In a previous blog we explained the four types of innovation – routine, disruptive, radical, and architectural. Here, we outline the three strategies available to enterprise leaders to make these innovations a reality. These include acquired innovation, organic innovation, and partner-led innovation.
For many large corporations, acquisitions are the primary means to innovation. Taking over another company fast-tracks growth by granting the buyer immediate access to skills, technologies, customers, and new markets.
In the technology industry, where there is relentless pressure to innovate, it’s rare to find a company without an acquisition strategy. Leading tech companies are constantly buying start-ups and making strategic investments. Microsoft, for example, has acquired 202 companies, including Skype, Nokia, and most recently in December 2016, LinkedIn. And Apple, widely considered the most innovative company in the world, has acquired 83 companies – eight in 2016 alone, and one already this year.
However, it’s not just the high-tech industry where acquisitions are the preferred method of innovation. The innovation by acquisition strategy is how just 10 companies came to control almost every food and beverage company in the world, and just six companies control 90% of America’s media. While not quite to the same extent due to media ownership laws, Australia’s mass media is also heavily concentrated, with 11 out of 12 newspapers owned by just two corporations – NewsCorp and Fairfax Holdings.
The innovation by acquisition strategy isn’t an option for most. Companies that aren’t in such a privileged financial position have to work with what they’ve got in-house. But while the results may not be as immediate, it is possible to make significant market gains through organic innovation. Employees are assets that can prove invaluable in making such innovation a reality.
As the name suggests, organic innovation tends to occur naturally in the organisation. In going about their day-to-day activities, employees will inevitably find more efficient ways ti complete work tasks. This is why where shadow IT exists, so too does ‘shadow innovation’. While it may be perceived as an act of rebellion, most of the time employees introduce unauthorised technologies, apps, and devices into the workplace as a way of improving productivity and collaboration. In this way, they’re essentially doing the innovating for you.
If these shadow innovations are treated as threats to the business rather than attempts to improve it, and employees are deterred from thinking differently, you risk killing internal creativity altogether. This has long term implications for the enterprise, because the innovative talent will eventually lose patience and leave. To be innovative, an organisation needs people who will challenge the status quo.
File hosting service Dropbox is a big believer in organic innovation, and encourages employee creativity with its annual Hack Week, where ‘Dropboxers’ from all over the world work in teams to develop product and process improvements, the best of which go on to be implemented.
This method has proved highly successful for Dropbox – its Dropbox Business product, for example, was the result of a Hack Week project. And while Dropbox has also gone down the acquisition route, with almost two years since its last takeover, it could be that the organic innovation strategy has taken precedence.
The problem with organic innovation, however, is that it’s difficult to manage. Staff may come up with suggestions for how products and business processes could be improved – that’s the organic part – but the reality is that that if you don’t have strong support mechanisms in place, these ideas will never make it off the ground.
The other problem is time. Organic innovation is a slow process at the enterprise level, which is why so many give up and choose the acquisition route. The genius idea may be there, but the reality is that it needs to go through many layers of management and rigorous development and testing before it can be made a reality.
Dropbox gets around these issues by channelling all of its innovation into one week and by having a highly effective, organisation-wide execution strategy. But it’s important to remember that this is a company that was founded on the principles of innovation, unlike the average enterprise, where a change in culture is usually required.
Unlike the Dropboxes of the world, most enterprises won’t have access to the talent and knowledge required to bring about innovation within their own borders. This is why the use of partners can be crucial to the ability of an organisation to accelerate and extend innovation.
Partner-led innovation occurs by leveraging ideas, expertise, talent, and resources of a third party, such as an outsourced IT provider. This is a lower risk, more cost-effective approach, because you’re drawing on the expertise of an independent organisation that specialises in making innovation a reality.
Unless you have millions – or billions – of dollars to spend on acquiring a promising tech startup, or the means and experience to foster innovation in-house, the partner-led innovation strategy is going to be the most effective option.
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