THE ULTIMATE GUIDE TO

CORPORATE
INNOVATION
(AND WHY IT IS ESSENTIAL)
01
Corporate Innovation:
How to Get Started (and Why
Now Is the Right Time)

02
Disruptive Innovation:
The Inevitable Change Every
Market Must Face

03
Innovation Management:
Growing at Scale & the Hurdles of
Corporate-Startup Collaboration

04
Innovation Partner:
An Undeniable Path to Sustainable
Business Growth

05
Partnering with MassChallenge:
A Look at How the Global
Network of Innovators Drives
Corporate Innovation
01 Corporate
Innovation:

How to Get Started (and

Why Now Is the Right Time)
In recent years, there has been an explosion in corporation innovation.

Traditionally, corporations didn’t need to worry much about innovating because they could expand their
enterprises on the back of a single successful product.

However, the old model no longer works in the age of disruption. As agile startups thrive with the latest
technology and talent, established corporations must adjust their business models.

Rapid marketplace changes drive customers toward the most convenient products or services.

Instant gratification is paramount now, as they want solutions at the touch of a button.
In the ebook, we’ll explore the importance of corporate innovation, explain how you can get started, and
highlight some corporate innovation programs that may inspire your own initiatives.

Let’s dive in.

Why is Corporate Innovation More Important Than Ever?

According to Harvard Business Research, the number of corporate investments in startups tripled
from 980 in 2013 to 2,795 in 2018, with their total value growing from $19 to $180 billion. Today,
75% of Fortune 100 companies have an internal venture capital department, like a startup accelerator.

Well-established corporations can get stuck in their ways, content to rest on their success rather than
keep evolving. Instead of striving to remain the bleeding edge, they focus on creating new iterations of
existing products. The trouble with this approach is that it leaves companies vulnerable to disruption.
Lean startups with a modern perspective can quickly turn an industry upside-down.

In 1960, the average lifespan of a company on 70 The average lifespan of a S&P500

the S&P 500 Index was almost 60 years. In the company is now less than 20 years,
fast-paced digital landscape, the average age 60 from c60 years in the 1950s.
Average lifespan (years)

Source: CNBC
of companies listed on the stock exchange is 50
under 20 years old.
40
Since 2000, a remarkable 52% of Fortune 500
companies have either gone bankrupt, been 30

acquired, or ceased to exist entirely. Even the 20

biggest corporations aren’t immune to the
threat of digital disruption, as seen when Uber 10
and Airbnb irrevocably transformed the taxi
0
and hotel industry, respectively.
1958 1980 2012

For corporations to remain competitive, they must adopt a culture that embraces new technology
and actively seek out ways to enhance their business model. With this proactive attitude to corporate
innovation, enterprises can remain agile in the face of rising competition. The corporations may even
identify new opportunities before any startup has a chance to establish itself in the market.

The message for C-suite members in big corporations is loud and clear: “Innovate and disrupt your own
business model or somebody else will.”

4
6 Ways to Get Started With Corporate Innovation
Corporate innovation comprises several key tenets, including problem-solving, leadership, people
management, and entrepreneurship.

With the right strategy in place, enterprises can bring these aspects together to create new products
in-house, form strategic partnerships through corporate innovation programs, or make targeted
investments in promising startups.

Let’s explore eight ways you can get started with corporate innovation in more depth.

Partner with an accelerator program

Many aspiring entrepreneurs hesitate to take the plunge, even if they have great ideas. When a
corporation supports workforce creativity, they offer a platform for new ventures to grow, giving people
access to the resources, expertise, and industry connections required to develop a proof of concept.

A corporation can use an accelerator program to go beyond an initial investment by serving in

an advisory role or co-developer, which can they target specific technologies or industries for
startup sourcing.

Create a corporate innovation lab

A common obstacle to corporate innovation is that enterprises lack the crucial infrastructure to support
new ventures. Even if somebody in the sales or marketing team has a viable proposal, it may not fit in
alongside current timeframes and quarterly targets. With no designated staff or budget, many ideas are
shot down before they get off the ground.

Companies can counter this issue by developing a dedicated team or office with the sole purpose of
developing exciting new ideas. Car manufacturing giant, General Motors (GM), runs a startup innovation
lab, called iHub, which assigns company resources to turn basic concepts into game-changing products.

Promote open innovation

If the talent isn’t already in-house, you can bring people into your company. A hosted accelerator or
corporate incubator is an event where a large corporation invites startups to come and work at their
physical locations, offering them funding, support, and technology.

By collaborating with rising talent, corporate leaders get a chance to learn about emerging technologies
directly from startups. This setup helps corporations speed up innovation cycles, which leads to gains in
productivity and performance.

