The Innovation Game: How Companies are Winning in an Era of Digital Darwinism

“We must increase sales and market share to succeed in the future, but we can’t change how we work or approach markets.” – Said no successful entrepreneur ever

Forty percent of the companies that were at the top of the Fortune 500 in 2000 were no longer there in 2010. There’s a reason for this and it’s called digital Darwinism.

With tech startups rapidly eating into traditional sectors, large organizations face an increased pressure to innovate. The challenge is that traditional innovation approaches aren’t agile, fast or empowered to innovate in a real-time world.

The weaknesses of traditional innovation approaches, which in of itself almost appears as an oxymoron, have led some organizations to explore new models for innovation.

Over the last eight months, Jerome Buvat of CapGemini Consulting and I studied 200 of the top global companies, 309 innovation centers, and also met with scores of executives who are running these new labs. The result is a one-of-a-kind report that’s now available on Slideshare, “The Innovation Game: Why and How Businesses are Investing in Innovation Centers.”

In this new research, we set out to understand…

1) Why innovation centers, labs and teams prevailed over other options.

2) How they were funded.

3) What objectives and success looks like.

4) Where these centers are located and their primary technology focuses.

5) To what extent they’re able to affect HQ performance, models and culture.

6) Their vision and goals for working with startups.

7) The presence they aim to establish within startup communities.

8) The challenges and opportunities ahead.

Through a series of interviews and secondary research methods, we uncovered an incredible array of innovation efforts that range from mere exploration and observation to complete transformation and investment in one or several innovation centers around the world. What’s clear is that the importance of innovation cannot be understated.

Report Highlights

38% of the leading 200 companies have set up innovation centers in a global tech hub.

The US and Europe have the largest share with 29% of total innovation centers respectively followed by Asia at 25%.

Silicon Valley is the most attractive area to locate an innovation center for leading organizations – 61%of companies have established one or more centers in the Valley. But many more hubs are emerging –the top 10 cities in our analysis represent only 35% of total innovation centers.

The most popular areas of research for innovation centers remain well-established technologies such as mobility (63%) and big data/analytics (51%).

Less mature technologies, including 3D printing (5%), virtual reality (13%) and robotics (13%), are currently less of a research priority.

Innovation centers help to accelerate the generation and implementation of new ideas, attract talent, drive employee engagement, and establish partnerships with startups.

Companies Invest in Innovation to Stay Ahead of Competition and Markets

In our research, we found several reasons why companies take formal steps toward building an innovation infrastructure. The most common reasons are as follows:

Culture: Traditional business cultures are typically risk averse. Building a culture of innovation introduces an entrepreneurial spirit to the organization, which unlocks new thinking and approaches to existing problems while also unlocking unforeseen opportunities. Culture also represents a challenge in some cases. When innovation operates in either a silo or independent satellite, the benefits of a culture of innovation are frequently limited to their environments. The ability to permeate the organizational culture at large is limited without the support, reinforcement and practice of the leadership team.

Talent: Innovation centers or teams are strategically placed to recruit qualified individuals to fill expertise gaps within the organization as a result of new needs and roles driven by the digital economy, e.g. data scientists, researchers, digital sales and marketing professionals, software and systems, developers, engineers, information security and agile IT professionals, hackers, etc.

Startup Investments and Partnerships: Businesses are assigning scouts to identify new opportunities for investment, partnership or acquisition in hotspots around the world. More evolved organizations are building accelerators to nurture investments, investing in existing venture funds or starting corporate owned funds to take partial ownership in startups with complementary or competitive technologies.

R&D: While hotspots exist around the world, certain areas excel in fostering innovation related to particular fields and technologies. Organizations are opening labs in these areas to plug into local communities to inspire creativity and also recruit leading and capable minds to accelerate new products and competence. On the research side of innovation, many companies are seeking to better understand behaviors and expectations of digital customers and employees, investing in technologies and tapping local experts to test and learn.

Community: Whether businesses open satellite offices, accelerators, invest in VC funds or take the Disneyland tour (visiting Facebook, Twitter, Tesla, etc.), many companies seek to become part of the local startup or innovation community. Nestle, for example, opened a small hub in Palo Alto to host Nestle executives from its portfolios of companies in Silicon Valley. Typical engagements range from tech tours to bespoke summits where local startups and experts are invited to speak to organized startup pitches and demonstrations that highlight new applications and possibilities.

Innovation Needs Purpose, Underlying Support and Autonomy

In our report, we advise that for organizations seeking to move away from a traditional innovation model, investment in physical centers can deliver huge potential business returns. However, their purpose must be clearly defined and well aligned to the business’ needs.

To deploy successful innovation centers, the report recommends the following strategies be employed:

1. Define a clear purpose.
2. Create a strong governance model, with senior leadership support, to implement innovations across the ?enterprise.?
3. Have an optimal focus – neither too futuristic, nor too close to current business operations .?
4. Closely involve business units to avoid isolation.
5. Create a truly cross-functional team that thrives in both structured and unstructured environments.
6. Operate with a degree of budgetary freedom, but know when to abandon projects ?
7. Work with a diverse group of partners in the innovation ecosystem, but use sound judgment when ?selecting them.

For the world’s largest organizations, innovation has never been more important – or more difficult. We find ourselves in a world where disruption is imminent and can come from anywhere and these digital-savvy competitors are threatening the very fabric of many established industries. Without constant innovation, once dominant players are finding their tried and trusted paths to innovation are now dead ends. It’s time to innovate or die! It’s time to think like the digital customer and employee and also act like a startup to compete for the future right now.

Download the report.

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