Is this corporate innovation scouting done wrong?

CB Insights CEO Anand Sanwal gets credit for the opening of this post. I’m taking it from his newsletter that went out on Sunday. It’s simply too funny and too true not to share, and I didn’t see it posted on their blog. Yet, the uninformed who only see the wrong, will miss the value that’s behind the humor. Yes, corporate innovation can be done wrong and it also can be done right.CB Insights

From the newsletter:

(This will probably be unpopular)

When I see a big corporation launch a buzzwordy accelerator program, I hear the sound of money getting flushed down the toilet.

They launch these to get some buzz/look cool and, in theory, support and learn from startups. But here’s the rub: if you’re a giant, slow-moving company not known for being particularly innovative, the startups attracted to your accelerator are going to be 2nd or 3rd tier.

This is innovation theater.

That said, if you are focused on trying to “look innovative,” here is the full list of tactics that we’ve previously detailed:

1. Hire a chef.

2. Make up ridiculous sounding titles for people like Innovation Sherpa or Digital Prophet.

3. Build a startup-y office with an open floor plan, showers, and an Xbox/Playstation.

4. Talk a lot about failing fast and disruption.

5. Visit Silicon Valley to meet startups. Talk about how you’re embracing innovation during company townhalls and tell stories about hoodie-wearing founders you’ve met.

6. Launch an innovation lab or accelerator. It doesn’t matter what it does (if anything) — but do this.

7. Tell people that you don’t wear suits and that you wear jeans to work.

8. Hire someone who wasn’t getting promoted at Google or Apple to head your innovation efforts. Tell people regularly that this person is from Apple or Google.

My commentary on the above.

The key line is “if you’re a giant, slow-moving company not known for being particularly innovative.” To borrow a line from my 12-step friends, “the first step is to admit you have a problem.” It’s a lifestyle change that’s needed here. No hoodie is going to make you an entrepreneur. T-shirts and beer don’t make a business succeed.

It’s a dramatic change that’s needed when the patient clearly has an addiction, which in the case of these slow-moving businesses is often high margins and profits. Who can blame them?

Accelerator or Intraccelerator

Accelerators and their variants will have their role in some corporations. I advocate Intraccelerators where corporate acts as the funding VC. Let the corporation own the IP, tranche investment in ideas based on traction and create a founders pool so there’s upside for the intrapreneurs that are going to take their shot but who have minimized downside risk by staying within the corporate setting. Now strengths of the corporation are aligned with the interests of the individual by integrating elements of the open market.

YCombinatorAre you going to get 1st tier ideas? No one knows! Y Combinator doesn’t know if a company is tier 1 or not. Andreesen Horowitz can’t spot a tier 1 at these earliest stages. And does a company trying to remain nimble and adapt to future markets need only tier 1 startups to keep it relevant? I don’t think so. We may find that tier 2 and 3 companies are the right ones to meld into an existing company. We are still early in the innovation overhaul of the enterprise.

Corporate Innovation Culture

Innovation initiatives can drive needed cultural change, part of which is learning to fail fast and to learn from failure. That’s not easy in the political and ego driven areas of a big company, but we’re getting there.

But it’s not just about being OK with failure, we have to adjust the measures of success as well. The fledgling business idea is not going to compete with the existing lines of business, though eventually some will. At these early stages, validation and traction are the success metrics. Well-defined goals and metrics for any new initiative, the better it will navigate the mixed signals markets send – and the better it will stand up to internal scrutiny.

Corporate Investment Fund

The ongoing funding of new initiatives is another area where the better innovators excel. Having access to funds outside of those running the core business will ensure capital is available outside the normal funding rules. Commitment to growing new businesses requires funding pools specific to that purpose.

Since these innovations can’t match the success levels of the existing business, they can’t compete equally for resources. Those funds, whether going to a corporate accelerator or other corporate innovation efforts, need to be earmarked for this specific purpose. They also need to be significant enough to weather some bad quarters.

A rough spot for legacy businesses can’t undo the efforts to reach new and growing markets. These steps are too important in the long-term.

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