Corporate innovation is essential to secure future cash flows without relying on expensive late-stage acquisitions. By fostering innovation internally, businesses can create value organically and align it with their unique strengths. Yet, despite the clear need for innovation, many corporate efforts fail to deliver measurable results, reinforcing skepticism about their effectiveness.
Why Innovation Often Falls Short
Unlike startups, where clear metrics and benchmarks exist, corporate innovation lacks consistent data to measure success. However, a recent McKinsey survey offers fresh insights. It highlights a significant disparity in returns between ‘expert’ and ‘novice’ corporate innovators:
- Expert Innovators: Generate $1.39 in value for every $1 invested.
- Novice Innovators: Yield just $0.17 per $1 invested.
This stark contrast shows that with the right approach, corporate innovation can outperform startup benchmarks. By comparison, even the most successful startups, like unicorns, often take nearly a decade to scale to significant revenues.
What Sets Expert Innovators Apart?
Expert innovators excel by applying proven strategies to build and grow new ventures, similar to how venture capitalists nurture startups:
- Structure: They establish frameworks that foster autonomy while maintaining alignment with corporate goals.
- Skills: They attract entrepreneurial talent to drive venture creation.
- Strategy: They balance exploration of disruptive ideas with the exploitation of existing capabilities.
3 Questions Every CEO Should Ask
To replicate the success of expert innovators, CEOs must rethink their approach to venture building. Start by addressing these three critical questions:
1. Are we allocating enough funding to scale new ventures?
Innovation often requires bold investments. Companies must dedicate resources beyond initial experiments to ensure successful ideas are scaled effectively. Underfunding risks stalling promising ventures before they reach maturity.
2. Do we have the right talent and structures in place?
Innovation thrives on entrepreneurial teams with the freedom to experiment. CEOs should ensure they have the right mix of skills, leadership, and structures to empower innovators while maintaining accountability.
3. Are we balancing independence with strategic alignment?
New ventures need autonomy to innovate but must also align with the company’s overall strategy. Striking this balance prevents ventures from drifting too far from core business goals or becoming irrelevant.
A Smarter Approach to Innovation
Corporate leaders have an opportunity to move beyond the innovation paradox—where high aspirations often lead to mediocre results. By adopting a venture-capital mindset and addressing these key questions, CEOs can transform their innovation investments into measurable value, ensuring long-term growth and competitiveness.
This article was first published on LinkedIn on November 11, 2024
No comments:
Post a Comment