If you work at a startup, innovation is part of your day-to-day. But if you’re at a more established company, particularly a larger one, the pace of change is likely slower.
But that shouldn’t stop you from innovating and, in fact, the survival of your company may depend on it. Disruptive examples abound, but take hospitality company Hilton. Founded 100 years ago, it has hotels and other properties with around 850,000 rooms across the globe and a market capitalization of about $28 billion. And yet in just 10 years, Airbnb has started from nothing to surpass Hilton’s market capitalization, with quadruple the number of managed rooms.
Tips for how to embrace innovation
The business landscape is changing quickly, making it hard for medium-sized and large firms to innovate quickly enough to thrive in this new context. Startups possess the agility and capacity to take risks that larger companies need, although their resources, such as employees and installations, are much more limited.
As an executive, what to do? One approach is to take a page from the playbook of corporate venturing, the growing practice of cooperation between large companies and startups. Here, some tips for how to embrace innovation:
1.Define an integral strategy
First, take a long, hard look at your current internal innovation efforts. Then try to identify your areas of business that are more vulnerable to disruption. Finally, define the nature of the opportunities the company is looking for, and the areas where growth may be strongest. Recent IESE research identified what distinguished the quickest and most efficient corporate venturing projects, based on interviews with chief innovation officers of more than 100 companies. The research highlighted the need for an integral, shared strategy both inside and outside the company as fundamental to avoiding repetition and generating value.
2.Look at different mechanisms
Once you’ve defined strategy, the next move is to select the right mechanisms for innovation. There’s no reason to rely on a single formula, or to stick with exactly the same ones over time. Again, looking at corporate venturing, the number of options has multiplied to include hackathons, open competitions, incubators and accelerators. In the creation phase, for example, companies have been found to use mechanisms, such as scouting missions, that can be deployed quickly and at relatively low cost. With time, companies tend to use more complex mechanisms such as incubators or corporate venture capital, and finally accelerators.
3.Re-think traditional metrics
If you measure innovation only by its short- and medium-term financial returns, you’ll never innovate – and may well lose in the long term. You may have to come up with other metrics and indicators of success. At some companies, innovation projects have an independent cost center and different time span for reporting cycles.
4.Involve other departments
According to different studies, the most quick and efficient projects spread the cost of innovation among different departments. That’s also a way to increase total budget for innovation and encourage the participation of other business units in the project. It’s important that others be involved in the decision-making from the beginning.
5.Incorporate a startup mindset
The success of projects is linked to the entrepreneurial mindset. That means that projects are run like startups, incorporating agile principles such as the delegation of authority; flatter and more simple structures; freedom to try new ideas (and fail); modular processes; and action-based plans.