(This article on corporate innovation was authored and originally published by the Silicon Valley Innovation Center)
Rapid advances in digital technologies and the resulting disruptive innovations sweeping multiple industries has made corporate innovation an imperative. This (non-exhaustive) list from Investopedia identifies 20 industries that are about to or already undergoing massive disruption fueled by digital technologies. While corporations are responding to this twin threat and opportunity by applying digital transformation methods and other initiatives, there is one weakness these strategies have that can thwart the overall impact of such internal efforts on the corporation’s defensibility and profitability.
This weakness has to do with commercialization of corporate innovation. While most corporations are rushing to incorporate cutting-edge digital technologies into their existing products or create new products altogether, they must be cognizant of the fact that the market will ultimately determine the viability of such innovations. To put it differently, customers will not buy technology, but solutions. This is a strong recommendation Andrew Goldner and Sean Sheppard, co-founders of GrowthX, put forward when we spoke with them about commercializing corporate innovation.
Find Your Truth
“It starts with the truth,” says Sean. When companies embark on a corporate innovation agenda, they must start by first determining the truth of the effort they are undertaking. If new product development is underway, the truth could mean determining whether there is product/market fit, or put differently, whether a market exists for that product, or if a pivot to something different is necessary, or whether to shelve the product altogether. The challenge corporations face is they lack a framework by which to discover this truth. Such a framework is necessary to provide a roadmap that is replicable across all innovations the corporation chooses to undertake.
Undertaking such a framework requires either an internal entrepreneur or an entrepreneur-in-residence, which could be one or a handful of people tasked with rapidly iterating on feedback emanating from the market on a given innovation. This iteration must be done in small non-scalable ways in order to arrive faster at the truth about that innovation. “Can you determine whether or not there is a business model and a way to monetize that innovation? And what does that look like? How big is that opportunity beyond your early customers?” are some of the questions Sean urges corporations to ask about their innovations. The answers to these questions will often point to the truth about the innovation.
Establish Functional Learning Organization
“You have to believe that learning leads to revenue and if you do believe that and the organization is behind it, you’re going to find your truth,” counsels Sean. Andrew provides more perspective to this by adding that corporate culture is often a barrier to finding this truth. As entrenched corporate culture and mindsets are difficult to replace, the duo point to a more measured and effective means of achieving incremental change. They call it establishing a functional learning organization. “Do it in very small bits. Try to create functional learning out of small groups and teams,” explains Sean, “to establish measured learning and entrench data-driven decision making.” The importance of starting with measured learning is that it creates momentum that leads to the next step, and then the next.
For this strategy to work, says Sean, “you actually need to be out interfacing with those customers and those early customers, which you shouldn’t be selling to, you should be recruiting for joint development.” This points to a crucial factor corporations must address throughout their corporate innovation cycles; listening and learning from the market is tied to revenue. As the small units within the organization undergo functional learning and increasingly find the truth about the products they are responsible for, there emerges a direct correlation with the organization’s revenue. Sean sums it up this way, “If you don’t have that mindset and people don’t buy into the fact that learning leads to revenue, then more often than not (your corporate innovation agenda) is going to fail.”
Seek Profitability Opportunities
“Where we find the biggest gap to be addressed that’s holding most big companies back from the big bets they’re looking to make is the commercialization,” advances Andrew. He goes on to explain that most innovation that goes on in corporations has to do with improving the status quo, not making disruptive big bets. While conversations around innovation may be ongoing within corporations, what is often missing is the how, he says. Sean provides an answer to this dilemma:
This creates a scenario where corporations must put more emphasis on market development earlier in the technology and research and product development phases to figure out what they should be spending their time and money and resources on by actually solving problems for customers and end-users instead of just building cool tech.
Such a market-first, product-second mindset is what corporations need to foster within their teams in order to discover commercialization and profitability opportunities within their innovation agendas before spending substantial resources upfront.
Sustaining Corporate Innovation Commercialization
“It’s not about finding a market; it’s about finding the truth,” emphasizes Andrew. While it is advisable for corporations to partner with startups from Silicon Valley to build next-generation products, finding the truth means knowing when corporate innovation will be profitable and when it may not be. The imperative, therefore, becomes to seek out the truth behind your corporate innovation before undertaking a full-scale roll-out. Sean concludes by saying that to commercialize corporate innovation, the current economy will force product companies to transform into services companies that focus more on listening to the market through data, than on building new products.