Innovation has traditionally been associated with startups and small enterprises given their nimble sizes and better adaptability to change. It might have been the case some years ago; however, nowadays, the increasing number of startups and their novel approaches to business models impacts the way large enterprises design their business strategies, incorporating more innovative approaches.
In this regard, no longer innovation is solely a startup ‘thing’. Larger and thus less flexible, corporations, however, strive to stay abreast of venture-backed startups that are transforming customer expectations and shaping new business models; and this poses a tangible risk to traditional business models adopted by corporations.
Bill Gross, Idealab’s co-founder, mentions in one of his interviews that ‘it’s harder to grow big and still remain innovative’ and ‘there are very few leaders who can balance the short term and the long term together, and also know how important that growth is, and have a sufficiently long-term horizon that they’re willing to sacrifice things’. Nevertheless, despite the need for such sacrifices and tough decisions, more and more established companies are now going in this direction. Let’s look at the key innovative strategies corporations pursue to better understand how they face the innovation challenge ‘imposed’ by startups.


1. Establishment of Innovation Centers of Excellence

Any innovative idea can ‘blossom’ but only if it’s ‘planted’ throughout the whole organization and not only within a single group of people inside a corporation. To this end, more and more corporations are nowadays establishing multidisciplinary groups that spark innovation and propagate the gained knowledge throughout the whole company. Creating such a center of excellence is a widely executed strategy, and it’s especially popular among various retailers and consumer packaged goods companies.

2. Creation of Dedicated Innovation Teams

Another effective strategy to boost innovation in a corporation is to create innovation teams inside the full-time staff within the company. Each team’s primary objective is to come up with novel business ideas, develop innovation strategies, manage and enhance innovation programs. In fact, CEOs of such companies (for instance, MasterCard, Hallmark and BMW) are experts of internal communications and change agents.

3. Hosting of Startups (Internal Accelerator), or Establishment of Corporate Incubator

To bring a flow of fresh air into the corporate world, big companies sometimes host startups, allowing them to settle and create at their physical locations. In many cases, they also provide funding, consultancy and other benefits, such as one-day hackathons or even involvement in long-term programs.
It’s a win-win strategy, indeed. On the one hand, startups get financial assistance and experience from older (and well-to-do) companies, and on the other – corporations draw on inspiration and novel ideas from smaller and more agile companies. Vivid examples of corporations implementing the strategy are Munich-based Allianz Digital Labs and GE Garages.


4. Partnership with Third- Party Accelerators

Besides hosting small-sized enterprises, large companies, such as Plug and Play, Singularity University and Runway, collaborate with external accelerators to provide funding or sponsorship in exchange for ties with startups and integration options. To this end, corporate innovation specialists start working in the offices of an accelerator to strengthen links with local startups. Unlike, for instance, Innovation Outposts (the next strategy discussed in the article), which are run by a company’s employees, the External Accelerators are managed by third-party institutions.

5. Establishment of Innovation Outposts

Trying to ‘spice up’ traditional business models with novel approaches, outside corporations set up physical offices, for instance, in Silicon Valley or other innovation hubs, and staff them with corporate innovation experts. The latter are assigned to stay tuned in to the novelties on the market, set up ties with local startups and integrate programs into the corporate headquarters. As we mentioned above, an Innovation Outpost is managed by company employees, who sometimes host partners, events and startups thus taking up functions of an Internal Accelerator. Swisscom, Vodafone, and Nestle are to name a few that have set up Silicon Valley outposts.

6. Implementation of Intrapreneur Programs

Many companies prefer leveraging their own resources to boost innovation, rather than leaning on the outside sources. They set up teams of so-called ‘intrapreneurs’ – those with entrepreneurial mindset inside an organization – giving them necessary resources and platforms for creation and innovation. Thus, companies invest in their employees’ passions to unlock their creative potential and at the same time seek new ways to improve customer satisfaction, enhance existing products or even launch internal startups within the company. Perhaps, Adobe’s Kickbox program is the most popular intrapreneur program nowadays.

7. Acquisition of a Startup

Finally, a more radical strategy includes acquisition and integration of a startup. It’s the most expensive way of innovation, indeed. However, rather than building innovation from inside with vague outcomes, a company can purchase an already successful startup and help it develop faster. This is what Unilever did in July this year, acquiring Dollar Shave Club startup for reportedly $1 billion.

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In conclusions, big companies have reconsidered their views on innovation, challenged by startups. An increasing number of renowned large companies, such as Idealab and Unilever, are looking to integrate innovative ways into their business models. Some of them go for employing their internal resources opening intrapreneurship programs or setting up dedicated innovation teams, while others opt for external sources – such as collaboration with Third-Party Accelerators Further still, others acquire already established startups to rev up the process.
In every case, innovation has stretched out of being the prerogative of small and agile companies: it’s become a top trend for bigger names who make their organizations hotbeds of innovation, too. Reconsidering old business models is a thorny path; yet it’s the only effective and extremely rewarding way to bring change and innovation into the corporate world, often considered as dull and stagnated.
What do you think of the innovation strategies described above? Have you used any one of them in your company? Feel free to share your thoughts on the comments section below. 1-650-274-0214