How can your medium/large company innovate cheap and fast?

Are you sure your company will survive the AI and next-tech revolution? How long does it take your company to launch a new product? How many innovative product launches were done in the last decade, year or month? Even for Google, Meta/Facebook or Amazon, it is unclear if they will lead the AI revolution, so how does your company compare to them? Are your current products still growing revenues strongly or do you need to work on the next-generation of products?

Why is innovation critical?

Look at the car industry as a great example. Out of nowhere came an American competitor who made internal combustion engines irrelevant. When existing car manufacturers asked their customers in 2018 if they wanted an electric car or a robotaxi, the answer was very clear: “NO!!!”. Fast forward to 2024. BYD, Xiaomi,... are disrupting the lower end of the market with cheap and luxury EVs which are beating internal combustion engines, while Tesla and Google are getting closer to self-driving robotaxis that make car ownership irrelevant. The traditional car brands are unlikely going to survive this innovation crunch.

Why can medium/large companies not innovate cheap and fast?

Most companies who have been around for over a decade have seen their innovative founders leave the company and have new management focusing on operations and efficiency. The skillset to create a new business out of nothing and take it to $/￡/€ 1M is totally different compared to scaling from 1B to 10B. Operational focused management is likely to listen to customers who do not want an EV car or robotaxi because they are inferior to the current product family. The innovator’s dilemma has caught some of the best managed companies, e.g. Kodak, Blockbuster, Nokia and now companies like VW, Toyota, Ford,...

Large companies are organised by skill set, e.g. the CFO oversees accountants and other financial experts. To create a new venture you need many different skills but only one or two of each. In large companies to bring these different skills together, define a common strategy, get a budget,... takes months. Add an innovator’s dilemma and you can easily see why large companies fail.

The other example of innovation failure is the telecom industry. Companies like Vodafone, Deutsche Telekom, Telefonica, AT&T, NTT,... have spent billions on launching new products. All to see the number of revenue generating products in the last two decades to go down from SMS, calls, data to only data. Telcos launched hosted email, portals, social networks, app stores, cloud computing, telecom APIs, IoT platforms,... and are probably working on generative AI solutions today. The telecom industry has made the same mistake over and over again. They focused on me-too products whereby a budget was allocated to making a copy of a successful product another company launched, e.g. an app store. Most of the products they launched however where in the platform category where the winner takes most of the market, e.g. Apple’s App Store and Google’s Play Store, Amazon/Microsoft/Google Cloud,...?To be successful, you need to skate towards where the puck is going, not where it currently is.

As an ex-chief innovation officer of a FTSE30, launching innovative products was possible, e.g. SmartClaim won the award for best claim technology platform of 2018, world’s first reinsurance on blockchain, the workplace pension team won the award for the best pension technology provider of 2020,... However scaling inside the realms of existing business units is very hard when dealing with technology platforms which disrupt established power structures. Office politics is the main reason why corporations cannot innovate at scale.

How to get to cheap and fast innovation?

No existing business likes to fail. However if you cannot manage the risk of failure, you cannot innovate. Startups are companies purposely built to reduce the risk of failure. Large companies have funds, revenues and customers. Startups are looking to get all three but they often can provide the missing part large companies don’t have, i.e. innovative new products. By combining both, large companies can innovate cheaply and fast. The large company shares industry problems with the innovators who now create quick prototypes on how they would take different approaches to solve them. Customers are invited to an innovation event where they are put into the right mindset and exposed to 5 to 10 different innovative approaches. Even if customers don’t like 90% of the new approaches, that is a big win for the organising company. These are failed experiments which hardly cost anything to the corporation. If they would have built 9 internal projects that failed, the total cost would have been into the many, many millions. The customers can put small monetary incentives to see a more personalised prototype come to life. The selected startups now have access to customers that would never have selected them directly. The larger company can either make seed investments in the startups their customers like or pre-order 70% of the remaining capacity. The way this second model works is that instead of charging the cost of building a new product to the first 1 to 3 customers, you divide the cost over 10 customers. The large company looks for the remaining 7, while the startup already can launch with the first 3. In exchange, the large company gets a preferential reselling agreement and a minority stake. Both sides win. The startup has enough funds to launch a platform and the large company invests into a new platform which it knows already three of its customers have bought into. When 10 customers are on the platform, the large company can either keep on investing or buy the startup. Either would be a win-win for both sides.?

If the corporation would do the same internally then they would probably spend at least 10 times more, be slower and kill the new business with processes which apply to its old business but are too complex for a nascent business. Even if the innovation event does not lead to anything, the corporation comes out as trying harder than competitors. However imagine if the opposite happens and the innovation event is the start of a complete new industry! Please reach out if you want to get more details on how an innovation event for your industry could look like…??