As with many buzzwords, the term “innovation” can get thrown around so broadly that it almost seems meaningless. Add a business-oriented adjective beforehand and you’ve got yourself some certified, indecipherable jargon, right?
Enter: corporate innovation. This relatively young phrase is gaining traction as innovation itself trends, becoming a standard value of forward-thinking companies.
As entrepreneur Travis Sheridan, President of the Venture Café Global Institute, has pointed out, many corporations are beginning to recognize the importance of embracing innovation — but sometimes that translates to superficial efforts (Sheridan calls it “innovation tourism”) rather than meaningful engagement with experimental ideas or new talent.
So what does genuine corporate innovation look like?
In this post, we’ll dig into the meaning of corporate innovation and why it matters in today’s business landscape. And we’ll look at a variety of corporate innovation models, exemplified by some of the very corporations that have set up offices at CIC to immerse themselves in local innovation ecosystems.
What is corporate innovation?
You might be thinking that corporate innovation is simply innovation in a corporate setting — which is certainly true! But to really understand corporate innovation as a practice, rather than merely fluffy language, we have to look at how and why it gets used.
Corporate innovation refers to the intentional fostering of out-of-the-box thinking within corporate environments.
To achieve this, many companies set up satellite offices in coworking or other shared office spaces to get acquainted with startups in their industries and scope out potential markets and collaborations.
Beyond the built-in networking opportunities, these satellite spaces can also help corporations foster the mindset shift that’s crucial for growing an innovation practice.
When it comes to implementation, corporations might dedicate resources to experimental projects; set up programs to jumpstart creativity among staff; or partner with outside talent, organizations, and companies.
Why does corporate innovation matter?
Companies develop new things to sell, or variations of them, all the time. A brilliant idea is often what leads a company to success in the first place. But growth brings its own set of challenges.
Large and well-established corporations are particularly prone to slow change and getting stuck in their ways. They tend to build upon existing products rather than rethinking the wheel.
In today’s world, startups with fresh perspectives and backed by investment are finding opportunities to upend entire industries with new technologies — and business models.
Corporate innovation is an attempt to spot those opportunities first; if your business doesn’t adapt to changing circumstances, someone else will be more than happy to take your place in the market. Proponents of corporate innovation like Tendayi Viki will often cite the downfall of Kodak, whose scientists developed digital technology which the company refused to build into their business model out of fear of cannibalizing profits from their photographic film.
In recent years, a growing number of corporations have worked to preempt similar downfalls with intentional innovation plans.
Take Stanley, Black, and Decker, for example. When the commercial and industrial tool supplier began their corporate innovation initiative in 2016, the $13 trillion, publicly traded company had just come under the leadership of CEO Jim Murray. Taking the helm of a 175-year-old business in a rapidly evolving marketplace, Murray recognized the need for outside innovation in securing the company’s next 175 years.
“We wanted to disrupt ourselves before another company could,” says Dina Routhier of Stanley Ventures, the venture capital arm of Stanley, Black, and Decker, based out of CIC Cambridge.
How corporate innovation works
The first step in any corporate innovation strategy is a vision.
Once your company understands its goals, then you can design a concrete plan with market conditions in mind.
As Executive Director of Captains of Innovation, a partnership with CIC, Carrie Earle Allen helps corporations define their innovation goals and then works with them to develop and implement the best strategies for achieving those goals.
Wondering what actions a corporation can take to jumpstart an innovation process?
“Corporations can benefit from bringing outside ideas in through pursuing open innovation strategies such as hosting innovation events, forming startup partnerships, and issuing calls for proposals,” says Allen.
Let’s dig deeper into three examples of corporate innovation strategies:
1. Corporate venture capital arms
We talked about why Stanley, Black, and Decker embraced corporate innovation — now here’s how. The company’s VC arm, Stanley Ventures, invests in startups — ready to finish development or begin scaling — whose products compliment their own.
“We don’t want any control,” Routhier explains, “but we want to see that company’s technology flourish so that we can utilize it in our product offerings.”
