Analytics · Business Analysis

What can be done to unleash innovation with larger corporations?

Alejandro Cremades Executive Chairman at CoFoundersLab

Last updated on August 16th, 2017

Corporations experience significant challenges when trying to keep up with innovation (see studies from MIT and HBR here and here). Corporations are essentially meant to deliver, not to discover. The lifespan of S&P 500 companies has decreased from 60 years to 10 years in the last few decades and the average CEO tenure to 5 years.


With 200,000 mid-market companies (between USD $100M and USD $3B in revenues) in the USA and over 19,000 large corporations (over USD $3B in revenues), there seems to be a market opportunity here. Corporations have done many attempts to drive innovation by partnering with accelerator programs, creating venture arms, spinning out corporate innovation departments, spending millions on consultants, etc… but so far, most have failed to produce results, with the exception of a few.


If we take into account that most corporate innovation departments spend at least USD $3M in fixed costs for salaries the potential market for serving these companies could be USD $6B+.


A good case study of how corporations fail to drive innovation is General Electric. They implemented in 2014 FastWorks with the intention to apply the lean startup methodology within its organization. Three years later FastWorks does not seem to have impacted GE’s share price and the share price has dropped over 30% under Jeff Immelt tenure costing the company USD $150 billion in market value.


What services do you think would drive value and unleash innovation in larger corporations (with USD 100M+ in revenues) by leveraging the CoFoundersLab braintrust (community)? What effective strategies should be implemented to grow the CoFoundersLab braintrust?

Thanks so much in advance for the help :)

Dom DaFonte I build products and see if they stick.

Last updated on August 16th, 2017

First thing I'd like to highlight is that innovation is only one part of building a successful business. Alongside innovation you need operational excellence, a good marketing / sales team, good leadership and good timing. All of that consumes a lot of full time resources to execute properly.


With regards to General Electric as an example, they are still very innovative, arguably one of the more innovative companies in the US. You can see here that they have a continuous flow of patents. http://stks.freshpatents.com/General-Electric-Co-nm1.php. Their share price is falling mostly due to their exposure to Oil markets and a change in leadership which everyone is uncertain of.


As someone who was in GE's leadership program (IMLP) I can assure you that it's one of the experiences in my life that triggered my entrepreneurial spirit. It is like a Y combinator and has built strong leadership and entrepreneurship throughout the company.


I'd also highlight that not all companies require constant innovation to be a success. If customers like your product, it's sometimes best to focus on how to supply them with that product more efficiently (operational items) than how to spend time on trying to change a good thing. Reynolds wrap is one example I could think of, or the variety of food products which pride themselves on coming from a generations old recipe.


If I'd offer advice on how to offer a service that helps foster innovation, I'd recommend focusing on either internal portals that help employees come together in a hackathon sort of way around a problem or idea, or perhaps a data science type tool that trolls through company data to identify opportunities.

Hope that helps and good luck.

Alejandro Cremades Executive Chairman at CoFoundersLab

Last updated on August 18th, 2017

All- many thanks for your thoughtful responses. They have all been extremely helpful when exploring this possibility.


I wanted to share that in the past few days I had the opportunity to speak with several corporations. They all seem to be interested in a venture builder model where CoFoundersLab could help them in finding the right cofounders to execute on a spin off company financed by the corporation itself. The process could be the following:


  1. CoFoundersLab connects with the corporation
  2. The corporation tells the CoFounderslab team which areas are of interest to them
  3. As a result they tell us what spin off company could make a difference to their operation
  4. CoFoundersLab will then connect the right cofounders with this spin off idea and charge an upfront fee that could be shared as an incentive with the entrepreneur. At this point CoFoundersLab is out of the picture and the parties are in touch directly.
  5. The corporation will then finance the operation and will let the startup be independent in order to execute
  6. Based on milestones achieved by the startup after a certain time the corporation will decide if they want to continue financing the startup or pull the plug and shut the operation down
  7. In the event the corporation decides to continue financing the startup they will then have to decide if they want to integrate the startup within the corporation or continue to let it run independently


I am not sure if this is the right answer to unleashing innovation in larger organizations... There is obviously not one single answer but many of them that could contribute to address the concern in the market. My goal is to find a way in which we can unleash innovation and have elevate our entrepreneurs.


What are your thoughts? Could a model of this nature work and deliver value?

