Traditionally, corporations have been built on a successful idea or product, and subsequently expanding their enterprise based on that. However, with the influx of startups and competition, corporations now must think of means to innovate in order to maintain and thrive within today’s competitive landscape. To do so, corporations have to embrace the opportunity to innovate, from the most basic day-to-day operations to the very business model under which they operate. So, what exactly is corporate innovation?
Corporate innovation can be defined as the process of corporations rethinking and revamping their business models, implementing new innovation opportunities into existing business models. Back in 2012, Grab started off simply as a taxi-booking mobile app. Subsequently, came the emergence of novel services such as GrabShare, GrabFood, GrabPay etc. More recently, Grab, together with SingTel, will be applying for a full digital banking license. Grab’s success throughout the years is attributed to its corporate innovations. In fact, Grab was placed second among the world’s 50 most innovative companies in 2019.
Importance of Corporate Innovation
Corporate innovation ensures the sustainability of business. Large and well-established corporations are particularly prone to slow changes and getting stuck in their own ways. They tend to build upon existing products rather than rethinking. On the other hand, startups with fresh perspectives are great at re-envisioning how an industry can operate and grow. Innovation is crucial to a corporation’s success by giving a competitive edge in today’s penetrating markets faster. Should corporations fail to adapt to today’s changing circumstances, it will only prove to be their downfall.
One prime example is Nokia. In the late 1990s and early 2000s, Nokia was the global leader in mobile phones. In 2000s, with the arrival of the Internet, other mobile companies started understanding how data and user experience was the future of communication. Nokia didn’t grasp the concept of software and kept focusing on hardware. By 2010s, Nokia was no longer a competitive brand compared to the likes of Apple and Android. Nokia’s mistake was the fact that they didn’t want to lead the drastic change in user experience. This caused Nokia to develop a mess of an operating system with a bad user experience that just was not a fit on the market.
Corporate innovation also allows for growth and expansion. According to a survey , 66% of the total respondents mentioned that innovation is critical for growth. Corporations that innovate succeed in adding more employees as well as in expansion. This further enables them to take up more customers as well as grab a larger share of the market. With the expansion, this allows corporations the opportunity to venture into new markets, or even new products.
Corporate Innovation Strategies
Research and development (R&D) is a very common approach to modernising corporations. By keeping innovation strictly internal, “intrapreneurs” are provided resources to improve existing products and even launch startups within the corporation. This will help to identify those with great minds and give them the tools they need to make their big ideas a reality. This can be a great way to create a huge competitive advantage and create new products.
However, this requires an immense deal of capital to even start. Immediately, this increases the risk level of the internal ventures because they are being built from scratch, having no guarantee of product-market fit. Nonetheless, this allows businesses to keep a better pulse on innovation. Moreover, it keeps teams more aligned with corporate innovation goals and objectives.
Additionally, some corporations also build their own dedicated internal innovation teams. These teams are dedicated to pursuing, deploying, and optimising value-driven corporate innovation activities. MasterCard, Hallmark, and BMW all have innovation teams dedicated to new business ideas.
Some enterprises own corporate accelerators designed to fulfill their own business challenges and objectives. Usually, the corporation partner provides capital, mentorship and office space, while the startups offer innovative products and services, new technology and nimble ways of working.
Some of the many benefits to corporations include faster time to market for new innovations, exposure to emerging tech and talent, positive PR and more engaged employees. Startups benefit through access to funding, tapping into a larger customer base and domain expertise as well as distribution channels that give them a better chance at scaling.
3. Mergers & Acquisitions (M&A)
Sometimes, M&A are the easiest ways to fuel corporate innovation. In this model, corporations simply merge with other corporations. Owners may enter into M&A negotiations for a number of reasons with it generally occurring between large and small organizations. There are the advantages of M&A, which can benefit business:
- Penetrate new markets
- Claim intellectual property rights and trademarks
- Enhanced product development opportunities
- Acquire key executive personnel and talent
- Gain significant financial power
In 2015, German publishing giant Axel Springer bought Business Insider for $450m. The sale represented Axel Springer’s recognition that publishing was changing and becoming digitalised. Through the acquisition, Axel Springer extended its global digital audience by nearly 200 million.
Finding the right strategy for your company
Unfortunately, there is no one-size-fits-all approach to helping corporations activate new ways of doing business. It can happen within or outside of a corporation. It can be carried out by internal employees or third parties. What problems need to be solved, who should be tasked with solving them, and in which industry or areas? Before deciding on any of the above options, corporations need to know what they want to achieve.
There is no doubt that the world is becoming a more competitive place and the arrival of the digital age has led to accelerated innovation. New technologies have drastically, and even fundamentally, changed how the economy and businesses within it operate on a daily basis. Only those who accept and embrace the opportunity to innovate will be able to withstand the pressures of a dramatically altered business landscape.
About BlackStorm Consulting
BlackStorm Consulting is a boutique growth consultancy firm that specialises in corporate strategy, profit management and investment management. We mainly serve clients in four sectors: FinTech, Gaming, Technology, Media and Telecommunications (TMT), and manufacturing.