November 15, 2019

Bet Your aaS

IBM owned the world of computing—but stumbled when mainframes gave way to PCs. The Gap was a retail behemoth for decades until its preferred milieu, the shopping mall, crumbled in the face of ecommerce and recession. The music business saw fat margins collapse when digital distribution arrived, but it took the major labels more than a decade to recover from the free-music whammy of Napster and others.

What’s wrong with big companies? Can’t they see change coming?

Of course they can. But here’s the problem: big companies get big by doing one thing really well. When all of your assets are aligned and optimized for mainframes or mall stores, it’s hard to move fast. Or even, in some cases, to move at all.

Which isn’t to say that big companies don’t try. And there are successes—think of Microsoft shifting from shrink-wrapped software to a thriving cloud service platform. Or who can forget the genius repositioning of Old Spice?

Arguably, big companies are getting savvier about innovation. And a number of service firms (Spark No. 9 among them) are evolving to help them. We highlight a few of note below.

Bet Your aaS

One way to avoid having your lunch eaten by startups: own the startups—or at least a piece of them. But not every megacorp is great at venture investing, and even those who are may not want to make the fixed-cost commitment required.

Enter Venture Capital-as-a-Service. VCaaS is a relatively new offering from pioneers like Touchdown Ventures and turf-protectors like Bain & Co. Providers offer a range of services—everything from strategy to deal flow to exit—to large corporations that want access to innovation beyond their campuses. Seems like a thoughtful solution, particularly in industries where innovation requires heavy capital investment, making risk-sharing attractive.

Bring Muscle

For those behemoths who have adjacent new business opportunities but lack resources to pursue them, enter the other two of the Big Three consulting firms.

BCG Digital Ventures launched in 2014 and works with corporates to incubate and build new concepts. McKinsey recently joined the party with Leap by McKinsey, which seems to use a mix of collaboration and training to coax innovation out of the most recalcitrant giant.

Innovation consultancies have been around for decades, of course, and firms like IDEO, ?WhatIf!, and SY Partners help their clients navigate change via strategy and product development. But the recent trend seems to focus not only on catalyzing internal startups, but also on building organizational muscle for sustained innovation.

Love a Lab Rat

Another strategy: innovation labs which, as this piece about why they fail points out, come in many flavors. Accelerators, incubators, research hubs—whatever they are called, you can’t walk a block without finding one in NYC, and it is surely similar in other cities. (Indeed, CB Insights has cataloged 75 of them here.)

Each flavor of innovation lab is different with respect to how internal they are to the corporate parent. Many companies, like Deutsche Telekom and Samsung, run their own incubators and accelerators. But service providers exist in this space, too—Techstars, Nestholma, The Bakery and others provide accelerator services for companies like Johnson & Johnson, Nordea and Amazon.


Test the Water

Our favorite strategy for corporate innovation is, of course, our own: working with companies to develop a test-and-learn culture. We have never encountered a big company that didn’t have lots of great ideas floating around. The challenge is usually one of two: new business concepts that are so undeveloped that they seem unworthy of investment or devotion to a single concept that results in spending too much too fast.

Turning ideas into action is important—research suggests that ideation acceptance drives profits. But the risk associated with nurturing lots of ideas can quash innovation. So what’s the answer? Quantified validation at every step of the innovation process.

How does it work? It’s all about bringing new concepts to life visually, sometimes before they exist, and testing customer reaction in venues where people expect to encounter new offerings. The resulting data almost always shows the path forward. And most companies have all the right resources to test and learn—they just need a little nudge to get things started.


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