Around the world and across industries, enterprises are facing tremendous market upheaval. Transformation and disruption were the new normal well before the pandemic, but the coronavirus crisis accelerated certain trends toward innovation and digitization and led to the fundamental rewiring of old business models.
Today, all businesses need to be more customer-oriented, and enterprises must learn to iterate quickly and roll out new products at the speed of customer demand. It’s no longer possible to make five-year (or even three-year) plans because a company might be operating in a completely different market in those time spans. It’s only by becoming more agile, efficient, and ultimately innovative that organizations can hope to stay in front of trends — and stay competitive in the marketplace.
Overcoming the ‘Enterprise Mindset’
It’s easy to see why innovation doesn’t come naturally to enterprises. As certain processes prove to be reliable, large corporate machines tend to stick to these known commodities, and they’re more deeply entrenched as companies become more risk-averse over time. Even large organizations traditionally seen as innovation engines have to come face-to-face with this trajectory at some point, and a recent New York Times article highlighted just such a reckoning at Google. Fifteen current and former executives who asked to remain anonymous described a “paralyzing bureaucracy” and a tendency toward inaction — concepts close to heresy at a company once known for rapid development and “moonshot” big ideas.
Indeed, the business landscape is littered with the broken hulls of companies that failed to change with the tides. The abrupt tumult of the pandemic, for example, left brick-and-mortar retailers like J.Crew and Neiman Marcus bankrupt, and more than 8,300 retail stores closed in the United States in 2020. But is the pandemic completely to blame? Retail has been trending toward e-commerce for a decade, and those companies were unable to meet customers where they wanted to shop.
Thomas Cook is another example of an organization that failed to stay relevant with the emergence of easy online booking services, more flexible travel companies, and budget airlines that all stole significant market share from the British corporation. Companies such as Airbnb and VRBO were the final straw, offering a combination of unique stays, painless bookings, and generous cancellation policies that attracted large swaths of the travel market in a short time.
Business will always have winners and losers, but when innovation stagnates, even the most established enterprises live on borrowed time.
Investing in Innovation
It makes sense that many enterprises struggle to innovate. Large organizations are hardwired with KPIs, performance incentives, reporting lines, and other factors that make it easy to stay the course and difficult to stray into the unknown. Yet the failure to pivot and think like a startup can sometimes cause the mighty to topple and fall.
To encourage innovation in your own organization, look to startups and how they identify, experiment around, and ultimately build new assets that can occasionally rise up and compete with the titans in an industry. Not sure how to think small? Here are three possible steps:
1. Create a separate team responsible for innovation: Many organizations opt to create a separate experimentation unit. This team reports to the CEO in order to get adequate management, priority, focus, and investments, but it’s chartered to look at business differently. That might mean experimenting with new modules, exploring new ways of accessing or servicing customers, or seeing a new platform through ideation, pilot, and launch stages to bring in new business. By keeping these efforts isolated from the larger company, you can avoid internal resistance and operate outside the confines of normal processes while still finding resources to fund the experimentation.
2. Create a separate company outside the parent organization: Sometimes innovation in business models demands a more dramatic approach, and creating a completely separate entity outside the parent company provides the funding model, flexibility, independence — not to mention the startup-friendly culture, processes, and policies — necessary for an initiative to thrive. There’s always the possibility of failure, but if it succeeds, it will succeed faster because it’s an empowered unit outside the bureaucratic and risk-averse tendencies of the parent company.
3. Create an internal incubator: An incubator is a great way to bring together ideas from different parts of an organization. Passionate employees who want to maintain their existing positions can scratch an itch for innovation by bringing their big ideas to the incubator, at which point the incubator team can sort through and identify the ideas with the most promise. With some investment, the ideas with scalability could one day blossom into startups that help the organization solve bigger problems than anyone thought possible at the outset.
For the modern enterprise, innovation is the only way forward. Ironically, the best way to inculcate it might be to look to the practices of startups. There are many different ways to go about creating an innovation engine within your enterprise, but one of the three options above might be the best place to start.