The benefits don’t stop there, as many startup-corporate partnerships yield new products and often
result in go-to-market partnerships or acquisitions.

Develop an intrapreneur program

Intrapreneur programs are similar to accelerators in that companies give their employees the platform
and support to work on innovations. These ventures could result in new products for the company itself,
or they may act as a springboard for new entrepreneurs to launch a separate company.

The British insurance company, Aviva, runs this type of corporate innovation program with great success.

5
 Employee, James Russell, proposed a plan to create tailored insurance products for small businesses
using machine learning technology.

While Aviva didn’t want to back the project internally, they sent James to a startup builder, Founders
Factory, to work on the idea while remaining an employee of Avvia. Within eight months, he launched a
6-person company called Brisk. Since then, Aviva has become a customer, and Brisk has raised £300,000
(~$390,000) from external investors.

Create a VC arm of your corporation

Another type of corporate innovation is venture capitalism (VC). This approach is popular with many
companies that prefer to take a backseat to the initial creation side of innovation.

700
Count of Select U.S.
Corporate Venture Capital
Investment, By Stage
525
Number of Rounds Per Year

Based on Crunchbase data for

venture deals made by high-market
cap public companies based in the
U.S. Data is current through mid-
350
September 2018.

Seed-Angel

175 Early Stage

Late Stage

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

Source: Crunchbase

The VC arm of Stanley, Black, and Decker use this model, assigning small venture teams to identify
promising startups for pilot projects. When the project is ready to scale, the main corporate team will
leverage its distribution networks, funding, and marketing experience to bring the product to market.

Dina Routhier of Stanley Ventures explains that “the best corporations realize they can’t go at it alone.”
Rather than go head-to-head with some of the brightest minds in modern technology, corporations
can back startups with game-changing products to form mutually beneficial relationships with
would-be competitors.

Form a mastermind group

A mastermind group is a type of corporate innovation model that brings together stakeholders from
multiple businesses in an effort to derive valuable insights and new business opportunities.

The old mantra is true, in that it’s not just what you know, but who you know. By networking with key
players in your industry—and other industries—your company can get the support it needs to succeed.

One caveat of this model is that mastermind groups can provide theory but may struggle to implement
ideas due to a lack of resources or practical capabilities.

6
02 Disruptive
Innovation:

The Inevitable Change

Every Market Must Face
According to Forbes, innovation could wipe out $8 trillion worth of U.S. public company equity.
Therefore, if long-established titans of industry are at risk of succumbing to the impact of digital
disruption, then so is every company.

There is no option anymore—every company must have an effective strategy to either engage in or
counteract disruptive innovation in its industry.

In this article, we’ll discuss disruptive innovation in detail—what it is, its challenges, and how to
implement it to grow your organization and your bottom line.

What Is Disruptive Innovation?

Disruptive innovation is when a new business model, concept, product, or service creates a new market
segment and value drivers. A smaller firm enters the bottom of the market, leveraging the benefits of
lower costs and scarce competition to gain traction, then rapidly surges upmarket to displace established
market leaders and products.

Clayton Christensen first coined the disruptive innovation theory in a Harvard Business School paper
to refer to companies who meet market demands with a simpler, cheaper solution. Contrary to what
many people may think, the larger incumbents were not standing still—they were actively innovating
but typically focused on the practice of sustaining innovation to improve existing services.

Disruptive vs. Sustaining Innovation

A simpler disruptive innovation definition labels it as the creation of dynamic, new solutions to
cater to unsatisfied market demand. This practice often results in game-changing products that are
fundamentally different from any current choice on the market.

By comparison, sustaining innovation seeks only to improve upon existing concepts or products.
Therefore, these innovations are merely slight variations of what the market has already seen.

It is common to see industry newcomers engage in more disruptive forms of innovation because
otherwise, it is almost impossible to compete with incumbents who have a larger reputation and can
afford to offer their products and services at lower rates to create barriers to entry.

Types of Disruptive Innovation Models

Not all disruptive innovation occurs the same way, as disruptors can use a variety of strategies. However,
two primary models dominate disruption. Depending on the model they use, up-and-coming firms
usually fit the category of either “New Market Disruptors” or “Low-End Market Disruptors.”

New-Market Disruptors
New-market disruptors create products or solutions that are so much more affordable or convenient than
existing options that entirely new segments of the population can begin using them.

These new-market disruptors create new value networks that are different from existing competitors.
Instead of competing with the incumbents in the industry, new-market disruptors are competing
with “nonconsumption.”
8
They are attracting new people to become customers when they would never have used any competing
products beforehand. As such, the only existing direct competitor is apathy or non-action.

Low-End Market Disruptors

Low-end market disruption occurs at the “low end” of existing value networks. Unlike new-market
disruption, it does not launch a groundbreaking alternative.

