We analyzed 20 of the most innovative companies and around 100 of their enterprise size competitors, and the theoretical potential for enterprises to compete. As a result, we found three key reasons why enterprises fail:

CONSERVATISM

Most enterprises underestimate entirely the investments necessary to fund innovation. When we look at one of the most recent innovative companies with just one product like Tesla, Cisco, Google, Facebook and so forth, they needed funding of about $1 Billion before they went public and became self-sufficient. All of these companies had only two risks: 1) to fail and shut down 2) to not return the funding to investors.

 

An established enterprise, when disrupting themselves has three more risk: 1) loosing a billion$ enterprise, 2) risking tens or hundreds of thousands of jobs, and 3) risking that general investors loose their investment entirely, which is different for the general stockholders versus venture capitalists. However – going forward, those risks also persist when they FAIL to be innovative and get disrupted by others.

MANAGEABILITY

Enterprises with more than 10,000 employees have a size that almost forbids to be innovative. Innovation is not only expensive but resource-intensive. Employees need to be at a healthy utilization rate for the company to be profitable and stay in business as well as sustain all kinds of downs and challenging times. How could a company inspire their teams to be more innovative while keeping its current performance? If the teams have time for innovation, they have not been fully utilized, and the company must focus on getting back on track and not derail. And if the team is fully utilized, there is no time to relax, meditate, get inspired, and think of new and industry-shaping ideas. Innovation needs to be managed as well, and it requires resources. Hoping for a lucky punch is a really bad idea. And dreaming of getting a free lunch… you know. Why does innovation work in a startup? Well, at least so far, it only worked in the initiation phase. What Intel, Cisco, Google , SAP did was ground-braking. But today 30 – 50 years later…? They ran into the same challenge. Like everybody else, they try fiercely to innovation – but we still wait for the outcome. And there is a chance they get disrupted from a startup that may have already been founded.

CUSTOMER EXPERIENCE

Enterprises with millions of consumers (B2B or B2C) are essentially out of touch with their target audience. They know only through questionable research what those users or consumers really want or need. The C-level of a global enterprise does not know what their customer’s pain points really are and what their dreams may be. The hierarchies, reporting structures, value definitions have no path for innovation to be happening. The experiences of top-level managers and the experiences of their customers are almost fundamentally different. The experiences of startup founders and the ones of their future customers, however, are well aligned or at least entirely understood – until they grow to an enterprise level. Microsoft executives get their laptops configured by their team. That way, they save the day it cost to get everything in order after buying a new machine. And on top of all that, the “customer experience thinking” is still seen as an esoteric luxury by most top managers as it is too hard to report on and to get it into the annual report in a way that it wows the investors.

 

In the past four years exploring the entire “Innovations Paradigm” based on our own experience building startups to billion-dollar companies and working with other startups that became billion $ companies we finally developed methods and tools that harness the innovation power of an enterprise by bringing new ways of thinking and new working models and cultural elements to selected teams.

Innovation based enterprises

Most of the big enterprises of this world started as innovative startups. Whether it was Alfred Escher, founder of Credit Suisse with a – back then-innovative banking system that laid the ground for the Swiss Banking System or Carl Benz with a radical idea of building a machine-driven carriage all of them  have been major disruptors. Henry Ford, Ferdinand Porsche, Robert Bosch and so forth, all created global enterprises with their ideas that have been at best – crazy. What happened in the past 50 years? There have been continuous innovations from Silicon Valley, including Intel, Apple, Oracle, Cisco, Google, Facebook, AirBnB, and Tesla which made it to global leadership. One of the  last ground-breaking innovation from Europe was SAP, 50 years ago. We have seen less popular, yet ground-breaking “inventions” in laboratories from all over the world. But none of them made it to a ground-breaking “innovation”.

From invention to innovation

The automobile evolved from INVENTION to INNOVATION. The disk brakes moved from INVENTION to IMPROVEMENT. The first electric BMW car made it from INVENTION to an EXPERIMENT, while Tesla made it to innovation much later than BMW. A self-driving Mercedes S-Class made a 1,000-mile journey from Munich to Copenhagen and back! It was already using computer vision and computers to react in real-time. The autonomous car achieved speeds exceeding 110 miles per hour (175 km/h) on the German Autobahn with nearly no human intervention for 95% of the distance. It drove in traffic, executing maneuvers to pass other cars. Despite being a research system without emphasis on long-distance reliability, it drove up to 98 miles (158 km) without human intervention. Also here it did NOT go from INVENTION to INNOVATION but DRAWER.

Invention vs. Innovation

In most enterprises, we may find hundreds if not thousands of geniuses with amazing ideas but no way to go. There is this massive difference between INVENTION, the act of having and documenting an idea, maybe building a prototype and INNOVATION, the full cycle of invention, prototyping, market validation, product-market-fit, funding, marketing, testing, producing, launching, more funding, branding, selling, customer engagement, servicing, business model optimization, more funding, going international all the way to being a global player in that segment.

Failing of the enterprises

The five single biggest mistakes enterprises can make is 1) never developed a comprehensive plan to identify the brilliant ideas, which their teams already have, usually based on their experience with the problem, 2) seeing the brain spark of an invention already as innovation and wonder why it is not successful in this highly competitive global economy, 3) completely ignore the fact that innovative businesses require a lot of funding to become that innovative business everybody is dreaming about, 4) running innovation on the side and hoping for the magical growth and market disruption and 5) Never asked themselves where these ideas are actually come from and how they are created in our brain, how those ideas can be translated to meaningful solutions and how to use the techniques of ‘thinking’ in an innovation continuum.

