In this article in Innovation Excellence, Steve Glaveski examined the reasons why larger companies should partner with startups to drive innovation, rather than taking more traditional routes. According to a study by Innosight, nearly three-quarters of the S&P 500 will disappear from the list by 2027. In effort to avoid this projection, large companies faced with disruption posed by emerging technologies need to redefine their space in the business landscape in order to not only become but stay relevant in this rapidly changing business environment.
Implementing tired strategies such as product improvement and innovative pricing models aren’t enough to keep up with the trends. Instead, large companies ought to embrace disruptive innovation. Unfortunately, this isn’t as simple as it sounds.
Large companies mostly depend on existing customers and investors for their resources, but disruptive innovation doesn’t immediately meet these mainstream customer demands. Not only that, the market for disruptive innovation is difficult to measure, and it doesn’t immediately satisfy the growth needs or revenue targets of larger companies. However, despite these obstacles, studies have shown that companies that moved within two years of a disruptive technology first appearing were 6 times more likely to succeed than later entrants, and to much greater payoff.
So, knowing the results of buying into disruptive innovation, what are the options available successfully embrace it in light of the obstacles? Large companies can:
- Redesign internal processes and culture to support disruptive innovation
- Set up autonomous companies with their own processes and values with the goal of exploring potentially disruptive innovations
- Acquire/Invest in potentially disruptive companies in the early stages, as a way to buy the newest S-curve
- Acquire disruptive companies once they have already made it to the mainstream
Although many companies have been able to follow these models successfully, the risk of failure is often not compensated by the eventual return on investment. Many times these models fail to get off the ground, or worse, become so steeped in inner conflicts that true innovation never fully happens.
Fortunately, there is a fifth option:
- Large companies can look to partner with emerging startups with potentially disruptive innovations and technologies in a more mutually beneficial model.
Companies like Singtel’s Innov8, Telstra’s Muru-D, and Coca-Cola’s Founders Program are some successful examples of this model, and part of the reason for their success is their willingness to invest small amounts of funds in a diversified range of startups. The corporations benefit from new market opportunities and the startups gain access from corporate distribution channels and unique industry insights.
Therefore, instead of perceiving disruptive startups as a threat, large companies would be better off to view them as opportunities to explore new innovations and exploit emerging trends, using this partnership model as a bridge to the world of disruptive innovation. One of the easiest and most valuable ways for corporations to increase their growth is to get outside perspectives by thought leaders, authors, and top consultants.
Read more details in Innovation Excellence.
What’s the best way that your organization has gained a new insight through partnership lately?