How Innovation Can Set Larger Businesses Apart

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Disruption from new, high-tech start-ups has become one of the most significant risks facing established companies today. But increasingly, many businesses are trying to beat the innovators at their own game.

It has never been more important for companies to stay ahead of their current and potential competitors by operating innovatively. Perhaps the key business lesson of the last two decades for firms in any sector is that there’s an ever-present risk of being disrupted by a new, often much smaller, rival – typically one that can exploit technology more effectively, either to gain market share or completely revolutionise the industry in question.

The most frequently cited examples of major corporations that have been damaged by their failure to innovate since the turn of the century include video rental chain Blockbuster and camera-maker Kodak. Today, we’re seeing the dramatic impact of recent entrants such as Airbnb and Uber on the global hotel and taxi industries respectively.

So how are larger businesses evolving to meet these challengers?

 

No longer going it alone

“Maybe 30 years ago there was a feeling that if you had a good R&D [research and development] department as well as the right marketing expertise, you could probably develop your next generation of products on your own,” says James Mawson, editor in chief of research organisation Global Corporate Venturing. “But particularly with the digitalisation of the global economy, the idea that your company will have all the smartest people and that you can’t be disrupted has completely changed.”

Mawson says there are a number of strategies that companies can adopt to make themselves more innovative and adaptable. “In terms of the tools, firms are still doing mergers and acquisitions to bring the smartest people into their organisations, and they’re still doing R&D; but they are increasingly thinking about what we call an ‘open-innovation’ toolset.”

This might involve collaborating with academics, or working with start-ups, either through acquisition or some sort of partnership, he says. “Or firms may invest in venture capital funds, which then invest in those start-ups; as a result, you get some ideas transferred.

 

Internal innovation

“Another option is creating a culture of ‘intrepreneurship’ within the organisation: this means encouraging internal innovation and having internal accelerators that will bring ideas to market more quickly.”

In Ireland, Mawson says, such activity tends to be carried out by foreign corporations. “Historically, Ireland hasn’t necessarily had a huge number of indigenous large-scale companies; the likes of Mastercard, Facebook and Apple have tended to lead the way in terms of corporate venturing.”

 

“We’re starting to see corporates innovate at a faster pace than in the past: there’s a sense of urgency that hasn’t existed in the last 20 to 30 years”
 

Patrick Walsh, founder and managing director, Dogpatch Labs

 

This process is now acting as a ‘virtuous circle’ for the country’s economy, says Regina Breheny, director general of the Irish Venture Capital Association. “In many cases, these foreign-owned companies are encouraging teams of their own employees to set up start-ups in Ireland – then they may even allow them to take some of the technology they have developed,” Breheny says. “These teams may attract some kind of venture capital investment, and then later on, when they have done something significant, the original corporation will buy them back.”

 

An entrepreneurial environment

Dogpatch Labs is a Dublin-based innovation hub that hosts a number of high-potential start-ups while also helping some larger businesses gain valuable exposure to the latest entrepreneurial ideas.

“For corporates, it gives them space away from the mothership where they can create internal start-ups in a new environment; they can think differently and play by different rules,” says Patrick Walsh, Dogpatch founder and managing director.

Generally speaking, he adds, many large businesses are only now starting to understand the importance of becoming more innovative and entrepreneurial. “I think the penny is still dropping for certain companies even now, despite all the technological change,” Walsh says. “But now that various giants have been awoken because of disruption, we’re starting to see corporates innovate at a faster pace than in the past – there’s a sense of urgency that hasn’t existed in the last 20 to 30 years.

“And that’s good to see because the innovations we need to improve people’s lives are not all going to come from start-ups.”

 

Changing behaviour

Dogpatch is also home to Ulster Bank’s innovation hub. “By exposing Ulster Bank to the culture here, they become more dynamic and innovative themselves as they develop new ideas – that’s a big challenge for any large organisation,” Walsh says. “Given the potential disruption from the likes of new fintech businesses, what companies like this need to do is start to behave like start-ups themselves by having a culture that fosters ideas and an environment that’s geared around moving fast.”

From the perspective of the start-ups themselves, this kind of collaboration can also have significant benefits: “Start-ups need enterprise sales; they need to sell their technology to people who are going to pay them money for it. A huge proportion of start-ups are selling to corporates, and there are huge opportunities for them to get to revenue faster if they operate in spaces like this.”

 

Top tips for corporates to create an environment for innovation

Patrick Walsh says his company, Dogpatch, looked at what factors had been key to successful collaborations between start-ups and corporates in Silicon Valley before trying to emulate them in Ireland.

1. Involve the whole organisation

It’s important to ensure that employees who aren’t part of a company’s innovation efforts don’t start to resent those who are. “We put a lot of energy into making everyone feel part of it,” Walsh says. “We encourage everyone to share any ideas and participate.”

2. Get the right senior people on board

“As well as senior staff like the chief information officer, it’s important to involve the head of human resources because you’re effecting a lot of cultural change,” Walsh adds.

3. Keep staff in the loop

“I think the key piece is, how do we make sure that the message about what is happening in the start-up hub is feeding back to the other employees?” Walsh says. “How do we make them feel that we have some ownership in this initiative?” The most successful innovation programmes will be those where the benefits and progress are clearly visible throughout the company, he says.

