Internal vs External Innovation

By June 9, 2016 blog No Comments

Can Companies Self Disrupt?

Or why you might need to go outside your company in order to effect true change.

Given the widely acknowledged corporate innovation paradox, how do companies go about innovating? Most lightbulb-801941_500large and midsized companies are not properly organized to implement an innovation process. As one expert on the topic clearly stated, “Self-disruption is not a competency many companies have”, which is why most innovation is outsourced to those with separate vested financial interests.1)

Organism vs Ecosystem

John Geraci, Former Director of New Digital Products at the New York Times, made the observation that one of the oft missing ingredients from a company’s innovation strategy is adopting an ecosystem mentality. In his experience, many large companies function as a self-contained entity and as a result, are slow to adapt and absorb components from the outside world. A company that adopts an ecosystem mentality understands that the solutions to your challenges are beyond the organization and that you must locate and interact with them to thrive.2)

Innovating from the Outside

One question executives should ask their management teams is, where do they find new ideas? The biggest obstacles are the fear and inability of organizations to look outside their own walls.

Given the rate of technological change and the sheer volume of knowledge being generated, if you do not have a plan to to source ideas from external sources, you miss opportunities to identify radical new ideas and leverage growth from industries outside your own.

One of the solutions to this issue is to look outside the corporate structure for innovation, hence the raft of “innovation partnerships”, but that challenge then becomes how do you make sure that this isn’t just big shiny ball syndrome?

Shared employees with noncompeting companies. In 2008 P&G and Google swapped two dozen employees for a few weeks. P&G wanted greater exposure to online models; Google was interested in learning more about how to build brands.3)

Engaged more outside innovators. In 2010 P&G refreshed its C+D goals. It aims to become the partner of choice for innovation collaboration, and to triple C+D’s contribution to P&G’s innovation development (which would mean deriving $3 billion of the company’s annual sales growth from outside innovators). It has expanded the program to forge additional connections with government labs, universities, small and medium-sized entrepreneurs, consortia, and venture capital firms.4)

Brought in external talent. P&G has traditionally promoted from within. But it recognized that total reliance on this approach could stunt its ability to create new-growth businesses. So it began bringing in high-level people to address needs beyond its core capabilities, as when it hired an outsider to run Agile Pursuits Franchising. In that one stroke, it acquired expertise in franchise-based business models that would have taken years to build organically.5)

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