Corporate innovation is an essential concept that many businesses fail to understand. The ability of a corporation to innovate may dictate whether or not it will continue to grow or exist in the next few years.
Many successful corporations that dominate the market now have strong corporate innovation capabilities.
These corporations can successfully see where the market is going and innovate accordingly. Or they might even be the cause of change and disrupt their competitors through their innovations.
But many do not know what corporate innovation really is. Nor how it is successfully done.
What is corporate innovation?
Many people think that corporate innovation is only the creation of new technology. But this is not always the case.
According to Masaki Mitsuhashi, Managing Director of the Embiggen Innovation Institute, corporate innovation happens when a business creates or captures new value.
While one of the most obvious forms of corporate innovation is the creation of new technology, there are many more aspects of a business that can be innovated.
Doblin, a global innovation firm, identified 10 types of innovation. Only two of these focus on a company’s products, technologies, or services.
Beyond creating new products and services, organizations can innovate a range of different aspects of their business from improving their internal processes all the way to revolutionizing the way their customers interact with their brand.
For example, corporate innovation can take the form of developing a better and more convenient way for customers to access their products. This is what Netflix did when it digitized the media rental industry.
Its streaming platform made accessing movies more convenient for its customers. Instead of making customers physically rent a DVD, they could now stream movies online without leaving their homes.
This is a perfect example of an organization innovating the profit model, product delivery channel, and customer engagement aspects of its business. It paid off when it eventually dominated the industry, defeated competitors, and ultimately created new value and exponential growth for the company.
Thus, corporate innovation is more than just creating new products, services, and technology. It’s all about creating new value for an organization, whether or not it involves the creation of new technology.
The Three Horizons of Corporate Innovation: Developing corporate innovation capabilities
The process of introducing and applying corporate innovation in any business requires extensive effort and commitment from all levels of an organization.
Building and developing a corporation’s capability to innovate may take many months or even years to complete. Typically, corporations build this capability and execute their innovation projects by following the 3 Horizons of Corporate Innovation Model.
This model was developed by McKinsey & Company to visualize how a company grows through innovation:
- Horizon 1: Core Growth. This horizon is all about finding opportunities to innovate within an organization. Most importantly, it is under this horizon that companies build the foundation for their future innovations by training their team members in the practice of innovation. One way they do this is by sending them to programs such as those of the Embiggen Innovation Institute, Global Innovation Management Institute, and the Asian Institute of Management.
- Horizon 2: New Growth. Here, corporations start looking for innovation opportunities in adjacent industries and markets. For example, a company could begin investing in up-and-coming startups through venture capital. It brings some new value to an organization but not as much as Horizon 3 innovation.
- Horizon 3: Emerging Growth. Horizon 3 innovations focus on creating entirely new avenues of growth. Often this involves entering or creating entirely new markets by building new startups or ventures through corporate venture building. The innovations under this horizon brings the most value to an organization, but are usually also the most resource-intensive.
It is important to note that once a corporation has built its capability to innovate, it must simultaneously focus on all three horizons to innovate effectively and successfully.
Here are 6 models of corporate innovation
There are many ways corporations can improve their innovation capabilities. This can be done through the many corporate innovation models or strategies that organizations employ. Corporations employ these to build their innovation capabilities and bring innovation into their organization.
Some of these models and strategies may be riskier and more capital-intensive than others. A corporation interested in building its innovation capabilities just has to identify the model or strategy that best fits its capabilities, needs, and goals.
Here are 6 of the many models of innovation:
- Corporate Venture Capital. In this model, corporations invest in startups that they believe will perform and succeed in the future. The main risk under this model is the possibility of the startup underperforming or failing to meet expectations. However, this risk may be offset by the value and benefits it will bring if the investment succeeds.
- Corporate Venture Building. To innovate, some organizations may choose to build an independent entity, outside of their core business, to produce innovative products and services. These entities are called ventures. These ventures combine the innovative mindset of startups with the resources of a large corporation. Thus, these ventures could grow quickly and exponentially and may even scale into billion-dollar companies.
- Acquisition. Often, corporations purchase startups and integrate them into their organization. Corporations that choose this model face a lot of risks, such as the failure of the startup they acquired. Also, a lot of capital is needed to pursue this model.
- Intrapreneurship Program. This program gives support to the organization’s workforce to innovate. It is a platform where employees can ideate new innovative ideas and implement their innovation initiatives. In a sense, corporations that have this program train their very own internal entrepreneurs or intrapreneurs.
- Dedicated Innovation Teams. Many innovative corporations have in-house dedicated innovation teams. These teams are solely focused on managing the corporation’s innovation initiatives. They also generate new disruptive ideas that their organization can take advantage of.
