There has been a dramatic pivot in the nature of competitive advantage, with consequences no big enterprise can ignore. In an age where growth and innovation are increasingly synonymous, the term innovation is equated not with scaled incumbent market leaders, but with scrappy entrepreneurs. Look around at the fastest growing toplines and biggest disruptors—Tesla, Nest, Xiaomi, Square, Slack, Spotify. As different as their lines of business may be, they have one big thing in common: they’re run by entrepreneurs. They break category norms because neither conservative leaders nor legacy business systems are there to tell them they can’t.
For big established companies, the barriers to change are often entrenched. But so too are the risks of not adapting to win in an environment of rapid change, powered by the mighty crosswinds of digital technology, globalization, and the shifting expectations and behavior of consumers.
Corporations built around set ways of doing things now find themselves needing to strategically navigate through the minefield of startups, new technologies and consumer trends that can tip the fate of an incumbent’s business seemingly overnight. Startups are achieving scale faster and in more lightweight ways than ever before.
In 6 years, Uber has expanded to 60 countries and 300 cities worldwide, tracking toward $10 billion in bookings by the end of 2015. They facilitate 1 million trips a day, yet they have no fleet of cars and employ no drivers. And they have spawned dozens of businesses from their service model.
Amplified by a consumer who now trusts startups to deliver parity-or-better quality while suspecting the motives of big business, the shift of power toward smaller companies makes it hard for big organizations to react and keep pace. As bleak as this may sound, there is not only hope for big businesses’ ability to innovate and win, but basis for genuine excitement. Nothing begets change like sheer necessity, and the need to rapidly mobilize in new ways is setting the stage for what may well prove to be a golden age of innovation, with startup culture and big business propelling one another toward ever greater leaps in creating value for consumers and the stakeholders backing their respective businesses.
While the learning curve large organizations will face in adopting a more entrepreneurial orientation will be a steep one, the prize for getting it right is massive, for one simple reason: the combination of entrepreneurial innovative thinking and scale is far greater than either on its own. Sounds tasty, but how can big businesses actually get to that entrepreneurial Promised Land?
In a new report by Fahrenheit 212 called “Big Entrepreneurship,” the company tackles the challenge of how big companies can leverage scale while embracing the level of disruptive, innovative thinking and action that entrepreneurs showcase every day. As the name suggests, this concept of “Big Entrepreneurship” is a way of defining what big businesses need to do to become more entrepreneurial.
After studying these challenges across a host of industries, here are the five critical questions that many of the world’s most innovative companies echo. (Disclosure: I am the founder of Fahrenheit 212.)
How can big companies innovate in a world that favors the underdog?
For years, being big was universally considered a big edge. But scale has been transformed from a killer asset into a form of liability. In pursuit of growth, one of the most pressing problems facing Fortune 500 companies is that they are Fortune 500 companies. Platforms like Kickstarter spawn new competition overnight. In this world that now favors the underdog, and where change is inevitable, how can the value of scale be reignited as a durable advantage?
Developing strategies for making this happen starts with bringing a new orientation to the identification of meaningful growth opportunities. They need to meet three essential criteria: big, sustainable, and winnable. Scale only matters as an advantage when the opportunity is both big and meaningfully defensible. Without that combination of scale and defensibility, you leave yourself open to providing a roadmap for legions of fast-followers in today’s hyper-competitive and increasingly transparent marketplace.
How can I cook up meaningful innovation with an innovation lab?
With the urgency to innovate rising, there has come an equal urgency for companies to develop internal innovation capabilities. In the US alone, the number of internal innovation incubators has grown from twelve in 1980 to an estimated 7,000 today. As you might expect from an early-stage movement like this, the success rates from lab to lab are wildly uneven, with the difference between the good, bad and ugly deriving from several factors – from how the lab is structured and chartered, to how it is funded, to the types of skills within it.
