Conquer innovation inertia and build corporate innovation engines capable of systematically, repeatably and predictably realising new value.
In our first instalment of Future Foundry LIVE for 2023, we’re zooming out to look at how to get the foundational elements in place to build your own corporate innovation engine.
You can check out the full episode here or settle in and enjoy our in-depth write-up of the key takeaways right in this blog.
So, let's deep dive into the prep work needed to avoid hurtling into the usual blockers around bandwidth, skills and processes.
What’s getting in the way of innovation?
First up, let’s talk about those blockers. One of the biggest issues companies face is ‘Innovation Inertia.’
This is the term we use to describe the challenges corporate change-makers are up against in their organisations, including time constraints, a lack of investment in design thinking, and outdated systems that slow innovation progress down to a glacial pace.
When you struggle with innovation inertia, setting up a corporate innovation engine can feel like trying to turn an oil tank.
It’s slow, freight with risk, and very, very complex.
What you want is a slick speedboat that helps you move faster, eliminate risk and simplify innovation. So, how do you ditch the oil tanker and get on board our speedboat?
Let’s assume you’ve overcome the three main issues companies struggle with in innovation:
Methodology (or lack of one): No scalable way to identify opportunities, validate ideas and scale new initiatives.
An inability to leverage the core: No proven way to seize the advantages of the corporation and manage it at the same time.
No portfolio mindset. No discipline and perspective around placing a large number of small bets.
Without fixing these issues, you’re not ready for corporate innovation. Inertia = doing things ‘the same old way' = stagnation. Innovation culture = taking more, smaller risks = greater returns for the business. Ok, you get it. So, how do you go about building one of those super slick speedboats?
How to build a corporate innovation engine
There are ten key components that form the foundation of your innovation engine:
You need to put all ten in place before you even begin thinking about running identification sprints, validation missions or scale accelerators. If you don’t, you’ll find yourself in a stop-start world of resistance, internal politics and stakeholder management. Bleugh.
It might sound harsh, but if you miss even one component, all your hard work will be a total waste of time. With our handy breakdown, this shouldn’t be a problem for you!
This is the reaction we usually get when we ask C-suite executives what their vision for innovation at their company is. They know they should be doing something but can’t articulate why. Or what they want to achieve.
This core ‘why’ will act as your north star. Here are three common objectives you may relate to:
- I want to identify, validate and scale new ventures, products and services to drive meaningful growth. Great! But how much meaningful growth? What contribution do you want your innovation strategy to make to top-line revenue, operating margin or EBITDA over the next five years?
- I want to drive the company into adjacent markets. Awesome! Which adjacent markets and when by?
- I want to use innovation to transform the brand and drive up share prices. If your objective is more cynical, be honest about it. How do you want people to feel about the company when they hear about your efforts, and what impact do you want it to have on your firm's valuation?
There’s no right answer, but you do need an answer. Here’s how to define your north star:
- Get into a room with your CEO, your sponsor and your innovation team. Articulate your ambition for innovation in a way that is specific, measurable, achievable, relevant and time-boxed (SMART).
- Identify which assets you’ll need to take advantage of to reach this goal, from leveraging credibility from the brand, to access to capital. Identify which people or teams within your organisation are critical to unlocking these resources.
- Develop early hypotheses around which territories you’re going to focus your efforts on.
Next, take the outcome of the above three points and turn it into a challenge statement. This should frame everything you and the company want from innovation.
A great challenge statement should:
- Establish the aspiration for your innovation engine
- Speak to some early hypotheses about how you’re going to achieve that ambition
- Give you guardrails so that your innovation engine doesn’t go rogue
And now you have your north star. Gold star (pun intended) for you! Only nine more fundamentals to go before you’re ready to fire up your engine.
The best corporate innovation teams in the world can confidently answer 7 questions when they’re in the hot seat. These are:
- Are you an internally or externally focused entity?
- Are we in one location together or in multiple locations virtually?
- Will we operate globally, regionally or locally?
- Where does your involvement end and the core’s begin?
- What are our criteria for killing new ventures, products and services?
- How are we going to launch new ventures, products and services?
- What services do we provide, and what does the core provide?
Having clarity on these 7 questions is super important, and you can start to see why mapping your internal stakeholders early on and engaging them is so critical.
