The pace of technological change is accelerating, and established companies must adapt to stay relevant. The ability to respond at pace, be agile, and bring new customer-centric propositions to market is more crucial than ever.
Established companies such as Starbucks, Walmart, Huawei and Unilever are responding to this need for innovation through internal innovation hubs, digital factories, accelerators and incubators. While starting on the right foot, 90% of these innovation hubs fail before achieving anything tangible. Why? Because the innovation isn’t populated throughout the business as a whole.So, what is the secret to maintaining innovation in your business? Alignment. Your core business functions and internal innovation hubs need to talk to each other.
So, what is the secret to maintaining innovation in your business? Alignment. Your core business functions and internal innovation hubs need to talk to each other. Fail to do that and any initial investment into an innovation hub will be wasted. Your core business functions will also not undergo the change necessary to remain competitive.
Mistakes in mobility
The American car company Ford provides a clear example of well-intentioned innovation gone wrong. Ford attempted a digital transformation by creating a new innovation function called Ford Smart Mobility. The goal was to build digitally-enabled cars with enhanced mobility. Problems began when the firm failed to integrate this new innovation function into the rest of their business. Instead, it was seen as a separate entity with no synergies or integration to other units.
Ford spent vast amounts of money working on this new innovation function. Despite this, their attempt at transformation failed. Ford lost over $102m on Smart Mobility and saw their overall stock price drop by 7%. After attempting to decouple their innovation programme and core business, Ford’s failures became blatant. They lost on both fronts.
Turning weaknesses into strengths
Companies can overcome this challenge. Done the right way, established firms can even use their size and structure as an advantage to drive returns, despite this often being seen as a constraint to innovation.
Sustainable success depends on the relationship between the innovation hub and core business units. Innovation hubs offer flexibility, creativity and an unconstrained focus on doing things better and faster. In the core business of an established company, this is extremely difficult to replicate. Because of this, corporates must make sure that both innovation and core business systems are using their capabilities for mutual success.
Done the right way, established firms can even use their size and structure as an advantage to drive returns, despite this often being seen as a constraint to innovation.
Established businesses have a clear advantage over new entrants in the market through their brand recognition, customer base and infrastructure. Used correctly, these offer the innovation hubs of established organisations a clear leg-up over startups.
Despite these advantages, established firms still often fall short against new entrants. How can you fix this problem?
The two-speed solution
There is one solution to harnessing the strongest characteristics of both core businesses and innovation entities: working with a two-speed organisational model.
What does that look like? Picture a hamster wheel (the innovation hub) spinning in the middle of a ferris wheel in steady revolution (the core business). Innovation is initially cultivated within the innovation hub, allowing them to rapidly test, learn and identify any ideas that are likely to fail. The solutions proven valuable by the innovation hub must then be injected into the core business continually. This will accelerate the pace of transformation throughout the business. Equally, it serves as a crucial mechanism to test and learn within a safe environment.
This model safeguards against failed innovation and protects the core business resources in time and money. Armed with innovation of value, the core business can leverage critical assets such as brand image, distribution networks and existing customers; assets that new entrants lack. The innovation hub can then deliver its solutions efficiently and at scale. In other words, a win-win.
Aligning for answers
The success of this two-speed model relies on constant engagement and collaboration between the innovation hub and the core business. So, how do you achieve this?
- Agree on your innovation objectives. This will keep both parties’ strategy and assets aligned. Innovation hubs will focus on creative solutions that fully support the core business and will make sure the business keeps its assets ready to implement objectives.
- Aim for early engagement. We recently set up an innovation hub for our client, a large bank. The core business was brought to the table during the innovation hub design phase. Having the two entities in conversation from the outset made sure that the focus areas of the innovation hub fully complemented the work of the core business.
- Agree on your collaboration principles. We helped our client design a series of touchpoints throughout the innovation lifecycle to make sure that the innovation hub and core business were always on the same page.
- Define how innovation will be executed. Identifying unambiguous and efficient execution mechanisms early on will help prove that the innovation hub can drive value for the business. The implementation of the innovation is the bridge between idea and result: only successful implementation will certify the utility of the innovation hub.
Staying ahead of the market
Once the two-speed approach has come full-circle and the innovation hub has facilitated successful implementation, a new engagement model will develop. The core business will approach the innovation hub for help addressing its most challenging problems. The flexibility and creativity of the innovation hub can then provide disruptive innovation to drive valuable solutions.
To achieve success, both the innovation hubs and core businesses of established companies must work at two speeds but with one goal: to maximise innovation returns.
Many established companies are struggling with how to drive innovation into their core businesses at pace. We know this does not have to be the case, just ask our clients. Established companies can leverage their well-developed assets to deliver and scale innovation in a way that new market entrants cannot.
To do this, both the innovation hubs and core businesses of established companies must work at two speeds but with one goal: to maximise innovation returns. If they are able to do this successfully, established companies will be on the cutting-edge, maintaining their status as market leaders for years to come.
Are you interested in exploring your innovation opportunities? Get in touch with our team.