The corporation has dedicated venture teams, groups of about ten employees, who work with those selected startups to pilot their products. Eventually the early stage project will then get transferred from the venture team to the main corporate teams that use their funding, distribution networks, and marketing prowess to take the new product to market.
Why does this model work? One thing corporations have, and startups desperately want, is resources. By allocating some of those resources to fund startups with game-changing products, corporations can bring potential competitors into the fold.
Routhier puts it simply: “The best corporations realize they can’t go at it alone.”
As a result, more and more corporations are setting up venture capital funds to form mutually beneficial relationships with promising smaller companies.
2. Internal innovation labs
Just because corporations might struggle to innovate doesn’t mean people who work at them lack inventive ideas. In fact, corporate talent can make a great source for companies’ next initiatives.
The problem is that, in a corporate environment, ideas that diverge from the company’s existing business model may hit a wall: they don’t fit into the time frame of quarterly goals, they seem too risky, there’s no designated staff or budget to foster them, and so forth.
With internal innovation programs, corporations establish teams or offices whose very purpose is to investigate and develop those smart ideas with no home in the status quo.
One such program is iHub, a startup-like innovation lab at car manufacturing giant General Motors (GM). iHub empowers GM employees to innovate by providing them with company resources — money, access to a makerspace, and a percentage of their work hours — to turn their napkin sketch ideas into full-fledged products.
Imagine someone who works on brakes all day; then she comes up with a concept for improving car seats. In a corporation as large and compartmentalized as GM, that employee’s manager would be unlikely to assign her to an experimental seats project. iHub provides an opportunity for her concept to materialize, rather than the idea getting lost and the company losing out on its potential benefits.
“It’s really about moving faster,” says Will Dickson, iHub’s University Innovation Champion at MIT. “GM is realizing, especially when you see all the news about autonomous vehicles and electrification, that this industry has become sort of a race.”
Towards that end, iHub helps connect people across the organization to allocate resources and expertise where they’re needed, as well as brings employees into their makerspace for a portion of their work week to build out their ideas. iHub also conducts internal innovation challenges in which employees go through design thinking crash courses to stimulate new thought paradigms.
“That little bit of empowerment is really all it takes,” Dickson says, “because we believe very strongly that everyone at our company has it in them to innovate.”
3. Hackathons and pitch competitions
Perspective is everything.
Sometimes it’s people looking at an industry or a specific problem from the outside who come up with the most stunning insights and creative solutions. That’s why corporations are increasingly turning to hackathons and pitch competitions to find collaborators in the startup world.
Here’s what Umar Aziz, Chief Innovation and Technology Officer of the CIC-based innovation delivery agency Creative Chaos, has to say about the value of startups for corporations:
Startups by nature are driven with a philosophy of experimentation. Founders have already put their life savings and houses on mortgage to do what they believe in, and they’re not scared of making mistakes. So when they come into a corporate environment, they’re willing to ask tough questions, identify operational inefficiencies, and identify opportunities.
For corporations, hackathons are like highly concentrated R&D sprints. For startups, participating in a hackathon or pitching a potential corporate partner is a networking and visibility opportunity at the very least, but there are typically material benefits for top performers.
Multinational pharmaceutical and life sciences company Bayer, which maintains an office in CIC’s Kendall Square location, hosts its G4A Generator to deliver self-care solutions to customers. Applicants vie for the opportunity to pitch in front of a panel of industry leaders, and winners walk away with a Letter of Intent to close a deal with Bayer.
It’s an exchange of expertise and IP for resources and major market potential.
CIC frequently hosts hackathons such as Hacking Dermatology, co-sponsored by a handful of nonprofits, university initiatives, and Danish pharmaceutical company LEO Pharma. Top teams are awarded cash prizes and the opportunity to compete for additional grant funding of up to $50K.
“It’s a great opportunity for large organizations to take advantage of these founders and visionaries,” says Aziz, “and to collaborate on projects that these enterprises themselves would not be able to because they don’t fit in with the company’s roadmap or the philosophy of the organization itself.”
In any of these models, the key is to combat your company’s own limitations with structures that provide complementary aspects to your core business.
Expanding innovation capacity in the present helps to fortify corporations for future markets.