Technology and Innovation are key areas of Whitecap’s specialist expertise. In this blog, our tech lead, Stefan Haase, shares his thoughts on the key insights into corporate innovation business leaders should be considering for 2022 and beyond.
A recent white paper published by MassChallenge, a Boston (US) based and globally leading accelerator (which Whitecap visited in 2018), focuses on the importance of corporate innovation. It highlights that in recent years, there has been a rapid increase in enterprise innovation whereas traditionally, corporates didn’t need to worry too much about innovation as they could expand their enterprises on the back of a single successful product or service.
In the age of disruption, however, this approach has expired. Agile startups push the latest technology, forcing established corporations to adjust their business models. Rapid marketplace changes drive customers toward the most convenient products or services and instant gratification.
Why is Corporate Innovation More Important Than Ever?
According to OECD, the number of corporate investments in startups more than doubled from $22bn in 2014 to $46bn in 2019 in the US and more than trebled in the UK from $0.6bn to $1.8bn in the same time period. Today, 75% of Fortune 100 companies have an internal venture capital department, like a startup accelerator.
Historically established enterprises have rested on their success rather than keep evolving. Instead of striving to remain the leading edge, their focus is on product / service iteration. However, this approach leaves them exposed to disruptors, such as agile, modern startups who can quickly turn an industry upside-down.
Since 2000, an astonishing 52% of Fortune 500 companies have either gone bankrupt, been acquired, or ceased to exist entirely. Even the biggest corporations aren’t immune to the threat of digital disruption, as seen when Uber and Airbnb irrevocably transformed the taxi and hotel industry, respectively.
Thus, for enterprises to remain relevant and competitive, they must adopt a culture which embraces digital innovation, constant transformation, and new technology. The message for corporate boards is your either innovate and disrupt your own business model or somebody else will.
Six ways to develop a corporate innovation strategy
MassChallenge outlined that corporate innovation comprises several key ingredients to create new products / services, develop strategic partnerships through corporate innovation programs, or make investments in innovative startups.
- Partner with an accelerator program
In addition to supporting workforce creativity by offering a platform, access to resources, expertise, and industry connections for new ventures to grow, enterprises should consider formal engagements with accelerator programmes to target specific technologies or industries for startup sourcing.
Whitecap’s recent engagement with Digital Catapult’s Made Smarter Technology Accelerator programme highlights how (manufacturing) corporates can successfully collaborate with startups, scaleups and SME to develop innovative solutions to key corporate challenges and need for digital transformation and automation.
- Create a corporate innovation lab
A common obstacle to corporate innovation is that enterprises lack the crucial infrastructure to support new ventures. Even if employees have viable proposals, they may not fit in alongside current timeframes and targets. With no designated staff or budget, many ideas will never see the light of day. Companies can counter this issue by developing a dedicated team with the sole purpose of developing innovative ideas. Successful example of such corporate venture arms are:
- Vipps by DNB – DNB is a Norwegian financial services group which launched Vipps, a mobile banking application that gives users the possibility to make payments via the receiver’s telephone number instead of an account number. Revenue: $91,5 million.
- Car2Go by Daimler – In 2010, global automotive manufacturer Daimler’s independent innovation lab, Lab1886 launched Car2Go, a pioneer of free-floating car-sharing services. Revenue: $69 million.
- Evidation by GE – Founded in 2014, Evidation Health is the result of a collaboration between GE Ventures and Stanford Health Care. The company’s platform turns raw, high-frequency behaviour data from sensors, devices, speech, video, and other sources into new knowledge about health and disease. Revenue: $51 million.
- Niantic Labs– founded in 2010 as an internal startup within Google. The company became an independent entity in October 2015. Since then it has been working on a planet-scale augmented reality platform for current and future generations of AR hardware. Revenue: $900 million.
- Livongo by Microsoft – Livongo offers digital services and products to help people struggling to manage chronic conditions like diabetes, hypertension, and mental health issues. Revenue: $167 million.
- Promote open innovation
If the skills, talents and innovators are not already in-house, corporates need to introduce them. This could be facilitated via an accelerator programme or a corporate incubator to invite startups to come and work at their physical locations, offering them funding, support, and technology.
