Industrial innovation companies have more innovation activity than ever - accelerators, labs, venture arms, partnerships - yet the economic impact remains marginal. Yet, years later, most executives struggle to point to measurable impact on growth or valuation.
The usual explanations are cultural: risk aversion, legacy thinking, slow decision making. But those explanations don't survive scrutiny. The same organizations successfully execute billion dollar plant expansions and platform transitions.
The real difference is more mundane: Industrial innovation inside corporations is financed like a product development program, economically is behaves like a venture investment. And it is this very mismatch that determines the outcome long before the technology reaches maturity.
The vast majority of executives are being told they are running a portfolio, but in reality they are managing a bunch of projects and apply a project logic consisting of fixed budgets and predefined deliverables where success is measured against plan and deviations are branded as failures. Often corporate innovation projects are expected to prove they work even before funding.
Venture logic of staged capital, frequent pivots, and unknown outcomes is fundamentally different where success is measured by learning and termination is success if risk is removed. The ventures are funded to discover whether something works.
The symptoms are only to well known and are directly related to the lack of stage gates and kill criteria. Because companies require certainty upfront, business cases are inflated, teams optimize for approval and not truth, cancellations get pushed off, and scaling happens either too later or never.
The most common questions I have encountered is "how do we make innovation succeed in my company?".
The better question would be "how should we govern investments with unknown outcomes"?
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