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Innovation vehicles and where to drive them

Jonas Bohun
Striking a balance between exploiting the core business and exploring new opportunities. Innovation Manager Jonas Bohun guides you through the world of Innovation Vehicles.
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One of the greatest challenges for companies is exploring new opportunities and seizing them. Large organisations fail even though they own the technology or have the necessary capabilities within their ranks. Often, they don’t plan carefully enough or do not choose the right vehicle for the innovation.

Overall, we generally speak of seven different innovation vehicles. These vary in terms of investment volume, duration, and type of innovation. While complex scientific innovations are created in R&D departments, a new service idea might result from an intrapreneurship program. However, corporate companies need to be aware that there is no “one size fits all” vehicle that will accommodate all their needs. Instead, corporates must educate themselves on the different vehicle strengths and time horizon impacts — and deploy them strategically. We will look at the seven most common innovation vehicles, evaluate the benefits and risks, and how to implement them.

R&D Departments

Generally speaking, research and development (R&D) includes all companies’ activities to innovate and introduce new products and services. It is often the first stage in the development process.

R&D Departments are necessary for the long-lasting competitive advantage of the biotech, computer technology & automotive industries. However, Europe’s Return on Research Capital (RORC) is negative. R&D Departments are expensive to maintain and often focus too much on technology rather than products and services.

Finally, Companies with an emphasis on R&D might run into the innovator’s dilemma, meaning that they prefer to invest in incremental innovations and steer away from disruptive ones, leaving the market to more innovative companies with a tendency for disruption.

Hackathons

Corporate Hackathons are design-sprint-like events where developers, designers, project managers and subject matter experts come together to collaborate on a specific problem space. In contrast to R&D, Hackathons are part of open innovation efforts, focusing to counter the secrecy and silo mentality of a traditional corporate structure. The aim is to establish a valuable stream of ideas and to integrate talent from the get-go to create contagious energy to pervade the entire company.

Downsides include ideas often ending up in a drawer and not pursued to the end, the risk of wheel spinning (creative ideas, but no implementation) and the grasshopper syndrome (many different ideas, loss of oversight and no connection to the strategy). To counteract those weaknesses, provide the hackathon with resources to pursue novel ideas even after the event ends and create a clear catalogue or requirements to validate which initiatives are worth pursuing.

Startup Collaboration

Startup collaborations are a popular choice for open innovation where corporates try to use startups’ complementary abilities and resources. Integration levels vary from networking over partnering to merging. The goal is to develop new products and services and change a corporate’s positioning. Additionally, working closely with startups often requires a new mindset and customer focus. In return, the startup will have access to resources it previously lacked, such as corporate financial resources or strategic management.

However, be aware that, even though you prepared extensively for collaboration, communication and mindset challenges might persist and must be overcome to be successful.

Intrapreneurship Programs

Intrapreneurship programs are structured programs that identify and educate intrapreneurs and empower them to ideate, structure and validate business ideas. They usually last between 3-6 months and have dedicated resources. Not only will intrapreneurship programs bring forward various new ideas, but they also serve an education and transformation purpose. Employees will have the chance to take responsibility and take charge of a project and bring a product or service idea close to the core to life. Employees will acquire novel skills, and cross-functional collaboration will be fostered. Additionally, intrapreneurship programs will strengthen your brand as an employer.

Intrapreneurship programs are effective vehicles for learning within the company and productive innovation, albeit they bring about a high organizational effort. Check out what a program like this looks like for the Austrian Federal Railways – the leading mobility and logistics provider in Austria.

Cross-Industry Innovation

Cross-industry innovation is a clever way to jump-start your innovation efforts by drawing analogies and transferring approaches between contexts beyond the borders of your industry, sector, area or domain. A distinction is made between two types of cross-industry innovation: (i) the outside-in process and (ii) the inside-out process.

The outside-in process describes transferring existing solutions, knowledge, and skills from other industries into one’s own company. An example of this could be a company that cannot solve a certain problem because the necessary know-how is unavailable in its own company. According to the outside-in process, such a company could use know-how from other industries to solve the problem.

On the other hand, the inside-out process describes a scenario in which a company uses specific solutions, knowledge and skills to develop new products as part of a diversification strategy and/or to work in new markets.

The benefits of cross-industry innovation are the sharing of costs and risks, exchanging knowledge and transferring ideas into new contexts. But be prepared to conduct long negotiations.

Venture Building

In corporate venture building, established companies build separate ventures from scratch. A new brand, team and revenue stream is created to target untapped opportunity spaces, often outside the existing business. Venture Building allows for fast implementation and productive innovation. However, it is necessary that the corporate has the knowledge, or acquires skills, to execute innovation from scratch. Another option is to share the risk with a dedicated external venture builder, especially when one opts for Venture Building as a Service. Be aware that there will be little impetus for long-lasting transformation if you obtain services.

Challenges that must be overcome are the legal setup of a new venture.

Corporate Venture Capital / M&A

Corporate venturing has become a fundamental part of the corporate innovation strategy, letting them tap into external innovation ecosystems. Corporations can directly invest in interesting start-ups. Corporate VC allows fast-track answering to customer needs. However, the growth strategy should align and/or overlap with the innovation strategy since corporate VC and M&A mean long-term commitment and are rather costly. Even when the bureaucratic efforts are concluded, there might be conflicts of interest and a clash of cultures between the merging entities.

Conclusion

Innovation in a corporate context can take many shapes and forms. Finding the right vehicle for one idea is paramount to ensuring success. A full-fledged innovation strategy might also consider more than one vehicle and combine them to ensure maximum traction for novel ideas.

Do you need some sparring to figure out what makes the most sense for your business? Let’s talk!

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