If you’re lost in the middle of a forest with no idea how to get home, the most useful thing you could find is a map. And that’s exactly what your proven processes will act as — a map.
Almost all failing innovation functions have no standard way of identifying new opportunities, validating new ideas or scaling new initiatives in-market. Without a predictable innovation framework for identifying interesting opportunities, validating strong ideas and scaling proven ideas, you can’t build cadence, rhythm or momentum.
A method based on Design Thinking, Lean Startup and Agile will guide your actions every step of the way, from when you discover a new territory to explore to when you’ve validated an idea. This will help you run a repeatable, scalable model.
Most corporate innovation teams have poor governance, which isn’t going to fly here.
To overcome this and create a line of sight, there are three support networks you need in place:
- C-Suite sponsorship and support. You need a C-level sponsor to connect you with the mothership and innovation engine board. They will provide cover for your team, encourage engagement from the wider C-suite and become a key escalation point for removing blockers.
- An innovation engine board. This board is made up of influential executives from across the organisation who are capable of behaving like top-tier venture capitalists. They review your progress at each stage of the identification, validation and scale phases and decide how to proceed. They also provide access to funding and the critical components you need from the core.
- An advisory group. These advocates provide expert advice and engage the rest of the company in what you’re doing. They need to be willing to open up access to the core’s capabilities, including corporate functions, specific business units, revenue lines and distinct geographies.
Without these three components in place, you will fail to manage not just your innovation engine but the core itself. Cue your innovation initiatives going off the rails.
Corporate innovation teams are responsible for the future growth of the business, so any investment in this team will pay dividends (quite literally) in the future.
Surprisingly, most corporate innovation teams represent less than half a percent of the company's workforce. Your team should be lean and fast-moving, but you won’t get anything done if you don’t have the people you need onboard!
The exact size of your team will depend on the number of ventures, products and services you want to ship in a year, but there are several key roles that will form your A-Team.
In your fixed team, you should have:
- Someone to lead operations
- Someone responsible for finance
- An admin expert to schedule and organise all the interface points between the innovation engine, the core and the external partners.
You also need a flexible team which scales up and down. In your flexible team, you should have:
- Someone to undertake in-depth customer discovery and validation work.
- Someone to own each opportunity area, each idea and each initiative
- A designer
- A systems architect
You then need to recruit for three roles from core:
- A subject matter expert who specialises in your products or a specific market
- IT support and, if you’re fully remote, someone dedicated
- An HR specialist to support with continuous hiring and compensation
You also need to consider how to compensate your team, such as through phantom stock, bonuses and equity.
And now you have your team!
Once you've created your team, you need to think about your operational approach. We’ve all heard the old adage, fail to plan, plan to fail — and it’s true.
You need a plan you can stick to, as this will guide your budgeting, recruitment, expectation management, and stakeholder management. In other words, everything.
That means creating an annual plan that defines how many territories, opportunities, ideas and initiatives you will scale. Without this understanding, you can’t define the scope, size and budget for your innovation engine.
It’s simple maths: If you want to launch four things this year, that means you need around 40 ideas. If you want to test 40 ideas, you need to identify 160 opportunities. Scale this up and down as appropriate, and voila!
Welcome to Innovation Island. Innovation teams butt up against the core again and again, so many end up operating like an island. But alienating yourself only severs your access to those much-needed resources.
The best way to ensure the core has a fantastic experience with your team is to add value the other way. Try creating a company-wide community of employees who are up to speed on the latest trends and technology, so they can leverage innovation, solve customer pain, and drive growth.
You can do this by setting up three events that inspire, enable, and excite the broader employee base, drive employee engagement, and help develop future leaders:
- Monthly webinars on small topics and techniques that other team members might find interesting
- Quarterly masterclasses on externalities like customer trends, exciting startups and tech
- Annual symposiums where the whole company is invited to find out what you’ve been focused on, your portfolio and early demonstrations.
Underpin this programming with a weekly newsletter to keep everyone informed.
When you work in corporate innovation, you do some cool sh*t. And what do most of us do with all the cool sh*t we’ve seen and learnt about? We lock it away, never to be spoken of again.
To this, we say, no more! You need a communication plan that helps tell your stories internally — to consolidate corporate support — and externally — to communicate the value you’re building.
Internally, act as the eyes and ears of your corporation, sharing external market trends, information on exciting new startups, and best practices from other industries.
