?
To select the few bets that should still be nurtured or even accelerated, our cross-industry client group thinks that the evaluation should be viewed from three different angles:
- Start with a Covid-aligned portfolio (see above, lines of action 1 and 2)
- Validate “Worth to be scaled”. In the sense of our Lean Scaleup framework, this means a full Validation on desirability and viability. This comprises e.g. well-defined customers and their jobs-to-be-done, pains and gains, willingness-to-pay, a sized and analyzed the addressable market, a clear value proposition, a robust and resilient business model, a positive business case, a clear growth strategy, a supportive ecosystem, etc.
- Validate “Ready to be scaled”, i.e. validated feasibility and contextuality (fit with the corporate context). In the Lean Scaleup framework, this means validating the scalability of the business concept and the technology combined with the organizational embedding of the Scaling-Up into the corporate context
The Lean Scaleup framework helps to select corporate startups
To answer the last two points, a growing number of companies use the Lean Scaleup. This “provides a framework for taking promising new concepts to scale using the best ideas from venture capital and the lean start-up world and makes these work in a corporate context“, as a Member of the Board of a Fortune 10 company wrote.
The problem that the Lean Scaleup addresses is that most large companies do not create business impact from their innovation activities. Statistics tell us that 85-90% of corporate startups fail, i.e. never make it to scale.
The Lean Scaleup has been co-created by 20 companies from various industry sectors, up to Fortune 10 level. Some of these companies went so far as to completely re-design their incubation/acceleration / scaling-up approach. A precursor to this framework has been published in a book (see HERE).
If you are a corporate practitioner and want to learn more about how this framework can help in increasing corporate innovation’s impact and in selecting the right corporate startups then drop me a line or book a call HERE.
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