By: Jon Eggleton
As I wrote last fall, the rise in popularity and interest in startups has been dramatic. The result of a confluence of events- explosions in technology, millennial workers demanding more from their employers, a changing balance of work versus lifestyle to name a few – the corporate business world has stood up and taken notice. That said, how companies have approached incorporating a spirit of startup culture into their own organizations has varied widely. Some have gone the route of setting up innovation teams who focus solely on leveraging new technologies that can be implemented across an organization. Others choose an “intrapreneurial” approach, supporting one or more exploratory business models as a way to embrace innovation while still diversifying risk. And some organizations view innovation as something that needs to be a part of every facet of the company. We look at each approach and the pros and cons of each.
The Lab Approach (White Coats Optional)
When done purposefully, creating a stand-alone innovation lab can be an effective way to generate new thinking in an organization, working in partnership with internal departments to deploy. An example of a company using this approach is Atlanta-based First Data, who created an innovation lab focused on cultivating innovation across products, clients and employees in the 24,000 member organization. If you have the capital and leadership buy-in to formalize this type of structure in your organization, it can be a very effective way to explore new technologies and business opportunities, as it has for First Data. For those following this approach, however, it’s critical to keep your innovation team tightly integrated with the rest of the organization. Building key relationships with department heads and others from both internal and field sales teams is the best way to ensure that innovative ideas and technologies can find their way into real projects and processes. You want to avoid innovation becoming just a buzzword versus an actionable part of the business. As First Data’s VP of Client Innovation Kevin Lewis joked at a recent EES luncheon, “rub some innovation on it” does not make for an effective strategy on its own.
The Portfolio Approach
Creating a stand-alone division focused solely on innovation is not for everyone. Many organizations are still hesitant to allocate significant human resources or capital to an effort that may not have a direct relation to sales and revenue, particularly those that are public. A hybrid type of approach is to create a portfolio of new business channels, products or services that may differ from the core offering, typically with an opportunity to scale appropriately. Similar to an investor who spreads capital across a number of different opportunities to mitigate risks, this approach allows companies to test new business methodologies at a scale comfortable to them. For some, that may mean one new business idea or opportunity at a time, for others it could be twelve. Unlike a stand-alone innovation lab, these opportunities are likely to have P&L requirements much like any other part of the business, albeit not at the same revenue scale, or perhaps even the same margins as the core business. The downside to this approach is you may lose the ability to see innovative thinking cultivated from these endeavors spread across the rest of the business. What happens in a silo can often easily stay there.
The Innovation Everywhere Approach
The last approach to innovation is to focus on its existence everywhere in the organization, and not just in isolation in one or more business units. One way to accomplish this would be to have innovation goals for every business unit or leader, thus making it a regular part of the business. The main advantage to this approach is it does not require investment in a separate innovation center or business unit(s), nor is there any risk of innovation not infiltrating throughout the organization, since you’re keeping it wrapped into everything you do. However, following this path is not without risk, either. In order to be successful, a significant buy-in of innovation and intrapreneurship must be cultivated in each and every employee, project and process. This is easier said than done for most companies, particularly those that may have an existing culture that is more conservative or slow-moving. The innovation everywhere approach likely means making greater upfront investments in people, and structuring hiring practices to attract people with this mindset, which can take years to implement. Despite the challenges, organizations that can master this balance can potentially have the best of both worlds.