Startups instead of R&D: how corporate innovations work

Companies across the globe give a lot of freedom to their business development departments and are moving away from the R&D format, where only solutions to concrete tasks are worked on. In this case, you’re letting go of what is happening in the world. Digitalization is everywhere now.

European and American corporations rent offices for innovation-related departments in the most advanced startup centers in their respective regions — Norway, Sweden, and Canada. “We don’t want to sit in a big boring office,” employees say. And the company is ready to invest in their ideas.

For example, engineers at the Cisco Innovation Center in Toronto are working on development for retail and a Smart City on the 47th floor of a business center with the best industrial landscape in the city center. In total, there are 14 of these centers in the world, each with its own specialization. Tasks come both from the outside of the business but are also born in the process.

If the project does not stir up commercial interest within the company, the innovative solution is laid out in the public domain and becomes available to anyone. Cisco believes that developing an innovative ecosystem is beneficial to everyone. The result is a good reputation and the best position in the struggle for talent.

Cisco is not the only example. For many years, Orange Polska has had its own program of cooperation with Orange Fab startups. Year ago alone, 250 projects passed through the company, with 15 selected for further cooperation.

Introducing innovations in large companies is painful, with each one solving it in its own way. For example, Chinese giant Huawei opened an Innovation & Experience Center in London in December this year to demonstrate its capabilities and work on projects using 5G technology. Despite the relevance and hype of technology, its business value is yet to become obvious. Such creative centers help to attract the most progressive to the solution.

Startups cannot be approached as typical company projects. Changes in business processes, the involvement of top management, more freedom of action, and high-speed decision-making are required. Even the largest beer companies create their ventures - an organization within the organization to search for innovations for the business and related fields. For example, the direction of AB InBev corporate incubator is expanding assortment, E-commerce, interaction with the brand, searching for and developing new categories, and research. The company helps build businesses from scratch, buys turnkey solutions, and uses minority investments. AB InBev gives startups the opportunity to take full advantage of our global supply chain and marketing to realize their projects. This is a win-win.

Startups are a more modern response to failures.

We are changing the approach to business. If everything goes badly, we made a mistake; if it is good, the company benefits. At the same time, we are trying to change the attitude towards errors. 99% of innovation is about mistakes. Failure does not mean incompetence. We need to learn a lesson and improve the next project, - says Innovation Directors.

For example, a service for frequent travelers that remembers exactly where a person likes to sit on a plane and checks in for them on a turnkey basis for flights on 200 global airlines was created “by accident” in the Lufthansa innovation hub in Germany. The team did not have business tasks. They just looked for what else could be improved in the user experience during flights.

How to make corporate startups effective for business, and not just for PR

1. Define goals. Focus on solving real business problems that require intervention now and narrowing down the search for startups to the most relevant areas. Some companies, before launching innovative programs, seek the help of consulting companies to find where there are pain points.

2. Select a format. Corporate venture capital fund (SAP, Google Ventures), accelerator (PayPal, Oracle), cooperation with the existing ecosystem or startups based on your own product (Microsoft, BizSpark program). It’s your decision. Some corporations choose different formats for different tasks. In this case, an effective startup pipeline, for example for Ukraine looks like this: 182 input projects, 30 of which correspond to business objectives, and 10 reaching the implementation stage.

3. Involve top management and department heads. Most startups know little about the company’s business, its features, and needs. Therefore, it is very important that everyone is involved in the process and shares data. Including top management. Dream day would be when employees will move from thinking like an artist to thinking like an entrepreneur. Here, you need to leave your comfort zone. Many are not used to it, and it scares them. In the beginning, the process may slip, but over time, people understand the value and begin to believe in the possibility of change.

4. Define success criteria. Each startup project goes through a scoring system, which differs significantly from the standard evaluation system of a procurement department. It is important to determine how strong and experienced the team is, how well the startup meets business objectives, and whether it has potential. It’s a big positive if there is experience in working with investors. This means the project is interesting to the market.

5. Use the opportunity. It is necessary to get away from working in the style of a research center (R&D), which is focused on solving specific problems. This format restricts thinking and limits opportunities.

So, how do you plan to add innovations and creativity to your today?