Corporate Innovation: A Comprehensive Guide

What is Corporate Innovation?

Corporate Innovation is the process of building and delivering a product or service that unlocks previously unknown value.

A company’s innovation strategy might focus on continuous or discontinuous innovation. However, to consistently deliver innovative products, the strategy needs to be a blend of both.

Corporate continuous innovation bets on product teams gradually improving their existing products to increase the value delivered to customers. This leads to retaining or increasing market share and building a solid competitive edge.

Market-dominating companies naturally avoid disruptive innovations, as they risk cannibalizing their successful products. However, all products have a limited shelf life and will eventually be outplaced. Let’s see how a company can remain competitive and create new and better products without disrupting its existing product portfolio.

Why is Corporate Innovation so Important?

Increasing Customer Value

Delivering successful, innovative products brings more value to customers, which is the main prerequisite for a company's health. By pushing the boundaries and delivering more than expected for your customers, you ensure their problems are not just solved, but customers are delighted. That’s one of the pillars of a strong referral effect.

Competitive Advantage

Creating a strong innovation process on its own is an unfair advantage that gives your business a powerful competitive edge. While competitors may copy the new products you come up with, it’s hard for them to replicate the innovation process that you built.

No Other Way Out

Take that, and another product will eventually displace your market-dominant product. What can you do to ensure your company’s continued success? You can be the one that builds that new disruptive product.

While a company can count on improving its existing products for a while, such an innovation strategy is vulnerable and will eventually lead to its demise. Just look at RIM, which produced Blackberry or Nokia. Even though they were market leaders in their segment, both companies missed the disruptive innovation wave for smartphones.

Types of Corporate Innovation Models

1. Closed Innovation

Closed innovation relies on internal talent and resources. Think of it as your company’s own think tank. This is where dedicated teams focus on developing groundbreaking solutions. The model includes:

• employee sourcing,
• dedicated innovation teams,
• internal corporate accelerator programs,
• hackathons.

During my days at Coursera (NYSE: COUR), I was amazed to see how much creativity and innovation can happen in just a week in the form of a hackathon (in Coursera, they are called make-a-thon on purpose). Brand-new products and programs are designed, built, and sometimes delivered in just five working days.

Hackathons are powerful engagement mechanisms for employees. They unlock and foster creativity, collaboration, and unconventional thinking. This makes them a great tactic for fostering a culture of innovation in your corporate environment.

Building dedicated innovation teams is a deliberate strategy for innovation that can overcome the Innovator’s dilemma by creating healthy internal competition.

2. Opened Innovation

Open innovation, on the other hand, taps into external resources. This model includes:

• investments and acquisitions
• innovation outposts
• external corporate accelerators.

It’s about leveraging external talent to stay ahead of the curve. However, there are some risks associated with acquiring a company in the context of innovation that need to be managed. Below some important things to consider:

• Cultural Misalignment.
  This is can be the case especially when a big corporation buys a small innovative startup. During such processes, a huge risk is present. Often the larger acquiring company will overkill the innovation process of the smaller company, although this was among the reason for acquiring the company in the first place. Caring out a culture assessment prior to the deal is one way you can reduce this risk.

• Integration Challenges.
  The acquired product is useful only if it can deliver value to the acquiring company's customer base. This means thre should be some existing synergy between the two companies' product portfolios and that it should be technically feasible to integrate them in a meaningful way. If that fails, the acquiring company is just acquiring the smaller company’s revenue and employees, which might bring the expected outcomes.

• Loss of Key Talent.
  An acquisition is a big change on both ends. As with any significant shift, a proper change management strategy needs to be in place. Implementing such strategy you can ensure the continuity of both businesses. On the other hand, it’s important to note taht losing key talent can also block the reformed company's future leverage of the innovative product.

• Overvaluation and Unrealistic Expectations.
  The acquiring company might overestimate the innovative potential of the acquisition. This can eventually lead to disappointment if the acquired company's capabilities don't meet expectations. That’s why a rigorous due diligence process is a key activity before moving forward with a deal.

Being part of both an acquiring and an acquired company - I can appreciate the level of mindfulness from both sides during those moves.

5 Steps to Implement Corporate Innovation Programs

1. Creating an Innovation Strategy

The first step is to build the master plan for your innovation engine. Here are some questions you might want to ask yourself:

• Are you betting on open or closed innovation? Or you could create a mix of both.
• What industry trends arise that you need to leverage to unlock innovation? - AI is one great example. Currently, many companies are thinking about how it can fuel their innovation efforts.
• What are the key ingredients needed? Maybe it’s a very niche type of talent, a partnership network, or something else. What is it that would put you in the best position to innovate?

2. Building an Ecosystem

Corporate innovation rarely happens in a few isolated tiger teams. More often than not, the whole company, its partners, and even customers have a role to play in the innovation effort. Many corporate companies have insider programs for key partners and customers to support this effort. This includes fostering a culture of innovation internally.

3. Empowering an Innovation Team

Building innovation requires more than a fancy vision and a poster on the wall. It is completely frustrating to be tasked with an ambitious objective and left with your hands tied without the necessary resources to achieve it.

This can easily lead to demoralization and burnout, eventually doing more harm than good. Such teams need:

• Clear objectives and definitions for how success looks like
• Fast and clear decision-making process
• Autonomy to act independently within the scope of their research and development.

4. Integration with Core Business

The innovative efforts should start in isolation to overcome the Innovator’s dilemma. However, there should be a clear path for how this product will be embraced by the whole organization when ready for prime time.

The incentives and objectives of all teams, especially sales and marketing, must be adjusted. This is an important step to ensure that the innovation projects are properly supported.

5. Continuously Scaling and Sustaining Innovation

Once a discontinuous innovation becomes mainstream, it needs to switch to the same continuous innovation process. This is crucial if you want to keep and increase the momentum it has created.

3 Successful Corporate Innovation Examples

Amazon Lab 126

Amazon Lab 126 is a prime example of closed innovation. Founded in 2003, this dedicated innovation lab has produced groundbreaking products like the Kindle, Amazon Fire, and Amazon Echo. The lab's focus on innovation has helped Amazon stay ahead of the competition.

I can only imagine the internal discussions that took place around the Kindle, for example, which threatened the revenue from paper books—the largest product category at the time!

Disney's Acquisitions

Disney’s acquisitions of Pixar, Marvel, and Lucasfilm demonstrate the power of the open innovation model. By acquiring these companies, Disney has leveraged their creative talents and intellectual properties. This, in turn, has resulted in the production of blockbuster hits and significant market growth.

Nike’s Innovation Kitchen

Nike’s Innovation Kitchen is a specialized division where designers and engineers collaborate to create cutting-edge athletic footwear, apparel, and equipment. This lab focuses on material science, biomechanics, and sustainable design.

The Innovation Kitchen has produced iconic products like the Nike Air series, Flyknit technology, and self-lacing shoes like the Nike Adapt. These innovations keep Nike at the forefront of athletic performance and fashion.

Wrap-up

Corporate innovation is no longer optional—it’s essential for long-term success. By understanding the different models and strategies, you can create a robust corporate innovation strategy that aligns with your business goals and drives growth.

Ready to take your corporate innovation to the next level? The Icanpreneur platform helps product leaders establish a structured approach to innovation in their organization by following a proven methodology for getting from an idea to a product-market fit.

This can help your organization achieve a comprehensive innovation program by:

• giving a standard process to your innovation teams.
• supporting hackathon participants who are not used to validating innovative ideas and want the maximum from their sprint efforts.

To find out more, start your free trial.