Corporate Innovation/Analysis/ This is why big companies can’t scale up innovation You need a separate team, better governance and a “killing” culture By Maija Palmer 29 September 2020 \Sustainability Six carbon capture startups and scaleups to watch By Sifted 22 August 2022 Corporate Innovation/Analysis/ This is why big companies can’t scale up innovation You need a separate team, better governance and a “killing” culture By Maija Palmer 29 September 2020 Most large companies now have some kind of innovation lab or open innovation programme, but the results of these are patchy at best. In many cases, a promising collaboration with a startup just peters out after the proof of concept. “Despite increased access to innovation, we saw that few companies were getting the benefit of it. There was an inability to apply it, to consume it and grow it. Too many projects were still stopping at the proof of concept stage,” says Lanny Cohen, chief innovation officer at Capgemini, the French consulting firm which conducted a study into the problem. “Sometimes that was because there was a problem with the model or a change of leadership. But often it was just that the project lost momentum. We were curious about why that happens,” he says. But why exactly? Cohen and his team conducted in-depth interviews with some 40 innovation leaders, from across a range of industries to winkle out what the problem was. They found three key reasons: 1) You need a different team to handle the scaling part of the innovation. Most companies don’t realise this. The innovative team in the lab, cycling through dozens of ideas at a rapid pace, is probably not the same team that can handle negotiating licencing agreements for the technology across 150 countries. Or safety-testing the production line. You need a different crew, with a different skillset, for this part of the work. “Within business schools, what we teach about innovation is very front-end loaded.” “It’s quite hard to scale innovation,” says John Bessant, professor and chair in innovation and entrepreneurship at Exeter University. “Scaling is all about other people — trying to put yourself in their shoes, understanding how they might perceive the innovation, how they might perceive the innovator. These areas are much harder to shift and they are not amenable to a simple sales push — instead, they require subtle marketing. Also, we don’t teach scaling enough. Within business schools, what we teach about innovation is very front-end loaded. There is not even much academic literature written about scaling innovation compared to generating innovation.” Cohen says that among the business leaders he interviewed, there was little understanding that scaling was a different discipline. “It became clear there was a little distinction between the creation and scaling of innovation. The business leaders we interviewed would speak about it in the same sentence, they seemed to be at a very early stage in understanding what was needed for scaling,” he says. 2) There is little governance around scaling the innovation. Companies have worked out that they need to measure how well their innovation labs are working and have KPIs in place now around how well pilot projects work. After that? Not so much. “Governance was okay around the discovery phase, but we found there wasn’t the same rigour in looking at the skills and the team needed to scale the projects,” says Cohen. Two recommendations from the Capgemini team were that companies should give more authority to business divisions about scaling the innovation. If the idea is the CEO’s pet project, with all the decisions made by a small group of senior leaders, it won’t get enough of the real “do-ers” of the business behind it when it comes time to really put it into practice. Some companies, such as Medline Industries, a US manufacturer and distributor of medical supplies, allow individual business units to decide which innovations they are going to scale, and Capgemini suggests looking at their model. Another option would be to build a corporate venture builder in the company, rather than an innovation lab. It is an approach that a number of innovation consultancies, such as Founderslane, Bundl and Byld are pushing (see the Sifted Guide to Innovation Consultancies for more details about their approach). A venture builder is focused not just on ideas and pilot projects but aims to create viable businesses that can either exit or which can become new units of the parent company. Scaling is part of the picture from the start. 3) You need a culture where people are brave enough to kill innovations once they are past their sell-by date. There is always a lot of discussion about creating the right culture to encourage innovation at big companies. But a culture of killing innovation is equally important, says Cohen. Nothing lasts forever, and especially right now, with the Covid-19 pandemic radically changing the way we live and work, business models go fast out of date. Even if something was a company’s star innovation five years ago, it might be obsolete now. “There was an inability to shut down an innovation once it had outlived its usefulness.” But in general, says Cohen: “There was an inability to shut down an innovation once it had outlived its usefulness.” One innovation in the retail sector explained why: “If something doesn’t stick in the ideation or trial phase, it’s a little easier to kill it. But if something’s successful for a year or two at scale and eventually starts waning, that’s much harder. You should be able to kill that as well so that you have room to scale other innovations.” Fostering a “killer” mindset is hard, but Coca Cola’s awards celebrating failure might be one idea to try. For companies struggling to get beyond a bunch of moribund pilot projects, it is worth trying some of these ideas. The full report can be read here. I’d love to hear your thoughts on this. What are the main reasons pilot projects don’t progress at your company? Does your organisation run a separate “scaling team” and how does that work? Maija Palmer is Sifted’s innovation editor. She covers deeptech and corporate innovation, and tweets from @maijapalmer Related Articles The Sifted guide to innovation consultancies By Kimberly Eynon Click here to read more Why corporate venture building could save the world By Maija Palmer Click here to read more “Companies that outperform don’t dabble in innovation at the edges” By Kimberly Eynon Click here to read more Most Read 1 \Healthtech Is Daniel Ek’s new body scanner worth the hype? Sifted tried it out 2 \Venture Capital VC diversity needs to change — and white men need to take responsibility 3 \Venture Capital New €3.75bn European Investment Fund pot to back late-stage VCs 4 \Sustainability Counteract closes £15m fund for carbon removal solutions 5 \Mobility Was the $5bn that VCs plugged into escooters worth it?