Tuesday, 18 March 2014

Innovation exploitation


  • How close it to existing solutions offered customers, can they see the fit, does it add differentiation and ability to ask a premium price - if it is incremental value then absolutely fine to be in-house and a function of sales and marketing strategy to put the benefits across
  • If more disruptive - addressing totally new needs, even new client sectors and the company does not ready have the skills to exploit then some separation should be considered
    • Options include separate divisions, joint ventures and genuine spin-offs when the parent company may or may not retain an equity stake
    • For example, telecoms operators set up venture divisions that we almost shadow VC operations but within the existing corporate structure - these were used for experimentation with new ideas, technologies etc that they did not know how they would impact on existing customer relationships, their own operations etc and wanted to limit the downside risk if things went wrong.  This enabled BT for example to play around with various dot com concepts to learn which ones would work best, which ones should be brought in-house and which let go - BT Openzone was a great example of something that went through this process and then became mainstream for BT
  • When ideas are let go, it is very difficult for the originating company to keep a constructive collaboration going and it this has to be evaluated in terms of financial outcomes.  Why let ideas go that are fundamental to the future of the business and the sector if you would have to "re-invent" the solution to fulfil your own customer needs in future - how do you know whether you are giving away the very innovations that will make the difference between success and failure
  • A lot also depends on the people involved - what is the organisation structure that would work best for the team that has created the innovation in the first place - what are their motivations and drivers, what support do they need, how entrepreneurial are they, what structure is needed to attract the right skills in to exploit the innovation, how close to the current businesses CEO field of expertise is it - apply the rule that companies should not extend themselves too far beyond the ability of the existing management team to understand.  Bringing in new leadership takes longer to settle down than it takes for the window for innovation exploitation to close on any new ideas.  Better to spin something off and retain some interest rather than lose the innovation altogether by trying to hold to ideas, demotivate people so they leave anyway
  • There is a trade-off of keeping ideas in-house if they need lots of financial and other support - spinning them off could starve them of the resources needed to accelerate and then they have to find their own channels to market, sales forces etc that might be readily available in-house.  However, this depends on how flexible and innovative the culture is in the first place to adapt to new ideas and not resist them
  • For it is not about in or out of house but the vision of the leaders, the culture of the organisation and talent pool in the company
  • Another issue is how companies are actually outsourcing innovation - being part of incubators, accelerators etc to spot what innovations are happening that could be valuable to them.  They then can decide whether to invest, acquire or support in other ways like sales and marketing.  Unilever, Bosch, Barclays are examples of this in the UK
  • Smaller companies are good role models to see how this innovation exploitation can work - they don't have the luxury of enough resources to decide often on whether to keep things in-house so have to set up creative structures to exploit their innovations: venture units, equity for innovation teams, licensing to bigger companies etc

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