Corporate Innovation. A 30 minute tour of best practices of Global & Silicon Valley Innovation Leaders

Transcription

1 Corporate Innovation A 30 minute tour of best practices of Global & Silicon Valley Innovation Leaders

2 INTRODUCTION Fifth Era: Managing Partner Angel: Keiretsu & Band of Angels McKinsey, AT Kearney, Monitor, Booz Gap, NatWest, Bankers Trust Bay Area Council, BACEI Oxford & Stanford UK/US citizen living in California

3 SOURCES OF THESE PERSPECTIVES Perspective Matthew Le Merle Jamie Campbell Building an External Innovation Capability

4 THIRTY MINUTES! 29:59

5 ISSUES FOR TODAY HOW TO GOVERN CORPORATE INNOVATION? WHAT IS INNOVATION AS A SHARED VALUE? INTERNAL VERSUS EXTERNAL INNOVATION?

6 HOW TO GOVERN INNOVATION? Questions 1 Do you have a clearly defined innovation strategy? 2 Is your business strategy fully aligned with your innovation strategy? 3 Does your corporate culture support your innovation strategy?

7 GLOBAL INNOVATION 1000 >50% OF COMPANIES ARE NOT HIGHLY ALIGNED H Innovation Strategy and Cultural Alignment Matrix 36% 64% Low alignment Moderate Alignment High alignment Cultural Support for Innovation Strategy 9% 27% 44% 20% 53% 47% L L Alignment of Business Strategy to Innovation Strategy H

8 HIGH ALIGNMENT = SUPERIOR RETURNS Gross Profit (5 year CAGR) Enterprise Value (5 year CAGR) Mean of normalized 5 year CAGR Mean across all 1000 companies 42 Low Alignment 44 Moderate Alignment High Alignment Mean across all 1000 companies 43 Low Alignment 51 Moderate Alignment 56 High Alignment 48

9 HIGH ALIGNMENT OF MOST INNOVATIVE Top Innovators Alignment 14% 86% Low alignment Moderate Alignment High alignment H Cultural Support for Innovation Strategy 4% 10% 73% 13% 77% 23% Compared to 44% in Global 1000 L L Alignment of Business Strategy to Innovation Strategy H

10 SILICON VALLEY MUCH HIGHER ALIGNMENT Innovation Strategy Alignment with Business Strategy? How well does your company culture support your innovation strategy? 100% 14.3% Highly Aligned 100% 19.2% Strongly Supports 80% 53.6% 80% 46.4% 60% 38.3% 60% 32.3% 40% 30.4% 21.4% 40% 28.7% 28.6% 20% 10.7% 20% 10.7% 0% 14.3% Overall 14.3% 3% Bay Area Companies Not Aligned 0% 15.0% 7.1% 4.9% 7.1% Overall Bay Area Does not Support

11 TAKE AWAYS ON INNOVATION GOVERNANCE Global Innovation 1000 Develop an innovation strategy Ensure it is aligned with the business strategy Ensure it is supported by the culture of the organization Additional Frequent Observations (Interviews) Innovation reports to CEO and sits on executive team Innovation strategy reviewed by Board in annual cycle Innovation on agenda at executive and Board meetings Broad organization can describe innovation strategy and the way it fits with business strategy

12 ISSUES FOR TODAY HOW TO GOVERN CORPORATE INNOVATION? WHAT IS INNOVATION AS A SHARED VALUE? INTERNAL VERSUS EXTERNAL INNOVATION?

13 WHAT IS INNOVATION AS A SHARED VALUE? Questions 4 Should all employees be able to innovate products and services offered? 5 What X% of your employees do have a mandate to innovate products and services? 6 What does innovation as a shared value mean to the rest of your people (Y = 100%-X)%?

14 HIGH ALIGNMENT OF MOST INNOVATIVE Top Innovators Alignment 14% 86% Low alignment Moderate Alignment High alignment H Cultural Support for Innovation Strategy 4% 10% 73% 13% 77% 23% Compared to 44% in Global 1000 L L Alignment of Business Strategy to Innovation Strategy H

15 X versus Y Even in the most Innovative companies, the population tasked with breakthrough innovation is small (X%) But everyone needs to support innovation if it is to rise to be a shared value How do Innovation Leaders solve this conundrum? How do they make everyone want to support innovation, when they simultaneously don t allow most people to play?