It has never been more important for companies to stay ahead of their current and potential competitors by operating innovatively. Perhaps the key business lesson of the last two decades for firms in any sector is that there’s an ever-present risk of being disrupted by a new, often much smaller, rival – typically one that can exploit technology more effectively, either to gain market share or completely revolutionise the industry in question.

The most frequently cited examples of major corporations that have been damaged by their failure to innovate since the turn of the century include video rental chain Blockbuster and camera-maker Kodak. Today, we’re seeing the dramatic impact of recent entrants such as Airbnb and Uber on the global hotel and taxi industries respectively.

So how are larger businesses evolving to meet these challengers?

 

No longer going it alone

“Maybe 30 years ago there was a feeling that if you had a good R&D [research and development] department as well as the right marketing expertise, you could probably develop your next generation of products on your own,” says James Mawson, editor in chief of research organisation Global Corporate Venturing. “But particularly with the digitalisation of the global economy, the idea that your company will have all the smartest people and that you can’t be disrupted has completely changed.”

Mawson says there are a number of strategies that companies can adopt to make themselves more innovative and adaptable. “In terms of the tools, firms are still doing mergers and acquisitions to bring the smartest people into their organisations, and they’re still doing R&D; but they are increasingly thinking about what we call an ‘open-innovation’ toolset.”

This might involve collaborating with academics, or working with start-ups, either through acquisition or some sort of partnership, he says. “Or firms may invest in venture capital funds, which then invest in those start-ups; as a result, you get some ideas transferred.

 

Internal innovation

“Another option is creating a culture of ‘intrepreneurship’ within the organisation: this means encouraging internal innovation and having internal accelerators that will bring ideas to market more quickly.”

In Ireland, Mawson says, such activity tends to be carried out by foreign corporations. “Historically, Ireland hasn’t necessarily had a huge number of indigenous large-scale companies; the likes of Mastercard, Facebook and Apple have tended to lead the way in terms of corporate venturing.”

 

“We’re starting to see corporates innovate at a faster pace than in the past: there’s a sense of urgency that hasn’t existed in the last 20 to 30 years”
 

Patrick Walsh, founder and managing director, Dogpatch Labs

 

This process is now acting as a ‘virtuous circle’ for the country’s economy, says Regina Breheny, director general of the Irish Venture Capital Association. “In many cases, these foreign-owned companies are encouraging teams of their own employees to set up start-ups in Ireland – then they may even allow them to take some of the technology they have developed,” Breheny says. “These teams may attract some kind of venture capital investment, and then later on, when they have done something significant, the original corporation will buy them back.”

 

An entrepreneurial environment

Dogpatch Labs is a Dublin-based innovation hub that hosts a number of high-potential start-ups while also helping some larger businesses gain valuable exposure to the latest entrepreneurial ideas.

“For corporates, it gives them space away from the mothership where they can create internal start-ups in a new environment; they can think differently and play by different rules,” says Patrick Walsh, Dogpatch founder and managing director.

Generally speaking, he adds, many large businesses are only now starting to understand the importance of becoming more innovative and entrepreneurial. “I think the penny is still dropping for certain companies even now, despite all the technological change,” Walsh says. “But now that various giants have been awoken because of disruption, we’re starting to see corporates innovate at a faster pace than in the past – there’s a sense of urgency that hasn’t existed in the last 20 to 30 years.

“And that’s good to see because the innovations we need to improve people’s lives are not all going to come from start-ups.”

 

Changing behaviour

Dogpatch is also home to Ulster Bank’s innovation hub. “By exposing Ulster Bank to the culture here, they become more dynamic and innovative themselves as they develop new ideas – that’s a big challenge for any large organisation,” Walsh says. “Given the potential disruption from the likes of new fintech businesses, what companies like this need to do is start to behave like start-ups themselves by having a culture that fosters ideas and an environment that’s geared around moving fast.”

From the perspective of the start-ups themselves, this kind of collaboration can also have significant benefits: “Start-ups need enterprise sales; they need to sell their technology to people who are going to pay them money for it. A huge proportion of start-ups are selling to corporates, and there are huge opportunities for them to get to revenue faster if they operate in spaces like this.”

 

Top tips for corporates to create an environment for innovation

Patrick Walsh says his company, Dogpatch, looked at what factors had been key to successful collaborations between start-ups and corporates in Silicon Valley before trying to emulate them in Ireland.

1. Involve the whole organisation

It’s important to ensure that employees who aren’t part of a company’s innovation efforts don’t start to resent those who are. “We put a lot of energy into making everyone feel part of it,” Walsh says. “We encourage everyone to share any ideas and participate.”

2. Get the right senior people on board

“As well as senior staff like the chief information officer, it’s important to involve the head of human resources because you’re effecting a lot of cultural change,” Walsh adds.

3. Keep staff in the loop

“I think the key piece is, how do we make sure that the message about what is happening in the start-up hub is feeding back to the other employees?” Walsh says. “How do we make them feel that we have some ownership in this initiative?” The most successful innovation programmes will be those where the benefits and progress are clearly visible throughout the company, he says.

 

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