According to McKinsey, 80% of executives believe their current business is at risk of disruption while 84% believe innovation is important and the key to averting this outcome. However, a CB Insights survey of senior corporate strategists across the world found that 78% of innovation portfolios are allocated to continuous innovation (the small stuff,) instead of disruptive risk (the big stuff.) These stats paint a picture of senior executives who know what needs to be done but face challenges in accomplishing these tasks.
What these business leaders seek to achieve is corporate innovation, a concept that has become a major transformational driver for enterprises. Leaning on the four pillars of corporate innovation – a. Build (research & development), b. Partner (business development), c. Invest (corporate venture capital), and d. Buy (mergers & acquisitions), corporations are today seeking to reinvent themselves in the image and likeness of disruptive Silicon Valley-type startups. Questions, however, still abound as to how to achieve such transformative innovation.
In Day 5 of Silicon Valley Innovation Center’s Leading Digital Transformation program, four interactive sessions led by thought and business leaders sought to answer some of these questions. The first session of the day was focused on the importance of corporate venture capital in corporate innovation.
Case Study: UL Ventures – Corporate Innovation through Corporate Venture Capital
UL is one of the oldest safety testing companies in the world. In operation for over a hundred years, the company has gone through multiple transformations to keep up with changes in the market. The current transformation, says Mathieu Guerville, head of the company’s corporate venture capital arm UL Ventures, is in response to the explosion in digital technologies.
“The safety industry has evolved from people being worried about getting electrocuted by their kettle to people worrying about cyber threats,” he says, “and so having been stuck in its ways for all those years, UL has had to redefine what safety means and what it means to assess safety.”
Corporate VC, however, is not a silver bullet that magically infuses an innovation culture in an organization, he argues. While it can introduce exposure to startups and the startup culture of innovation, organizations must be ready to rethink their corporate culture while remaining true to their core mandate.
For instance, UL Ventures only looks at startups and innovations that can support and enhance its core mandate of safety testing. Mr. Guerville added that for corporations to benefit from a corporate VC fund, they must cultivate a culture of curiosity, which will help them find and partner with the right innovative startups working in their industry or niche.
Silicon Valley Digital Transformation Best Practice – Western Union Digital
Western Union is another traditional company that has been around for over a century. In 1861, Western Union led innovation by sending the first transactional telegram. By 2017, Western Union began a digital transformation journey to upgrade its legacy money transfer systems to match modern technological developments.
In the day’s second session, a senior executive from Western Union was on hand to shed light on how the company has managed to reinvent itself as a digital-first tech company.
To achieve this transformation, WU created an innovation team – the Western Union Way team or WU Way team. This team, which enjoyed executive support, was mandated with rethinking functional capabilities of departments and teams within the organization.
By building an innovation culture from the inside out, WU has been able to identify and transform outdated components within its operations. In this way, WU is working towards outpacing rapidly advancing money transfer startups like TransferWise, World Remit, Xoom (a PayPal company), Venmo, and Zelle.
Accelerating Corporate Innovation through Innovation Teams
Building on the Western Union talk, Tristan Kromer, founder of Kromatic, a lean startup consultancy, focused on exploring the benefits of innovation teams within a corporate innovation setting.
To spearhead innovation, corporations usually constitute an innovation team drawn from both internal and external sources. If your organization takes this route, how do you ensure the innovation team delivers? Here are some key factors to consider:
- Focus the team more on transformational (disruptive) innovation and less on incremental, routine innovation.
- Get the right people on the team – Forget about titles and seniority. Instead, look for truly innovative thinkers and doers within or without the organization.
- Offer solid incentives for innovation – Many enterprises fail their innovation teams by treating innovation as a routine job and not offering incentives either to the team or to employees for hitting innovation milestones.
- Put real dollars on the innovation table – Innovation is risky and so requires financial risk-taking. To hedge against loss, use traction-based metrics to fund promising innovations.
- Mandate the team to create an organization-wide innovation culture – While the team may be effective, long-term transformation can only be achieved if the entire organization absorbs the innovation culture into its DNA.
Organizational Behavior in High-performing Companies
Strategic alignment brings together business divisions, staff members, processes and culture, organizing them to achieve the organization’s core mandate. In an article in the Harvard Business Review, Jonathan Trevor, Associate Professor of Management Practice at Oxford University’s Sa?d Business School, identified strategic alignment as the key differentiator between high-performing companies and the rest.
To achieve this in a digital-first economy, companies must use transformational technologies such as Enterprise Resource Planning platforms (ERP) to align their organizational units. As such, leading organizations are those that see the potential benefit of digitally transforming in this way from the core outwards to not only remain competitive but break into new levels of productivity.
To align the organization, senior leaders must first focus on optimizing for inefficiencies before undertaking radical transformation. Organizations must also design the innovation journey as a blueprint. The session concluded with the speaker urging participants to not only focus on the tip of the spear (disruptive digital technologies) but also on the entire spear (business divisions, staff members, processes and culture).
Day 5 Conclusion
At the end of day five, participants left with critical insights on what corporate innovation is and how to implement it successfully. Illustrations from UL and Western Union added a real-world context to lessons learned on the day, helping the participating senior executives see how corporate innovation can work for their organizations too.
As the last day in the program, Andy Zhulenev, vice-president, Silicon Valley Innovation Center offered participants a summary of key takeaways while giving closing remarks. With the program over, participants left with ideas, insights, experiences and the resolve to effectively lead digital transformation in their respective businesses.