16 KEY CULTURAL ATTRIBUTES Cultural Agribute Rank of Importance Ranking (A) of - Cultural Support Attributes to Innova\on Strong Iden\fica\on with the customer and an overall orienta\on towards the customer experience 0.62 Passion for and pride in products and services offered Reverence and respect for technical talent and knowledge Open to new ideas from customers, suppliers, compe\tors and other industries Culture of collabora\on across func\ons and geographies Sense of personal accountability for any and all contribu\ons to the innova\on and product Tolerance for failure in the innova\on process Note: Please force-rank the following cultural attributes in order of the relative level of importance to your company and the degree of prevalence. Rank the most important 1st, the next most important 2nd and so on. - Responses above reflect the recoded means, that is, responses of 1 or 2 = 1, all others = 0

17 INNOVATION AS A CORPORATE SHARED VALUE Need Seekers 100% = X+Y Customer Needs (Met and unmet) Corporate Innova<on X% Better Solutions Voice of the Customer Culture to Support Corporate Innova<on Y% Developing breakthrough solutions to better meet our customer needs Delivering customer experience with excellence and being truly proud of our products and services

18 ISSUES FOR TODAY HOW TO GOVERN CORPORATE INNOVATION? WHAT IS INNOVATION AS A SHARED VALUE? INTERNAL VERSUS EXTERNAL INNOVATION?

19 INTERNAL VS EXTERNAL INNOVATION? Questions 7 The most important innovations in industry will come from: a. Your company? b. Your industry? c. Outside your industry? 8 What % of your Innovation spend is internal vs external? 9 What % of your innovation spend focuses beyond your industry?

20 SOURCES OF INNOVATION vs. WHERE $ SPENT Innovation 1000 Top 50 Companies Disguised Company Responses Sources of Innova\on $ (excl. major M&A) Industry Industry Beyond Industry Industry Beyond Industry Beyond Internal % External % External $ Trends Up Up Up Flat Up Up Up Up

21 CORPORATE INNOVATION - MODEL Corporate External Innovation e.g. developer relations, academic partnerships, thought leadership engagement Corporate Innovation e.g. innovation group, venture fund, incubation unit (24-60 Months Time Horizon, Disruptive & Transformational) Informal Innovation Coordination/Catalyst Groups Formal Internal Innovation e.g. innovation pride movement, communities of practice Business Unit Innovation e.g. product development, traditional capital allocation (6-24 Months Time Horizon, Core Business) Business Unit

22 EXTERNAL INNOVATION TOOLKIT Research Develop Seed Early Stage Later Stage Expansion Explore Ideate Concept Test Refine Launch Expand Risk (failure rate) Cost to play External Innovation Toolkit 1. Grants & Scholarships 7. Corporate Venture Funds 8. LP posi<ons 11. Venture Exchanges 2. Innova<on Networks 6. Incubators 5. Cer<fied Developer Programs 10. Collabora<ve Innova<on 14. In- licensing Programs 13. JV s & Partnerships 3. Joint R&D Agreements 4. External Advisory Boards 9. Related Ecosystems 12. Key Opinion Leader Councils 15. Acquisi<on Programs

23 SUMMARY: Innovation strategy must be aligned with business strategy and supported by corporate culture Many don t have an innovation strategy at all Most don t have high alignment The most innovation companies do, as do most Silicon Valley companies High alignment correlates to superior profitability / enterprise value growth Many companies chose to include Innovation as a corporate shared value But most employees don t have a mandate to be innovative in a breakthrough way For most employees the shared value needs to be translated into continuous improvement around customer experience standards and pride in products and services offered This provides the basis of the cultural support required for alignment Most executives agree that future innovations in their industry will not be driven by their company However most of their innovation spend is internally focused Some companies have begun to develop external innovation efforts, but the sources and spend are not close to being aligned As a result we expect massive reallocation of spending to focus on external innovation and a shift to Corporate Innovators Catalyzing Innovations rather than Generating them

24 California Dreamin