By collaborating with rising talent, corporate leaders get a chance to learn about emerging and disruptive technologies directly from startups. Furthermore, it could lead to startup-corporate partnerships, new products and services or result in go-to-market partnerships or acquisitions.
- Develop an intrapreneur program
Intrapreneur programs are similar to accelerators in that companies give their employees the platform and support to work on innovations. These ventures could result in new products or service for the business itself, or they may act as a springboard for new entrepreneurs to launch a separate company. Deutsche Telekom runs such as n intrapreneurship programme (UQBATE). Since 2017 they have over 400 ideas have been evaluated with 600 employees and several have been actively developed and are either in beta or production phase. In their 2020 financial report Deutsche Telekom referenced the Paketchef solution, which was supported by UQBATE, and which targets the last mile of parcel delivery services by giving the customer the freedom to choose when and where they receive their parcels.
- Create a VC arm of your corporation
Another type of corporate innovation is corporate venture arms. This approach is popular with many companies that prefer to leave the initial creation side of innovation to external startups. Corporate venture funds have become popular over the last few years, especially as some of the established ones such as RBVC and BMW iVentures have achieved portfolio performance that rivals that of the top VC firms.
But Corporate Venture Capital (CVC) is not a one-size-fits-all proposition. It can involve everything from sporadic investments from the corporate balance sheet to a fully autonomous CVC fund that has been spun out from the parent company.
Examples of highly active corporate venturing arms in the UK are:
- UK Steel Enterprise– A Sheffield based subsidiary of the steel-making conglomerate Tata Steel. UKSE is a corporate venturing arm that is solely responsible for assisting the economic regeneration of traditional steel communities.
- Martlet Capital – A Cambridge-based subsidiary of the engineering and technology services company Marshall Group. Founded in 2011, the fund is sector-agnostic, investing in B2B companies across markets, but primarily those also located in Cambridge.
- GV (Google Ventures) – The venture capital investment arm of Alphabet Inc—the parent company of Google. Founded in 2009, it’s one of the most prolific corporate venture funds worldwide. Typically investing between $2m and $30m, GV looks to invest in disruptive technology. So far, GV has backed at least 23 high-growth UK-based companies.
- Unilever Ventures –The venture capital and private equity arm of multinational consumer goods company, Unilever. It was founded in 2002 and, for almost two decades, has been working with innovative personal care brands and digital technology businesses. Unilever Ventures has backed at least 14 UK-based businesses.
- Others: Indie Growth Fund, Breed Reply, BP Ventures or Legal & General Capital
- Form a cross-sector thinktank
A thinktank drives a type of corporate innovation model that brings together stakeholders from multiple businesses in an effort to derive valuable insights and new business opportunities. By networking with key players in their industry—and other sectors—enterprises can get the support they need to succeed.
The inevitable change every enterprise must face: Disruptive innovation
According to Forbes, innovation could wipe out $8 trillion worth of U.S. public company equity. Therefore, if long-established multi-national £1bn+ turnover businesses are at risk of succumbing to the impact of digital disruption, then so is every company. Doing nothing is not an option anymore —every business must have an active and effective strategy to engage in disruptive innovation – the alternative is illustrated by those 52% of Fortune 500 companies have either gone bankrupt, been
acquired, or ceased to exist entirely
We are keen to hear your views on these points, as well as your view of key strategic innovation priorities. Please post your thoughts and tag ‘Whitecap Consulting’ (LinkedIn) or @Whitecapconsult (Twitter) or send Stefan an email at [email protected].
If you feel that your strategy development and strategy implementation process would benefit from independent review and challenge, please get in touch.
Established in 2012, Whitecap Consulting is a regional strategy consultancy headquartered in Leeds, with offices in Manchester, Milton Keynes, Bristol and Newcastle. We typically work with boards, executives and investors of predominantly mid-sized organisations with a turnover of c£10m-£300m, helping clients analyse, develop and implement growth strategies. Also, we work with clients across a range of sectors including Financial Services, Technology, FinTech, Outsourcing, Consumer and Retail, Property, Healthcare, Higher Education and Professional Services, and Corporate Finance and PE.