December 6, 2019
Innovation is hard. This is especially true for large enterprises, and in heavily regulated industries. While corporate enterprises are really good at executing a specific process with reliable success, becoming such an organization often leads to creative stagnation. To overcome innovation inertia, many corporations depend on mergers and acquisitions or become VC backers of innovative startups.
There are other ways for enterprises to innovate. For example, early in its development, Google had an 80/20 rule where 80 percent of employee time is dedicated to core company projects, and the other 20 percent was considered ITO -- or “innovation time out” -- to work on creative side projects. While the ITO brought us Gmail, Google Maps, and Adsense, as Google grew into an established enterprise, it effectively shut down the program meant to encourage internal innovation.
Within every enterprise, there are smart people with great ideas with the potential to become the next big high-growth startup.
The transition from innovation powerhouse to innovation dead zone is a natural evolution as businesses mature. In the case of Google and parent company Alphabet, big innovation no longer takes place internally. Instead, the tech behemoth focuses on acquisitions or funding startups through its venture capital arm.
Acquisitions and corporate venture backing may be the most obvious and traditional forms of corporate innovation, but there’s another option that utilizes the brain trust already within organizations. Within every enterprise, there are smart people with great ideas with the potential to become the next big high-growth startup.
These ideas could be the seed of corporate innovation but in order to thrive and succeed, they need to become “spin-out” business -- independent and separate from the larger organization. Taking internal ideas and spinning them out into independent startups is an alternate way to create a culture of innovation, while allowing those ideas the space to grow without being bogged down with established corporate processes.
Here are a few ways to foster a culture of innovation.
You hired smart people, look to them for the innovative ideas, and experiment with spinning those ideas out as startups. While not every idea will lead to a successful high-growth startup, the most successful will contribute to the long-term success and growth of the larger organization, while moving the entire industry forward.
Control is the default mode for most established enterprises, but it’s absolutely critical that corporations resist this impulse in order to give spin-outs the best chance at success. In fact, the lean startup philosophy is that startups are all about experimentation, in search of a sustainable business model. This means startups need lots of room for autonomy, experimentation, making mistakes, and pivoting when things don’t go according to plan.
Instead of controlling the structure and imposing corporate limitations on your corporate spin-outs, show support in the form of resources. Offering an ITO of your own like the now-defunct program at Google is one option. Other ways to support your corporate innovation programs include providing funding, mentoring, and other professional development opportunities.
We can expect technology to continue to transform the way we do business. Healthcare, finance, and insurance are all industries ripe for innovation, with huge bureaucratic and regulatory challenges to overcome. Smart business leaders and enterprises will be the leaders of innovation and technological transformation in their industries -- others will be left behind.
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