Instead, low-end market disruptors create a more attractive offer for customers of existing competitors.
Low-end market disruptors often fend off attacks from incumbents because low-end disruption entails
lower profit margins that might not be worth the time or investment from incumbents.

An example of this is discount retailers, who offer a lower-cost option than incumbents. By doing this,
they can pick off the customers with smaller budgets, who may offer a lower customer lifetime value
(CLV) to larger firms.

The retailer Wal-Mart successfully executed low-end market disruption by accepting 23% profit margins
instead of the industry-standard 40%.

Defining Characteristics of Disruptive Innovation

There are several defining characteristics of innovation that qualify it as genuinely disruptive:

• Lower margins - All things being equal, most businesses want to focus on higher profit margins, as it
offers more room for error and enables greater spending on marketing and development. Disruptors
accept lower margins and often focus on systemization and high volume to maintain profitability.

• Higher risks - Disruptors often undertake higher risks. This risk is essential because they are not
riding a wave of proven customer demand or a well-trodden path. They are an evangelist for an
entirely new category.

• Disrupts an existing market or creates a new one - As its name implies, this form of innovation
disrupts existing value networks or creates entirely new market segments. This approach is
different from merely creating new iterations of current solutions.

• Involves new technology and a new business model - Disruptors need to have a vision for new
technologies or new models to profit from their inventions. One example is taking a technology
concept that is generally reserved for enterprise companies and making it available or affordable
for consumers.

• It happens slowly at first - Disruptive innovation starts slow until it hits the mainstream. At this
point, it grows exponentially. For example, when Amazon disrupted booksellers by allowing
customers to order books online.

• New innovation is often ignored at the outset - At the beginning, current providers ignore the
newcomer, dismissing it as a fad. They don’t feel threatened until it is too late.

• It seems obvious only after the fact - Many consumers and competitors will think your solution is
obvious. However, this realization often happens after you have achieved mainstream success.
The Innovator’s Dilemma
Once you understand the differences between disruptive innovation and sustainable innovation, you have
a choice to make, which presents a challenge commonly known as “the Innovator’s Dilemma.”

There is often a higher upside to innovating in a disruptive manner. However, there is also much more
risk, time, and money involved. Because of these potential costs, innovating in a disruptive fashion may
be ill-suited for organizations that do not wish to commit these resources.

With sustainable innovation, you may not achieve such heights in terms of exponential growth or profit.
However, you can usually produce an incremental increase in profits or market share with less risk.

It is important to note that you don’t have to choose only one type of innovation at the other’s expense.
You can employ a strategy that borrows from both innovation types. In this way, innovation categories
are actually complementary and not necessarily combative.

Disruptive Innovation In Action

The disrupting business is not limited to a narrow set of skill sets or markets—it can happen across all
industries in a myriad of ways. Let’s take a look at some different disruptive innovation examples:

Video Streaming
Netflix is an excellent example of disruptive innovation in the realm of video streaming. It incorporates
all of the qualities of disruption. Netflix started small by serving a niche portion of the video streaming
market—those who didn’t mind waiting a few days or weeks to see their movies.

At the time, Blockbuster was the king of video rentals. But like many incumbents, it was focused on their
current most profitable customers instead of new markets.

Streaming video became extremely popular due to its cost and convenience, and Netflix quickly became
the first choice for video watchers. Blockbuster executives were dismissing Netflix in 2008, but by 2010,
Blockbuster was bankrupt.

Source: Viima Blockbuster revenue Netflix Revenue

10
Lightbulbs
For years, incandescent bulbs were practically the only option for lighting homes and offices. LEDs hit
the market as a disruptive technology but didn’t get much attention from existing light makers due to
their unreliable nature and reputation for low quality.

However, rapid innovation happened, and now: LEDs use less electricity and last longer. Almost every
big lightbulb maker today now offers LEDs. And in fact, many local governments require LED bulbs to
promote energy conservation.

Artificial Intelligence (AI)

AI has been another massively disruptive technology, as it helps enterprises collect and analyze vast
amounts of data with incredible speed and accuracy. As AI technology uses advanced machine learning
processes, including language pattern recognition and image analysis, there is simply no way for
traditional tools or humans to compete.

One of the many areas where AI has changed consumer habits is in cloud storage. Nowadays, anyone
can pay an affordable monthly subscription to store data in the cloud.

Ride Sharing
Uber started a ride-sharing revolution with the launch of its peer-to-peer (P2P) app. Traditional taxis were
more unreliable, costly, and offered little in regards to customer service or recourse for a bad experience.

Now, you don’t need to wander out to the street with the hopes of waving down a cab. You can simply
press a few buttons on your phone and arrange for a driver to pick you up in a relatively short time
frame. Even the payment is completely digital.

