The Myth of Corporate Innovation Programs

If you are in the innovation space, about every other week, there’s a multi-national corporation announcing its first innovation lab globally or at least in the region.

With some dollars for ‘innovation’ to spare from corporate headquarters, the regional managing director builds up a fancy colourful new space with some fancy screens, some colourful furniture that’s hip and cool ‘Google’ like (perhaps the token bean bags) and voila – we are now ‘innovative’.

Ok, to be fair, there’s usually some sort of program attached to this. All the self-declared smart ones in the usually sales or operations centered office can submit their ‘brilliant’ ideas to some innovation lead, who then has the responsibility to sift through them, allocate some money for some POCs and then move them through a process of development and staged funding approvals. Sound familiar? Yes, it’s not just your cool corporation that’s so innovative. Every man and his dog is doing it nowadays.

Is there anything wrong with this model? Not much, unless you want products that, well, by the time it reaches your customers, the product is obsolete, or at best, provides minor incremental revenues and do not really shift the needle for your business.

Why doesn’t this model work as well as everyone expected? Well, let’s talk through it.

First and foremost, let’s look at the funnel of ideas and innovation opportunities that could come through it.

In any given region, you might have up to 5,000 employees maybe 10,000. In most regions, the bulk of these employees are not the ultra-creative ones. They are likely to be the distribution channels i.e. full of sales folk and some technical staff who primary job is to support revenue growth. Their roles force them to think in a very clear and linear manner – there are systems, processes and rules and procedures. It doesn’t really encourage them to flex their creative muscles nor have the time to reflect on what could be a wholly alternative way of doing things or wholly different new business opportunities.

Then there’s the profit formula.

Why would I develop and promote a low cost new and innovative product that gives me a margin of $50 when I am comfortable selling my state of the art ‘legacy’ product with a margin of $1,000? Because incentives aren’t aligned, the product will probably die before it reaches the hypothetical shelves.

These are precisely the reason why corporate innovation experiments fail. They are well intentioned but misdirected efforts – efforts that are likely to go nowhere.

To really experiment and successfully scale the next $100-million-dollar revenue businesses for the corporate, there is a very specific formula that has proven to work for the world’s most innovative companies.

We have distilled it into the following six steps (not necessarily sequential):

6 Critical Steps For Effective Corporate Innovation

  1. FUNNEL: Create the world’s largest funnel for scanning qualified innovative opportunities – this can’t just be another funnel. This could be collaborating with other corporates, venture capitalists to launch some form of competition or challenge model. The funnel has to be targeted with clear measures – companies need to be solving for a human scale challenge or need that has application globally or at least regionally. The simple measure of success is if it does not have the potential to earn a hundred million in revenues by the fifth year, then it’s not worth looking at. And the funnel needs to attract from all of the most innovation nodes where the brightest minds reside; whether that is the Bay Area in California, New York, London, Paris, Berlin, Singapore, Dubai or Lagos.
  2. TEAM: Establish a completely separate and independent team of qualified, creative and wild entrepreneurial thinkers to sift through the universe and qualify the best opportunities. The team also need to get their hands dirty to mentor, guide and help build the businesses.
  3. INNOVATION NODE INCUBATORS: Fund a number of specialized incubators in each of the innovation nodes to scale the opportunities and focus on creating independently profitable business opportunities. It is critical to dedicate enough funding to these incubators to support acceleration of the propositions. In return, the corporate should have the option to buy into the companies in the future or take direct equity or preference note investments.
  4. CHAMPION: Champion the successful companies out of the portfolio – internally within the corporate to scope out opportunities to harness the distribution capabilities of the corporate and, externally to build its credibility in the wider market with the support of the corporate.
  5. FUND: Establish a dedicated investment fund to invest in the brightest opportunities that have gone through this process.
  6. INDEPENDENCE: The most successful companies need to be managed as independent entities, but with preferential access to partnership with the corporate.

Some innovation specialists call this Open Innovation. Others call it disruptive or radical innovation. Other’s call it horizon three innovation. Fundamental to this model is a deep recognition that innovation in the future is not going to be a sole corporate initiative. In the future, the only way to innovate divorced from an ecosystem of partnerships with co-collaborators and startups.

Is this how your model works? If not, what do you do differently and why has it worked? What hasn’t worked? We’d like to learn about your specific experiences.


About AREA 2071

AREA 2071 is an ecosystem to design the future that includes government, creative individuals, innovative companies, and people from all walks of life.

Together, this community imagines and creates solutions to the world’s most pressing questions, especially those posed by new technologies and disruptions to society. To design a future that benefits humanity, we need to challenge existing assumptions and create fresh social and economic models. That’s what AREA 2071 is designed to do.

AREA 2071 was launched in 22 May 2017 by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai to become the experimental nucleus of a new model extending across the UAE to shape its future, while giving hope to the MENA region and the world.

The name AREA 2071 originates from the UAE Centennial Plan 2071, the naming of which signifies 100 years since the formation of the United Arab Emirates. Through its vision and objectives, UAE Centennial Plan 2071 seeks to invest primarily in youth and to work for UAE to be the best nation in the world by 2071.