Doing more with less

How does Covid-19 impact the plans of corporate innovation teams? And why does it matter to startups?

In this research we've set out to identify and analyse the impact of Covid-19 on corporate innovation. 60 corporates participated in an effort to identify the impact of the corona crisis on innovation team size, innovation priorities, investment budget, engagement with startups, portfolio distribution across startup development stages, areas of innovation and other innovation parameters. We've also looked at the red threads in vision, challenges and opportunities that innovation leaders see for 2020 and 2021. 

Our main conclusions:

1. Publicly listed companies are hit harder in the size of their innovation teams than private run companies. The impact is bigger in companies with >10.000 employees.
2. Companies with big venture portfolios (>50 ventures) are less affected in budget
3. Almost 70% report a large impact in the engagement they have with startups
4. Financials and the energy sector report a bigger impact compared to other sectors, while the hard technology industry is least affected.
5. Innovation activities focused on IoT, AI and Blockchain report lower impact. 
6. 40% report more focus on short term and in general 1/3 feels their innovation horizon is heavily impacted

Please check the slides for the full research summary or read my take on this below.

Why Enterprise Companies Matter to Startups

For our team, working with hundreds of startup founders across Europe on a daily base, the impact of Covid-19 was very clear, very early: corona has shortened the runway so vaste and immediate that for most startups only a vertical launch would give them a chance to fly, to stay with the metaphor. Some of our startups active in corona testing, lunch-delivery and online collaboration did just that.. they took off like a rocket! But for most startups revenue growth as well as Angel/VC investment is just a huge challenge in 2020. Although a shake-out is healthy to separate the weak from the strong, across the board its just a huge blow to entrepreneurial talent working on world-changing ideas, teams that now risk an immediate full stop.

Corporate-startup collaboration can be an enormous lift; finding that one pilot customer, getting free access to a mass distribution channel, signing the proof of concept that pulls that one investor across ... small steps for an enterprise can mean the difference between life and death of a startup.

Why Investing in Innovation is Smart

Just as we started up our research I came across this post by Angelique Plugge, highlighting insights from previous crises researched by the Erasmus Center for Entrepreneurship. It proved from previous crises that listed companies who dared to increase their investment in innovation, saw a 300% increase in share price, after initial negative response from the market, whereas the cost-cutters recovered much slower and stock prices grew only 57% in the years after.

Doing More with Less

When asked about their expectations for the second half of 2020 and 2021 and 55% of respondents say they expect to have the same ambitions with less budget and resources, 44% expect their investment budget to decrease and 43% say they expect to be focusing on later stage startups. It seems in this crisis innovation teams aren't at risk of being cut out of the organisation entirely, they just have to perform better.

“Now is the time for innovation teams to free from innovation theatre and to show how they can actually deliver concrete value to the business” 

Mario Zorn, Head of Product Development & Innovation at Airplus International 

Speeding Up Agile Transformation

This particular crisis helps innovation teams to make their case for transformation. In previous research from 2018 we had found that innovators mostly blaimed company culture for blocking innovation. Most innovation leaders we've asked now see the biggest opportunities in speeding up digital and agile transformation, as change is no longer a luxury choice.

Innovation leaders often need to fight senior management in the silo-ed organisation (that funds them) to explain its not the brilliant idea coming from the top of the pyramid that sparks innovation but the delegation of ideation to team level and the more servant and structuring leadership style typical to agile leadership. Those conservative forces just don't work that well when everybody works from home. Zoom is an equalizer. Along with the needed digital tooling to support innovation at scale and with the benefits of collaborating online, the crisis seems to be playing in the digital cards of innovators.

Whats next to the data? To better understand the individual challenges innovation leaders face and to connect corporate innovators from different industries, we'll be hosting a virtual peer group meetup June 9th exclusively with and for corporate innovators:

LEAN INNOVATION MEETUP Corporate Innovation in times of Corona 

Tuesday June 9th 06:00pm - 09:00pm CEST

We will unpack the results of the research in which 60 companies participated. Alexander Osterwalder joins us with new perspectives on Building Invincible Companies, his new book that's been just released. With the research participants we will break up in smaller peer groups to connect and discuss in-depth with each other.

For the full program and free registration please register at https://bit.ly/LIMcorona