Challenges corporations need to address head-on to remain resilient in an ever-changing environment.
Partner, Alchemist | Managing Director, AlchemistX
The Three Headwinds to Corporate Innovation
Corporate leaders today face a tall task of addressing and responding to the world around them. With the increasing rate of acceleration in technological advancement and the uncertainty of how to stay culturally relevant, it’s never been more difficult for leaders to innovate effectively and implement changes within their organizations.
The folks I’ve been speaking to recently have a deep desire to change how their organizations innovate. They want to adapt quickly to industry advancements and consumer trends and to remain resilient in today’s ever-changing world.
However, I consistently see three headwinds that are preventing corporations from accessing the innovation being built in the world around them:
- Knowing where to focus
- Finding who is building the state-of-the-art
- Solving the Adoption Dilemma
What stands in the way of corporate innovation today
It’s never been harder to stay connected to the pace of change around us. Corporations are facing existential challenges and need to connect to the people driving a changing world to stay competitive. Most of the time, corporate leaders encounter three points of friction when trying to affect change in their organizations.
Addressing these challenges and being deliberate about solving these friction points can enable corporations to adapt to a changing world and remain resilient in the face of so much uncertainty.
1. Knowing where to focus
Corporations have two key questions to answer when evaluating their strategic goals:
- What are my priorities?
- Which priorities should be addressed by outside innovation?
The secret to finding answers to these two questions is understanding your organization’s core competencies. Innovation against your native expertise is something you can handle internally. For the rest, look outside.
This can be emotionally and intellectually difficult, as corporate leaders today face myriad strategic, operational, and tactical challenges, all seemingly existential to the business. The organization’s leaders must understand what their business does uniquely well—think MBA 101 “core competency”—and realize that all other challenges they face should be solved by leveraging external innovation.
One story I often tell is from my time at Microsoft, when I watched in amazement as the well-intentioned keyboards/input team attempted to build a soft (touchscreen) keyboard from scratch. This is classic and understandable decision-making—it’s the Keyboard team, right? At a software company. Shouldn’t they build keyboards? Actually no. They were able to apply fewer resources than the typical startup, were constrained by enterprise forces inside the company, and had predictably poor results. In my opinion, the team forgot that what they were excellent at was integrating input technology broadly into the OS platform—not actually creating novel input methods. In the end, Microsoft bought a startup to close the gap.
What most corporate leaders get wrong is that they believe they’re the best positioned to solve every challenge that their organization faces. This is simply not true and will be detrimental to their abilities to respond quickly to change.
The lesson? Pick where to focus your external innovation efforts.
- Evaluate your priorities and key challenges.
- Test against your core competencies and resource allocation constraints.
- If the challenge isn’t in something you have an inherent right to be the best in the world at, look outside.
2. Finding who is building the state-of-the-art
Once a corporation determines which challenges should be addressed internally vs externally, the next step is figuring out who to work
with.
This has never been harder. The same technological tools that are letting more and more people be builders, creators, and developers means more and more people are becoming builders, creators, and developers. There is more noise in the system, making it seem overwhelming to identify who’s capably and competently moving the state-of-the-art forward.
Many corporations mistakenly replace external innovation with the procurement team. Picking a solution off the shelf or contracting with a major IT services company to build something new is a massive blocker to creating real progress. Procurement is, in the end, a risk-management function in most businesses, and if you’re trying to inject creativity/innovation, you are, by definition, taking on risk.
Instead, corporations need to seek out the real innovators building state-of-the-art solutions. More often than not, these innovators are entrepreneurs at the helm of startups, with a deep thesis on where the world is heading and what we should build to bring it there or adapt to inevitable change. Naturally, this might feel uncomfortable, but the solution to these big, hairy innovation challenges won’t be large corporations themselves.
I’ll note that this is not easy—it never is. Myriad organizations promise startup connections, which often turn into innovation theater. So, I will leave you with a thought: How do you find the builders, and how do you sit down for real discussion and dialogue to understand their view on the future of the world? Do that, and you’ll be ahead of 95% of your competition.
3. The Adoption Dilemma
Finally, we come to the most intractable problem that corporate innovation has faced for years. As outlined repeatedly in the literature—perhaps most famously in the Innovators Dilemma—corporations are fundamentally focused on the efficient delivery of what they understand, not experimentation with high-risk, high-reward new things. This means that even if you understand your challenges, even if you have found the builders of the future from whom you can learn or with whom you can partner, actually doing something is… hard.
Once you’ve identified the areas to focus on and where to look externally, you need to ensure your organization is set up to drive real change. This means dealing with incentive structure, timeline expectations, cultural friction, and risk-management policies and organizations. It also means asking hard questions such as, “Does my team get punished for failing or rewarded for learning from failure?” Strong executive leadership is universally required to provide not just the vision but also the aircover and leadership accountability to support teams taking risks.
A common mistake I see organizations make is having an innovation team that operates independently from the core business. A connection must exist between the two. You must have a team that is free to explore, experiment, and create but also be well enough connected to ensure that it’s working on real priorities for the business and that it can actually drive change into the product and business lines.
Implementing key innovation objectives has to come from the top down, beginning with corporate leaders and executives setting the stage for which innovation challenges the company will focus its resources while providing connection points and often “side doors” around processes that would get in the way.
Who got it right?
Sadly, there are few examples of truly great companies that have successfully set themselves up for constant and ongoing innovation.
In recent years, Meta, as a founder-led company, has proven it can reinvent itself time and time again. Microsoft, under Satya Nadella, has done well implementing a learning culture, walking the line between focus and willingness to take risks.
These two companies, albeit one founder-led and the other CEO-led, have deliberately picked their core competencies and ruthlessly connected to external innovation for everything else. Their corporate leaders have set the tone for the entire organization, prioritizing which key areas to focus on.
There are others—the Amazon of last decade, Nokia over the centuries—but exceedingly few because, again, this is hard.
Why it matters
Corporate leaders have to be intentional about tackling their innovation challenges head-on in today’s ever-changing environment. With new technologies improving faster than ever, the organizations that are successful in embracing this change will be able to stay culturally relevant while other companies get left behind.
AlchemistX is the corporate and government services division of Alchemist Accelerator. We partner with industry-leading corporations and governments, take the expertise and tools that have helped make Alchemist startups so successful, and bring them to specialized programs around the world. Alchemist has become a critical hub connecting enterprise founders, VCs, corporations, and mentors.