This Corporation Is Totally Wrong About Innovation

Last week i was invited by a large enterprise to attend their annual summit. The theme: Innovation.

 

The gist: The company is actually very progressive in it approach to innovation. They have an internal ventures group that funds innovative ideas from within, sponsored directly by the CEO and the executive team. Still at the end of the summit i told the CEO they are getting it wrong. Want to know why ? read below.

 

A few words about the company: thousands of employees, still managed by one of the founders. Many of the executives have been with the company since its early days so the entrepreneurial DNA is still strong. Two years ago they established an internal venture group, who’s charter is to find and fund innovative ideas from within. Every employee is entitled to submit an idea. The ones selected get a chance to spend part of their time developing it to a startup. This entire process is sponsored by the CEO and the executive team takes active part in funding and mentoring those teams.

 

Sounds like a fertile group for innovation, right ? C-level support, dedicated function, funds and time allocated. Wrong !

 

I bet that for every valid idea that one of the teams is working on, there is an existing startup with a working product killing that need. On the one hand  a startup who’s been working on that need full-time for a while, most likely with an existing product and some funding (so already went through some vetting). One the other hand a new team, still learning how to be entrepreneurs, working on an idea that has not been fully vetted part-time as part of a newly formed team. What are the odds?

 

I think what the company launched a great initiative from employee satisfaction and retention standpoint. It might even play well with customers, impressed by the investment the company is making to drive innovation. However, from results and return on investment (ROI) standpoint – Don’t expect much.

 

I advise many corporations on how to drive innovation.Many fail to recognize their key assets: access to clients, in many cases decision makers, and insight to their needs. Teaching entrepreneurship or investing in startups is not their DNA nor is it a core competency. Accelerators and VCs do a much better job at that. Knowing that a CIO has a need and connecting a startup that has developed a solution to address that need – that’s the holy grail. Your customers will see the corporation as a strategic partner, the startup will benefit from your distribution channel (sometimes way more valuable then any corporate VC’s funding) and the corporation might find a way to extend its portfolio.

 

My advice to the CEO at the end of the summit: get rid of t.e funds you set aside. Take the group managing the internal innovation fund and give them a new charter. 1. Have a dialog with your customers around their needs. 2. Establish relationships with accelerators to source startups addressing those needs.

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About shanishoham

After 14 years of General Management and incubating/scaling new businesses & organizations for enterprises (established a $55M mobile business and a $100M/400 employees global division), I became an investor Today I’m a board member/mentor with 5 incubators & micro-VCs and involved with many other private & public incubators around the world. I also founded a VC firm named 2020 and I'm a member with a number of angel groups so i get to see & work with many startups, innovation centers and other parties across the ecosystem. I’m an alumnus of the Stanford Graduate School of business - Sloan Master in Management program, a 10 months intensive program for 57 carefully selected experienced Executives and leaders from all around the world.

2 comments

  1. Thanks for the solid insight, Shani.
    How did he react?

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