Internally and externally, focus on recruitment and retention, sharing stories from team members, details on developmental programming, and the interesting problems you’re solving to attract and onboard talented innovators and entrepreneurs.
Externally, deliver value for investors and your PR team by making it clear you’re focused on disruptive innovation with successful new venues, products and services that grow your value.
If you’re constantly fighting for the budget just to do your job, that’s not cool. Most companies know there are costs in establishing innovation capabilities but rarely provide the budgets innovation teams need to get anything off the ground. Part of the problem is that they don’t know exactly how much funding they need.
There are three pots of money you need to account for building, running and launching your innovation engine.
- Building budget: This should come from seed funding and is the bare minimum needed to get your innovation capabilities started. This will include team salaries, office space, equipment, software, and funds for communications.
- Running budget: There’s no point in having the budget to build the engine but not run it. This will also come from seed funding and will cover the identification, validation and scaling phases.
- Launching budget: A pre-agreed amount of money should be available to raise rounds of series funding. This will be approved by your innovation engine board and will cover the scaling and launch phases.
You need to crunch the numbers to know what your seed and series funding looks like, and be clear on the metrics required to unlock series funding.
Align your metrics with a "small bets, fail fast" VC mindset. This means you should focus on traction-based metrics, like customer acquisition and revenue, not profit-based metrics.
Stick with us — only one more to go!
Finally, you need a great tech stack to help you launch, run and manage your innovation engine. This is key to making sure you move with the same speed as the start-ups you’re competing with.
Here’s one way your tech stack can look. Remember to always learn and be innovative; these innovation tools can always change.
- Slack for easy communication with one another, stakeholders and customers.
- Google Calendar to schedule meetings and align on availability. Integrate with Calendly for scheduling meetings and use Miro as your virtual whiteboard.
- Balsamiq for low-fidelity prototyping; Invision for medium-fidelity mock-ups; Sketch for high-fidelity prototyping.
- Notion to capture and store everything centrally, including project cadence, customer database, interview transcripts, feedback and business cases.
- Google Drive to avoid local versions of documentation being saved on individual machines.
- Otter.io to easily transcribe video meetings.
- GSuite to separate your team from the core.
- Create an API layer to connect these tools into one central dashboard.
A handy breakdown
We’ve gone through a lot of detail, so let’s summarise these 10 steps:
- Obvious objectives: Write a clear goal for what your innovation program is trying to achieve and share it with everyone in your company. It might sound obvious, but few innovation teams have a north star. Without it, you’ll become rudderless.
- Brilliant basics: Get clarity on who your innovation efforts serve, plan for what you’ll do with successful ideas once proven, and agree on criteria for killing bad ideas.
- Proven process: Create deep domain knowledge in Design Thinking, Lean Startup and Agile and use it to create a systematic, repeatable and predictable method for identifying interesting opportunities, validating strong ideas and scaling proven ideas.
- Great governance: Get your innovation efforts sponsored by a C-Suite executive, and obtain the support of the broader leadership team. Get some of them to sit on your innovation/advisory board.
- Top talent: Hire all the talent you need and compensate them beyond a traditional salary model. Create a documented process for finding, recruiting and onboarding new team members.
- Outstanding operations: Agree on the number of new ventures, products and services you want to scale every year. Then turn this into an annual plan that visualises your cadence, start dates and availability.
- Excellent experience: Build a programme of events that you can use to engage the broader organisation in what you’re seeing, what you’re doing and why.
- Clear communications: Share your successes inside and outside the organisation. Use these stories to recruit, develop and retain top talent.
- First-class finances: Agree on an agreed base budget to keep the innovation team running along with an agreed-upon funding amount to identify, validate and scale ideas.
- Top technology: Create a space where you can validate and scale new ventures, products and services that exist off the established technology stack of the wider organisation.
Remember to check in on these components monthly or at least quarterly, using our diagnostics tool to see how strong they are, quickly identify malfunctions and fix them — before you come grinding to a halt.
So, what’s next?
You now have the ten key components to become systematic, repeatable and predictable. That means you’re ready to identify new opportunities and test interesting and scale-proven ventures, products and services perpetually!
This is a lot of information (though we could have written ten times the amount on the topic). So, if you’re feeling overwhelmed, we’re here to help you get going. Book a call if you need a helping hand getting started.
Until next time!