Noah Cardona Founder & CEO at nacgenX, LLC | Principal at Cardoson Holdings

August 16th, 2017

I think you nailed it on the head with the statement of "corporations are meant to deliver."


In my experience (definitely not a large corporation) the executive/management personnel of the organization should always keep the core business at the center of focus. However, whether it's a venture arm, incubator, etc., some part of the infrastructure needs to have room to maintain innovation awareness.


Also, I'd like to throw this into the conversation; I innovation does not necessarily need to come internally, but if someone (an employee) develops something great, then they should have the chance to speak up or at least an opportunity for discussion. This could be in the form of passing/vetting it through the chain of command or even quarterly events allowing employees to qualify to pitch ideas (ex: tech companies holding annual hackathons or dev presentations/competitions allowing for innovation recognition of personnel, while also allowing the organization to retain most if not all ownership).


Another option - which again, takes part of the organization to maintain innovation awareness - is to look for licensing or purchasing opportunities from smaller entities (even as small as a proven startup not on the map) that hascreated something innovative aligned with the organization's goals. This is not only good for the smaller entity (which has innnovation but not the resources to deliver), but great for corporations to capitalize on innovations where they are able to quickly deploy (having the resources to deliver), having the existing network (I understand that this is similar to a lot of incubator programs, but the point I'm stressing is outside of the organization).


A win win scenario is always great and often times more cost effective when identifying innovative founders early on and proposing a buyout, royalty/license, or majority investment deal while the valuation is lower and the innovators are not on the map (that $3mm in venture arm salaries is often comparable to a buyout of an innovative company, at the startup/proof of concept valuation).


Great question for discussion and I look forward to other's thoughts/points/suggestions!


- Noah

Larry MacDonald Explorer identifying previously unseen opportunities

August 16th, 2017

I believe large corporations want to buy successful small companies. They are not good at creating or building internally (absent a leader who was a successful entrepreneur).


Why? There is an autoimmune proclivity that leans toward eating its young.

Dane Madsen Organizational and Operational Strategy Consultant

August 16th, 2017

Larry has it simply and cold. The Innovator's Dilemma is still valid. Process and structure prevents internal innovation and internal investment arms are rife with overpaying for nebulous ideas and assets. It does not make them bad, it makes them different. Having sold three businesses to large companies, then to watch them languish and lose direction, even then, large companies are ill-suited to acquiring innovation.

Steve Karmeinsky CoFounder City Meets Tech / Lean Capital Ltd / Placeholder Ltd

August 16th, 2017

In the UK https://touchpaper.org was set-up just for this purpose

Daniel Andrade Grau CEO at Harmony Inc. | Inventor | Serial entrepreneur |

August 18th, 2017

What they overlook is that we are currently neglecting existing resources that we have in the process of entrepreneurship and recruiting innovative talents, the lack of re-evolving our thoughts, makes us postpone the simple concept of evolution / future, so today We have few CEOs that are sustainable because they are stagnant by the social, economic and innovation models, the new CEOs stop reinventing in improving them and commit themselves in creating evolution and introduction to the future, companies, Brands, strategies, systems, Innovations, etc. . That give us the way to the future, today there are the resources to innovate in an integral way, changing the world, quality of life and us of the introduction to the future and continuity of that vision of future, we must update the profiles of all Participants of these processes, today more CEOs are created than Serial and / or Visionary Entrepreneurs.

There is a lack of all the people of large corporations in updating and venturing (innovation) in new visions, that is why we must consider the integral innovation, that is why there are very few Job, Zuck, etc. what happened with that passion, inspiration , Etc. to innovate? Where is the innovation of those visionaries who managed to change the world, ideas of 1M + / 1B + and step to evolution, in which part of the world markets, systems, ecosystems are stagnating? (Being that we know that many of them were not the first and now they have the resources ?, now we need many CEO's that work the serial entrepreneurship with a focus on changing the world, giving global and globalized solutions, high performance ideas and projection returns Of 6B +, often changes to these geniuses is affected by poor access to 1M + resources, mentor as they neglect the personal and synergistic empowerment of the team, do not generate the freedom to implement ideas or business plan, vision, dreams, like But they did not become sustainable or integral, they only focus on finding new sustainable businesses and not the real busuqeda to talent that can continue to evolve its companies, applying resources and portfolio, generating and Influencing changes in the world and evolution to the future, stagnate in innovation and vision, possess the resources and freedom, Why change the Factors of tolerance to risk / innovation to apply a sustainable innovation / Vision of the Future?

