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Product Innovation: Why Should Startups Have All the Fun?

By Joe Morrow

Innovation and new product introduction within the enterprise ground to a halt as the pandemic settled in. Companies shifted into reactive mode and focused on maintaining their core business. Now we're starting to see the gears turn again, albeit slowly. The whole world has changed, and people are taking stock of what's going on. They know that they need to rethink and reposition and figure out how they're going to move the company forward.

The common wisdom is that innovative startups are the companies that will lead us into the future. But why should startups have all the fun? There's a lot of potential for innovation inside of big companies, and now is a perfect time to start developing those muscles. Having worked in internal accelerators for new business ventures within several large corporations, as well as consulted with a number of startups, I have some thoughts on how big companies can seize this moment to change and grow through innovation:

1. Tap into your strengths.

Big companies are an exciting and a fruitful place for innovation to occur because internal experts, customer support and sales teams are a rich source of new ideas. These people are plugged into your customers and their needs, so you have a lot of eyes and ears on the ground. That's a huge advantage that startups don't have, because startups often don't have a product in the market, or if they do, they probably don't have many customers. And they don't have that many employees.

In a big company, you have a lot of kindling to spark ideas. Some of them might be for innovations adjacent to existing product lines or revenue sources as opposed to disruptive, world-changing ideas like startups tend to chase, but there's a lot of value to be created in developing new revenue streams for existing customer audiences, and for expanding your offering into new customer spaces.

2. Marshall your resources.

Big companies have a lot of zeros in their checking account balance, and so may have capital to deploy on innovation activities. I say "may" because it can be challenge to secure resources in support of innovation activities even at the largest companies. Nonetheless, this is an advantage they have over startups that may be bootstrapped by the founders and struggling to keep the lights on. Big companies also have defensibility in their core lines of business, so they have a lot of runway. Both of these factors can work in their favor, once they align and direct resources towards innovation.

3. Make it ok to fail.

Or maybe I should reframe that as, "make it okay to invalidate a hypothesis," because in many cases, there's not a recognition of the benefits of failure inside of big companies. In the startup world, people tend to view failure almost as a badge of honor, and even brag about how many failed startups they've founded. There's an understanding that unless you're Elon Musk, not all of your startups are successful, but from each failure you learn, and you gain insight that you can't get any other way.

That type of attitude is not found in big companies as often. A big company got big for a reason - they've got something that works very, very well and that creates an expectation of continued success. There are people in senior-level roles who've been successful throughout their careers. There are highly accomplished people with deep expertise who are at the top of their fields. In that environment, it can be a career-limiting move to have a product introduction that fails, or to have a quarter where you didn't meet your numbers. That can undercut the experimentative culture that makes startups so effective in innovating.

That doesn't mean it can't happen. My experience is that in the context of a structured process, with the right training and resources, people can pick up innovation skills. They're usually very engaged and excited about the opportunity, and they bring a wealth of expertise to bear. To support them, allow for experimentation and risk taking, within defined guard rails. Manage expectations with stakeholders, and across the organization. Set clear success criteria and report out on your successes - and on learnings from invalidated hypotheses.

4. Get closer to the customer.

Many of today's most successful young companies were built around a culture of constantly listening to customers and incorporating their feedback to optimize and steer the product in the right direction. Product teams will go out on site and spend the day with a customer to see how they experience the world and gain a deep understanding of their problems. They'll have customers in for research, or to give feedback on features in beta.

In a big company, there can be a lot of layers between the product team and the customer - account managers, partnership managers, even corporate comms and PR. These "gatekeepers" sometimes make it harder to get access to customers, and to get the feedback innovators need as they build, test and learn. That's not necessarily a bad thing - you don't want to be approaching customers with half-baked ideas that may create a negative brand impression.

Obviously, the big firm can't behave like a tiny firm all of a sudden. But they can develop a network of customers that are willing and able to participate as partners in the development effort and introduce some customer-oriented product development approaches and roll them out gradually, keeping all stakeholders in the loop.

5. Make it someone's job.

To tap into internal resources for innovation; to create a culture of innovation, and to develop a framework for testing and experimenting, you need to be intentional. The plumbing isn't automatically there for different departments and operating units to be able to talk to each other. Everyone already has their roles and projects they're working on and KPIs they're responsible for. A lot of the people in big companies might be experts, but they're experts in something that already exists and may not be as effective at bringing something new to market.

It's really important to create an "office of innovation" or "innovation center of excellence" that can centralize the function and pave the way. This office should be empowered to put together a core team of people who've been through the process of defining and validating a new idea, and who know what it takes to be able to bring a new product to market.

These don't have to be new hires. They could be internal people, but they have to be set up for success, making sure that their incentives are aligned with participation, i.e. if they're going to spend 10 hours a week on innovation, their quota has to be adjusted accordingly so they're not penalized for participating. This group would be leading and evangelizing for the kinds of culture change that are required. They could be involved in getting approval on internal compliance processes (e.g. information security, legal, branding), and developing advocates in compliance roles. They would network internally to identify and build bridges with internal experts and resources, to understand who is good at what. Finally, they align on terminology between groups, and clarify boundaries and scope of control.

6. Augment your capabilities with "venture building" expertise.

Once you've marshalled your resources, identified your experts and your advocates, fill in the gaps with a bench of internal and external partners who can provide targeted services at different stages of the process. Some of the things you may need help with include value proposition design; user-centered design thinking; user research and validation; go-to-market strategy, internal comms and PR; and growth marketing. You may also need leadership coaching and mentoring. Consider bringing in an entrepreneur or executive in residence for a time as you build the foundations of the program.

When business is going gangbusters, it can be difficult to carve out time and resources for innovation, and amidst the press of operating challenges, the urgency may not be there. Now that we're facing a crisis of epic proportions, and all the chess pieces have been knocked over, there's an opportunity to think, "Well, are we going to put them all back in the same place and keep doing what we always did, or are we going to do something different?"

I think it's counterproductive to pull up the drawbridge and not think about innovation as part of your response to changes in the market, in the political dynamic and in the environment. But you can't just throw out a mandate to innovate and expect it to happen. And you also can't just put somebody in charge of it without giving them the support and the resources and the talent that they need because then they won't be successful.

With the accelerated pace of change, the most effective companies going forward are going to be companies such as Amazon and Apple, who have a culture of innovation at the very core. In my experience, it is possible for big companies to leverage their inherent advantages to create such a culture. The companies that think that now is not the right time to adjust and change and innovate - those are the companies for whom tiny startups are going to eat their lunch.

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About Joe Morrow

Joe Morrow is a product management expert specializing in working with product incubators and accelerators at large companies, and with localities in developing countries that are trying to support startup ecosystems.

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