Introduction: Large Companies have amazing talent, financial resources and industry insights. But why are game changing innovations not in evidence?
Corporate leaders principally have a choice between three growth strategies
The first choice is the one you worry the most about – acquisitions
Between two types of acquisitions: scale-oriented deals when companies join forces to build scale and market leadership. Examples include H. J. Heinz and Kraft Food, Dow Chemical and DuPont, Disney and Pixar or Mars and Wrigley. And scope-oriented deals such as Google acquisition of Android, PepsiCo acquisition of Soda Stream or Coca Cola acquisition of Costa Coffee when companies get access to new markets, geographies or critical capabilities for the future, the latest are on the rise.
Such acquisitions are prevalent across sectors such as healthcare, technology and consumer products.
While such deals do have an immediate effect on growth, they also have limitations. Taking over an innovative brand, technology or channel capability became expensive. Enterprise Value over revenue transaction multiple varied before COVID-19 between 10X to 44X, as competition for these deals increases. And once integrated, how much of what made the deal awesome stays?
According to Bain research, executives consider scope deals to be at least as successful as scale deals, which means that 70% or more of them are likely to underdeliver on value expectations.
The second choice is innovation through the mobilization of internal capabilities
This is a really great path to take. The challenge, however, is that even when we would love to play innovative disruption in a large company and work like startups, the end result makes marginal tweaks to products or services. How many innovations die in a business after long months or even years of hard work?
Innovation can imply a new construction or restructuring of existing ideas in new ways. Therefore, it typically requires exploring a hundred possibilities and killing 99 of them. In the corporate environment, where each project mobilizes significant human and financial resources, such effort leads to a perception of throwing millions at unpredictable outcome. And even when great solutions are found, they may be discounted to avoid the risk of failure or potential disruption of the company’s existing products and the entire business system.
And let’s face it. Imagining a solution is just the first step. To move forward from ideation to design and then to execution in a global matrix organization typically takes months if not years of internal alignment. The more unconventional the solution is, the higher the chances are that it becomes a source of conflict with peers in marketing, sales, supply chain or corporate affairs. How many leaders would keep defending a disruptive business rationale if it puts their career advancement at risk? Not many!
As can be expected, when amazingly smart and experienced people are assigned to innovation task forces or freshly launched disrupt teams, many feel like they are playing Russian roulette! Realizing that choosing the more conventional path, the easier it will be to “sell” the result internally and the higher their chances are to continue with their career advancement. Understandably, they end up making hardly noticeable tweaks to products following established practices.
Do you want to know what the secret ingredient of a successful innovative ventures is? It is people with a rebellious mindset. They are able to spot unmet needs. They have courage to bring a bold view of what is needed tomorrow, not how to improve what works right now. They don’t believe in sustaining the status quo or waiting for big gains from minimally improving a product or service. As independent thinkers they do not automatically accept the decisions of their superiors.
Business rebels are capable of disrupting the competition. But their talent, mindset and working style are often incompatible with corporate politics. Most peers and superiors admire and hate their quirky, witty and out of the box thinking! They consider that they are too hard to manage or work with.
In response to this challenge, industry leaders created innovation hubs dedicated to emerging opportunities to build and grow small brands with large scale potential – SnackFutures by Mondelez, HP Labs, the Garage by Google, Innovation Kitchen by Nike, P&G ventures are just some of them. This is a great way to identify and co-develop future solutions. What is success rate of these hubs? Hard to tell, but one thing is clear, most of them serve to build new brands and products for a longer-term innovation pipeline.
The third choice is innovation via strategic partnerships with external partners
All in all, the two choices described above are great ways to build new products or to expand Corporations portfolio with innovative brands.
But today large companies must move faster, innovate smarter, with less resources and an established portfolio of brands. What can they do to keep improving brand equity and attract new consumers? This brings us to the third choice.
Bring external innovators as joint partners to solve your challenges by using their original thinking, breakthrough solutions and resourcefulness in execution. By engaging with business rebels that work in ventures with innovative approaches in such areas as go-to-market, sustainability, digital capabilities, consumer experience or differentiating services you out-beat your competitors.
- Keep internal capabilities mobilized and empowered on new product developments
- Acquire access to a pool of solutions ready for deployment that create agile blends of innovations for existing brands
- Learn to work with nimble business rebels that understand how to out-smart competitors that keep spending millions of dollars on doing business as usual
Corporate partnerships are key to the innovation strategy of world leading firms
Unsurprisingly, the world’s biggest brands have adopted the third choice as a new standard process to successfully grow their businesses:
- Apple strengthened its foothold in the enterprise through partnerships with nimble innovators like Box and Docusign
- McDonalds bolstered its home delivery offering through partnership with Deliveroo
- P&G created more responsible products by partnering with Terracycle on recycling solutions for its packaging
Innovation consulting is the fastest way to accelerate your business transformation
Want to develop game changing innovations? Leave behind the time when your competitor’s business models, goals and mindsets were similar to yours. Remember that today, no matter how good your strategy is, future market leaders keep re-inventing theirs.
Work with Innopearl build successful relationships with entrepreneurs
Empower internal talent to win games, acquire innovative brands to win shareholders support, but build strategic partnerships with business rebels to win the place among innovation leaders!
Olga Guerous, CEO @ Innopearl
CEO of Innopearl, the pioneer in the development of partnerships between large FMCG Companies and small, nimble Innovators. In the past demonstrated strategic and inspirational leadership to accelerate business transformations and deliver superior business results in multi-billion FMCG companies (Danone, PepsiCo, Mars Inc), Healthcare industry (Novartis) and Technology consultancy (HRS).
Recognised for her original thinking, perspective and unique insights.
Member of LEAD (Leading Executives Advancing Diversity) Switzerland Chapter enabling the advancement of women in their companies.