For that reason its low performance in encubadoras, accelerators and participants since it is necessary to handle in a better way integral factors at mental level.

Today the systems are not revitalized, they do not re-evolve, they do not innovate because they are not flexible or massive or viral and they fail or they remain in the way strategies or ideas of businesses and they do not achieve the projected thing nor impact in the change of the world / Vision (remembering that a vision is created with passion, inspiration, etc.) and does not generate that innovation, those ideas, tools, systems, massive networks, technological implementation and evolution to the future, Big companies often only appreciate information in Contexts of present century but without that vision to the new century until.

I consider myself to be the CEO's, Serious Entrepreneurs, inventors who never give up the adventure feeling of new and bigger challenges to create / innovate with answers and solutions, both with products, Systems and Ecosystems, because like big companies I see These opportunities, but to what extent the team tolerates the creation / risks of these business ideas plans.

My question why postponing the introduction to the future and solutions to the systems, Influencing millions of people worldwide, giving real solutions that improve quality of life, inspire and inspire others, generate new experiences of life and usability of existing resources and develop , Effective solutions to the systems at all levels, why continue to delay and decrease their flow,

Knowing that today we need to increase exponentially.

If they want to work ideas and solutions to the current needs of these answers.

Daniel.andrade.grau@gmail.com

Thank you network and is a great topic to discuss, I hope to continue sharing my knowledge and experiences.

Narayanan Sundaresan Service Delivery Manager at Atos India Private Limited

August 16th, 2017

Interesting to know and thanks for sharing. There are plenty of Innovation platforms all over trying to create marketplace for ideas and creating ecosystem to realize them as well (intuitbrainstorm.com, innocentive.com, ideastorm.com, openideo.com, ambithink.org, to name a few) Innovation is no more bound by walls of the company and organizations worldwide are realizing the need to tap talent through all possible channels. What organizations really need to avoid are the common errors in innovation process and evaluate the gain-loss appropriately. Every innovation effort has to cross the hurdle of appropriately evaluating the gain-loss - avoid the mistakes of choosing wrong ideas - Fail cheap and Fail fast as well as avoid false -ves (Interesting story on making a business model out of the false -ves - http://timesofindia.indiatimes.com/business/india-business/indian-origin-biotech-entrepreneur-vivek-ramaswamy-raises-1-1-billion/articleshow/60015177.cms).

Lawrence Schrank Managing Director at Catalysis Consulting

August 17th, 2017

What is needed is innovation in the models themselves, we need to think of hybridization of entrepreneurial system and entrepreneurial ones, where is it written in stone a new paradigm (or several) cannot be tried? Incentivise creativity and allow employees to create startup inside the org. Its great, we have done it, the company becomes the major investor and has a great equity position, as well as first rights of refusal. Here in Asia it is particularly effective since investment are rare, due to the low quality and weakness in the teams, so..mitigate these weakness by supplying the core skillsets and support services, legal financial, even BD and allow great autonomy to the creators.

John Bilicki III

August 17th, 2017

The problem businesses have simply put: they don't have the perspective to understand why they're either wrong or to perceive what parts are missing. There is effectively an effectively complete disconnect between the business and their customers and/or potential customers.


Mozilla (corporate entity responsible for the Firefox browser) will be destroying a large and very critical subset of their user base with Firefox 57 later this fall. The reason? They're dropping support for any meaningful browser customization and forcing their preferences on users. It's a completely suicidal move that makes it blatant that either the leadership at Mozilla is at best blatantly ignorant of their supporters or at worst outright disregards their most critical supporters.


"But wait, we do user surveys!"


Bull.


Microsoft is known for doing user surveys but they never inquire to their customer base. Just look up "How Real People Will Use Windows 8" on YouTube. Apple? The Mac Book Pro touch bar shows how out of touch Apple is with their core audience for that product.


I see money just laying around everywhere and I'm just flabbergasted at how inept companies are and wish I was better positioned with the right connections to come in and swoop up all those paying customers. There are so many markets to make tons of money in but does any one pay attention to what matters? Just imagine how much richer the entire planet would be at all levels economically if people knew how to listen to their customer base and potential markets.