- Open innovation. Corporations can sometimes invite startups to partner with them and work together. Under this arrangement, the startups allow innovation to occur within a corporation while the corporation gives the startup support such as resources.
However, there is one strategy that corporations definitely shouldn’t do if they are interested in improving their capability to innovate. This is innovation theatre.
Not all ‘innovative’ companies actually innovate. The concept of branding an organization as innovative even if they’re just pretending to innovate is called innovation theater. These organizations want to make it appear to the public that they are innovative when in reality they are not.
One example of innovation theater listed in this article by Idea to Value, is having a Chief Innovation Officer (CIO) who has other roles alongside this position. Ideally, a CIO should be focused on managing and executing the innovation initiatives of their organization. However, if they have other roles alongside this, their focus is divided which does not deliver results.
Entrepreneur Steve Banks coined the term and stated in a Harvard Business Review article that in innovation theater, corporations sometimes focus more on the process instead of the product it creates. This stifles innovation in a company.
Some signs of innovation theater are ‘innovation’ initiatives that do not have any significant contribution or impact on a business. Innovation theater doesn’t bring new value to a corporation because the ‘innovation’ is all just for show, whereas successful innovation creates new value for corporations.
It acted as if it was one of the most innovative companies in Silicon Valley. All the optics and valuations pointed to this. It was once valued at USD 10 billion in 2015.
However, its main product, the ‘Edison’ blood testing device, did not work as promised. It could not perform the revolutionary 200 medical tests the company claimed it could do, performing as little as only 15 tests according to reports.
The company eventually dissolved in 2018.
Clearly, the company’s innovation did not create new value. If anything, innovation initiatives like these are a waste of time and resources as they do not add any value to a company.
And in Theranos’ case, innovation theatre was illegal as its founder was found guilty of four charges of fraud in 2022.
Fostering innovation in an organization
When a corporation is open to the idea of innovating, it can be classified as a progressive organization. These organizations are already thinking about innovating. They may be planning to implement various innovation initiatives or they may just be exploring the concept of innovation.
There are a few key qualities that distinguish progressive organizations from the rest, besides being open to the concept of innovation. These qualities are the reason why these organizations succeed at innovating. Gary Hamel and Nancy Tennant wrote that there are 5 requirements for a company to be considered innovative.
- A program or system to train employees to innovate and develop their innovation skills,
- A company-wide understanding of what innovation is, which allows companies to be on the same page as to what ‘real’ innovation is,
- A way to measure the progress of the company’s innovation initiatives,
- Innovation leaders who are accountable and capable of leading innovation initiatives,
- A management process that is innovation-friendly and doesn’t hamper innovation from taking place in the organization.
Beyond these requirements by HBR, other qualities can be observed in progressive and innovative organizations.
In the world of innovation, failure is commonplace, thus these organizations should be open to failure. Jeffrey Baumgartner wrote in an article for Innovation Management that openness to failure allows employees to have more courage to take on innovative projects, which are often risky.
Baumgartner also wrote that there should be an environment of trust in a corporation because innovation projects are risky. This environment encourages employees to share their innovative ideas with their organization.
All of these can help an organization foster innovation.
Outcomes of corporate innovation
Corporate innovation brings about a variety of products and outcomes. Unless an organization did innovation theater, innovation initiatives are often very fruitful and add value to an organization.
Corporations that are committed to corporate innovation and improving their innovation capabilities reap many benefits. Our innovation strategy programs provide many positive outcomes and benefits such as:
- Growth. As innovation is always focused on the creation and capture of new value, innovation initiatives contribute to an organization’s growth or success. New product and service offerings can bring new sources of revenue for a corporation that has been losing customers to new technology. Innovating a business model can unlock new growth and opportunities for an organization whose revenues have plateaued. There are many more ways that innovation can build meaningful growth.
- Adaptability. A truly innovative organization can adapt to both the opportunities it identifies and the challenges it faces. On one hand, these organizations take full advantage of the opportunities that are presented to them in order to accelerate their growth and contribute to their success. On the other hand, these organizations can take on the challenges that threaten the business by innovating and adapting to the situation.
- Resilience. Innovative organizations can take on the challenges that the future throws at them. By having the capability to innovate, the corporation also can respond to these threats and challenges to ensure the continued growth and success of its business.
This is by no means an exhaustive list of the benefits an organization can get out of corporate innovation. There are many more depending on the innovation initiatives and focuses of each organization.
Jumpstart your corporate innovation journey
One takeaway to keep in mind is that corporate innovation should bring new value to an organization.
It is a long process for an organization to build up its innovation capabilities but it is well worth it because of the new value it brings to the organization.
Are you ready to start your organization’s corporate innovation journey? Embiggen offers a variety of corporate innovation services.
Get in touch with us to find out more about our services and how we can build meaningful growth together.