Set up properly, an innovation lab can help push the company into new territories, reassure stakeholders, and entice consumers. But improperly calibrated, it can quickly become a cost center and a sticky note farm, with minimal impact on the balance sheet. Upping the odds of real impact starts with fundamentals, including: What problem is the lab really there to solve? What are the lab’s measurable goals and deliverables? What’s the relationship between the lab and company’s growth strategy? Without clarity on killer questions like these, the lab will struggle to get its outputs integrated into the organization.
How can my company attract, engage, and retain Millennial talent?
This enigmatic and uniquely entrepreneurial cohort will comprise 50 percent of the workforce by 2020. To turn Millennials’ entrepreneurial instincts into the stimulant big businesses need to remain relevant, companies need to innovate not just in their products and services but also in their work practices. For established companies this can be a daunting task. How does a large, traditional company appeal to the Millennial workforce when 72 percent of Millennials already want to be their own boss?
Stereotypes aside, Millennials actually stay with their employers longer than Generation X workers did at the same age. They’re also more educated than any prior generation. These factors shape unique expectations of the cadence and meaning of work. They expect work to be more fulfilling, to help them grow, and for the company to show them the same passion and dedication they bring to bear every day. Stop defining careers by the next promotion and consider the journey required to grow them into that next role.
How can multinational businesses keep up with the new global consumer?
Emerging market economies are expected to grow three times faster than developed markets over the next few years. An ambitious middle class is emerging and taking charge of its future. In a shift away from the model of aid-givers pouring in money, local entrepreneurialism is proving to be the killer app. Corporate annals are peppered with failures in entering emerging markets. Understanding the role of entrepreneurialism in lifting these societies is a pivotal step toward building lasting innovations for them.
Developing markets’ challenges and constraints can provide insights toward innovations with global appeal, like GE Healthcare’s portable, ultra-low cost electrocardiograph machine. Built for doctors in India and China, it’s now disrupting the global market. Sold in over 90 countries, it is priced 80% below products designed for developed markets.
The challenges emerging markets face are not just for non-profits and aid agencies to solve. In fact, businesses are very well positioned to address these challenges in a manner that will have bigger and more sustainable consumer impact while also improving the bottom line.
How do we hire a CINO that can build lasting innovation capabilities?
Embedding a Chief Innovation Officer (aka, a CINO) is seen as a step toward elevating and institutionalizing innovation in big enterprises. But as it stands today, it’s also the best way for a good executive to get fired within 24 months. In truth, the success or failure in the role is rarely a function of who’s in the chair, but more often of the structure and strategy behind it. The CINO should be focused on developing and elevating a durable innovation capability, rather than merely owning a tactical wish list for near term company growth. It’s time to rewrite the job description for the CINO.
So what should a CINO be responsible for, and what should lie outside their mandate? If “culture change” is currently in the job description, cross it off right now. In most situations, a CINO is in no position to change organizational culture. They can aim and ignite innovation activity, and foster momentum by putting wins on the board, but culture flows from the CEO and rest of the executive team. It’s a function of what’s rewarded, what’s valued, and where resources are focused. What the CINO can control is building the innovation skillset. This isn’t simply about recruiting the next wild thinker, but nurturing and enabling the growth of innovators and their skills within the team.
Disrupt or be disrupted
These aren’t the only burning questions big companies must stare down in pursuit of the desired outcome – Big Entrepreneurship – a way to compete with (or capitalize on) the small, nimble upstarts that don’t have the same shareholder pressure, customer expectations, and restrictive infrastructure in place.
But in an age of innovate or die, disrupt or be disrupted, change or be left behind, Big Entrepreneurship is an issue and a goal hat even the most innovative and entrepreneurial large companies face. But the organizations that successfully embrace the principles of big entrepreneurship will bring big returns to all the stakeholders with skin in the game – from consumers to employees and shareholders.
Read the full report on Big Entrepreneurship on SlideShare.