Innovation: how does big business keep pace with the disruptors?

innovation in big business

Innovation can be tough when you have a huge brand and layers of bureaucracy holding you back. But corporates needn’t be caught flat-footed by the start-ups, says Market Gravity managing director Dan Taylor

Innovation is once again high on the agenda of many big businesses. Start-ups, such as Uber, AirBnB or Lending Club, are leveraging new technologies to launch new business models and services to disrupt many industries, and the growth and margins of the incumbents are being eroded. In turn, those traditional big businesses are trying to see how they can become more innovative.

The good news is that these corporates have assets that start-ups can only dream of: strong brands, existing customers, cash and channels to market. When they get it right it can have great impact on both their business and the broader market – think BT Sport, Caterpillar’s expansion from earth-moving equipment into clothing or Marks & Spencer’s environmental project Plan A.

Unfortunately there is a flipside – innovation in big business is far harder than it is for start-ups. Whether it’s the bureaucracy, the budget cycle, office politics, or just the focus on the day-job, there are lots of reasons why big businesses struggle to innovate.

The two most common challenges of innovating in a big business are speed and scale.

Innovation at speed

Corporates are famously slow and bureaucratic at decision making, yet often have demanding short-term expectations from shareholders. There are lots of approaches to overcoming this inertia, but one great example of how a team captured the imagination of their executives to create urgency is detailed in my interview with Mary Ward, the former innovation director of ICI paints.

She says: “The worst thing is launching by committee… I was at a meeting where one of the brands wanted to get stakeholder attention for their idea. They created a mock-up of a trade journal announcing that the idea had just been launched as a new product by one of their major competitors.

“It made the conversation suddenly become serious and the project got approval quickly. You have to think about your stakeholders and be creative about getting their attention… You have to be creative and quick and use external help.”

Innovation at scale

Unlike start-ups, big businesses have to find billion- rather than million-pound ideas to have an impact on the overall business. Get it wrong when investing in big ideas, though, and they could do more than just lose money – they could damage the brand.

Again, there are a number of potential solutions, but a great one can be innovating under a new brand. This mitigates much of the risk and often enables access to new customers in its own right. Great examples of this are HSBC’s First Direct, Meridian Energy’s Powershop in New Zealand, and O2’s giffgaff.

Tim Sefton, former business development director of the phone network, says: “Growth was slowing in our main mass-market propositions and so appetite was there for innovation and something new. There was an idea of what would web 2.0 mean for a mobile operator – run by the customers, with no call centre, and self-determining a whole list of principles.

“Most importantly, it ticked the box strategically – it meant going after more niche segments to drive growth in a new way and was complementary rather than substitutional to the main business. giffgaff, which now has over a million customers under a different brand, was born.”

Innovation can make a real difference, but big businesses need to both leverage their advantages and overcome the barriers to succeed. This doesn’t mean following the latest fad of setting up an accelerator or running a hackathon – it means structuring the programme to deliver innovation at speed and at scale.


About author

Dan Taylor

Dan Taylor

Dan Taylor is author of The Secrets of Big Business Innovation and managing director of the New York office of Market Gravity, an innovation consultancy specialising in developing new products and services for big businesses.

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