By Henrik Bo Larsen, ICDK Deputy Director and Innovation Officer
During my time in Silicon Valley, I have experienced a large number of pitches from start-up companies. The story is almost always along the same path: After being inspired to develop an excellent business idea, an entrepreneurial group of very skilled and bright people decide to start a company. And then the problems ensue:
They need to secure finance, get an organization established, develop and launch products, perform quality control, manage HR and regulatory affairs… Just to mention a few. All these issues turn out to be skills and capabilities that larger corporations already know all about.
However, not only does the start-up need skills that larger company are good at: when looking further into the life of a start-up: as cheap and easy access to technologies means that as soon as a start-up gets a whiff of success, it has to race against dozens of copycats from competing start-ups, who try to get the same idea off the ground. This is also a challenge which is similar to what existing organizations face.
Combining the strengths of start-ups and corporations
This is a very interesting dilemma. As an entrepreneur you need your swiftness and courage to start a company, but from thereon you need the structure and processes of an established company to really succeed. On the other hand, the agility needed to get new ideas off the ground is not what you see most of in established companies.
This is clearly a dilemma for every organization: it being new or well-established, big or small. How do you balance the agility of a start-up to develop new businesses with the structure and processes to grow the businesses?
Many large corporations try to answer this dilemma by establishing what managing partner at Innosight, Scott Anthony, calls “The New Corporate Garage” in a Harvard Business Review article. The popular perception is that most corporations are just too big and deliberate to produce new game-changing inventions.
Hence a growing number of large Silicon Valley companies try to attract entrepreneurial individuals, or “catalysts,” that can use the mother company’s resources, scale, and growing agility to develop solutions to global challenges in ways that few others can. Intel, Google, Cisco, and SAP are examples of such companies.
How to launch a corporate garage within your company?
The big companies need to carefully consider the implementation of such corporate garage models when inviting catalyst entrepreneurs. At Innovation Center Denmark we consider the following three innovation capabilities when planning for a corporate entrepreneurship endeavor:
- Business models: Most business strategies I have read either try to justify the current business model or defend it. The company needs to develop the capabilities to understand the business model options in a broader sense – even those models that eventually will cannibalize your current solid performance business.
- Technologies: The big corporate needs to know and understand the recent technology developments of its and similar industries and consistently scan and scout for potential technology development and ideas in the entrepreneurial underground. This scouting often needs to come from outside the current domain of the company’s expertise, and the company need to develop capabilities to gain new ground.
- Mindset: Corporate leaders must critically examine to what degree their organization and themselves are capable of working together with the incoming entrepreneur catalyst. How do you and your organization deal with change and new ideas? Is your current mindset ready to explore new opportunities and to exploit the current business model and technology paradigms? And at the same time apply the structure and processes needed but keep the freedom of the entrepreneurial mindset?
As Lewis Lehr, the former CEO of 3M, put it: Innovation can be a disorderly process, but it needs to be carried out in an orderly way. The truly good manager finds the means to manage a disorderly innovative program in an orderly way without inhibiting disorderly effectiveness.