What to do

  1. Seeing the act of invention as an ignition point from the process of innovation is a very helpful starting point.
  2. Developing trust in the Innovation Potential of a company’s employees is far better than looking into startups and hope that somebody thinks more like a startup. If they would,they would be gone.
  3. Rationalize that any major innovation is also a major investment and there is no difference between a startup and a global enterprise.
  4. Create a serious effort to include customers into the innovation process and stop looking what the competition is doing.
  5. Stop hoping that employees think like startup entrepreneurs. If they would they would be long gone and if they don’t they can much better contribute to an enterprise level innovation process.

In the past 4 years exploring the entire “Innovations Paradigm” based on our own experience building startups to billion dollar companies and working with other startups that became billion $ companies we finally developed methods and tools that harness the innovation power of an enterprise by bringing new ways of thinking and new working models and cultural elements to selected teams.

The Innovation Challenge

Corporations of all sizes, older than 15 years are in jeopardy. It is NOT LACK OF INNOVATION as such, it is lacking the UNDERSTANDING HOW TO INNOVATE. TEST: Tell your teams to be more innovate. The response to the question may be: “Yes, we’d love to do that, but please teach me what I must do to be innovative”. Your team learned to handle machines, compile algorithms, develop strategies and business plans, how to sell and how to market, create a long term financial forecast or how to hire talents. They never learned how to innovate or how to create a disruptive business model. Most even set innovation equal to invention. The real challenge is:
1) We need to understand how one creates ideas in the first place?
2) How these ideas may turn into an ‘innovation’?
3) How do we know that those ideas are actually something the market will buy?
4) When do we invest in such an innovation and how much?
5) How do we organize an innovation process from idea creation to market success?

Not lack of innovation but lack of understanding how to innovate

 

IN SEARCH OF INNOVATION

Most businesses are seriously challenged and try all kinds of ways: Creating an innovation lab, investing in startups, trying to observe young innovators, hire teams to be creative and innovate – and all kinds of random actions in the pursuit of “finding innovation”. This already went on for decades with no serious success. Young businesses continue to disrupt entire industry segments. Whether it is the car industry, the taxi industry, the hotel industry, the mobile communication industry, the micropayment industry, the mobile payment industry, and on and on and on. Who is next: the insurance industry, the airline industry, the food industry, the waste industry, the ITC industry, the automobile industry, the mechanics parts industry, the legal advice industry…  Every industry will experience major disruption in the coming years. And this is NOT because some come up with some crazy ideas and think differently. 200 to 500 out of 1 million startups make it. So that is not much . But those 200 – 500 disrupt any available industry. And will not wait for anybody.

LEARNING TO INNOVATE

Each and every corporation has its own innovations paradigm. Most don’t even know. The innovations paradigm is the entire complex from idea development in an R&D center or innovation lab to successful market entry. Today this is all experimentation, trial and error. And we apply the mechanisms that we know to find out. Yes we need to think very differently – but not how we try today. Funny enough we need to follow age old rules:

  • We need to find out how ideas are actually created and processed
  • Once we understand how our brain works, we can apply strategies to use it.
  • We then will need to dive far deeper into our business ecosystem than ever before
  • And finally develop radically different solutions that unfold an ideal way for customers
  • Leadership in this entire process can make it a repeatable process so one can continuously innovate

Implementing such a “Innovations Paradigm” into the enterprise is far less difficult as it may look, yet it is not done over night and requires the buy-in of the C-Level. When anybody says we need to think like a startup, WE is all of the company. And the key driver is always the CEO – Startup or Global Enterprise. Carl Benz, Henry Ford, Robert Bosch, Graham Bell, Robert Noyce, Steve Jobs, Bill Gates, Larry Ellison, Mark Zuckerberg, Jeff Bezos were all young crazy entrepreneurs when they started. And many of that league are just about to get disrupted from people who think and act different – but that thinking is no secret any more and not unique.

You may want to join our webinar series of how to innovate and how to get your team to true innovation.
https://www.society3.com/webinars/

@AxelS

The Growth Accelerator and the brand new Entrepreneurs Academy are now open for applications.
Lots of news:

  1. Updated Growth Accelerator Program
  2. New Entrepreneurs Academy
  3. Partnership with World Innovations Forum

Updated Growth Accelerator Program

we added a new session INNOVATIVE THINKING based on our experience with “Disruptive Business Model Development”. It’s all about thinking out of the box, creative, big… but how do you actually shape your thinking process? In this new session, we teach you how to actually think innovative.
Admittedly – our all online accelerator program failed in emerging countries. Hence we are back to the former and highly successful “hybrid model”, consisting of a one week bootcamp and 10 weeks online program.

New Entrepreneurs Academy

Between fall last year and now we developed an all new Entrepreneurs Academy program. This is thought to be a precursor to the growth accelerator. It covers the key topics of entrepreneurship, company purpose, team development without a budget, business concept & funding, and so forth.

Partnership with World Innovations Forum

The partnership with the World Innovations Forum Foundation allows us to give stipends with substantial discounts, up to 99% to attendees from emerging and developing countries. It may also allow us to provide stipends for teams in developed countries with special conditions.

 

 

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