Software as a Service (SaaS)

Most business software of the past was clunky, expensive, and required computers with sufficient
processing power and capacity to download and run the programs without a hitch. But as internet speed
and connectivity became more reliable, and computers became more affordable, the SaaS industry
began to rise.

Today, a company doesn’t need to pay tens of thousands of dollars for enterprise software. Instead,
the SaaS model allows small businesses to pay a monthly fee for a cloud service that they can cancel
anytime to avoid a high upfront investment.

Peer to Peer Accommodation

The P2P model allows two individuals to sell, buy, or communicate directly with each other without a
third-party provider. Just like Uber is P2P for transportation, Airbnb is a P2P disruptor for accommodation.

Before, you had to pay a hotel or other company for a place to stay. Airbnb transformed the
accommodation sector by allowing individuals to open up their homes for unique experiences, and
quite often, lower prices than hotels.

Hotel chains like Wyatt and Hilton have had to adjust their business models, changing their pricing, and
even investing in these P2P accommodation companies to remain competitive. In a world where you
don’t need the middle man, people don’t want to pay more or deal with the extra hassle.
Obstacles to Innovation
Innovating in theory and putting it into practice in your organization are two very different things. Just
looking at disruptive innovation examples won’t get you the results you want. When dealing with real
people (both your team and the market you target), you will have some obstacles to overcome:

Lack of Talent
Coming up with new ideas relies on people within your organization with the right skillset. You can’t
expect to innovate within technology, for instance, if you only maintain sales and customer service
personnel. That being said, you can’t innovate within technology with pure technologists either.

It’s best to have a mix of empathy, design, and technology to innovate at a high level in today’s world.
This reality means hiring the right people and letting them do what they do best.

Lack of Leadership
Innovating at such a powerful level that you disrupt an entire market involves high-risk tolerance. Not all
managers are cut out for this high-risk activity. Some leaders are more suited for sustaining the status
quo — and that’s perfectly fine.

At the end of the day, you need various leaders to perform unique roles. If you feel that your current
leadership is not well prepared for disruptive undertakings, don’t hesitate to look outside of your
organization for the right personnel.

Lack of Culture
Understanding that you have a lack of innovative culture is often hard to diagnose. This problem happens
because an organization’s culture is so ingrained into everyday operations that you may not notice that
innovations are happening at a slow pace or are out of line with market demands.

Great companies make culture a priority, evaluating it on an ongoing basis. Sometimes, this means
bringing in third-party experts to see what you can’t see. This attitude is particularly beneficial if the
consultants have direct experience with innovative projects.

No Innovation Partners
Innovation is a challenge for any organization, regardless of its resources, budget, or how long it has
been in business.

A partner can help you speed up the innovation process and offer new perspectives, expertise, and ideas
that your organization may not have access to otherwise.

Through initiatives like corporate accelerators, innovation labs, and incubators, you can forge
partnerships with individuals that “speak the language” of innovation, and together, devise viable
concepts and models that can disrupt a market.
03 Innovation
Management:

Growing at Scale & the

Hurdles of Corporate-
Startup Collaboration
Innovation management is a focal point for many businesses today. If it’s not a priority for your business,
you risk stagnant product offerings and may succumb to the ever-present threat of disruption.

While every company may have great ideas, only those organizations with a strategy and effective
leadership can turn those concepts into business growth and success. Specifically, navigating the world
of fast-moving and, perhaps, inexperienced startups with brilliant ideas takes a thoughtful approach to
sourcing and relationship building.

The Essentials of Innovation Management

Innovation management, or an innovation management system, is the process of managing new ideas,
from ideation to taking action and making them become a reality. This approach has four distinct steps:

• Generating - Brainstorming and employee input to uncover hidden concepts.

• Capturing - Recording ideas in a way that is easily shareable with key stakeholders.
• Evaluating - Discussing and criticizing innovative ideas to see if they fit your needs.
• Prioritizing - Deciding which innovative ideas will be executed to maximize time and other
resources in your company.

Innovation management informs—and is informed by—high-level business targets that generate

significant value for your organization. Certain actions and practices will result from your innovation, just
as your innovation will follow as a response to your business vision and problems that arise.

In order to implement effective innovation management processes, you need excellent communication
between employees at all levels and a collaborative environment to uncover additional innovative ideas.

Why is Corporate Innovation Management More Important Than Ever?

The rate of technological innovation has become exponential.
Source: ARK Invest

Increasing the velocity and transition rate of innovation efforts is an imperative for large organizations.
Over half of the current S&P 500 will be replaced this decade by the next wave of disrupters (Deloitte).
 Tesla is now the world’s most valuable automaker

Tesla’s market cap has shot up by

over 375% over the past year, and the
company is now the most valuable
automaker on the planet.

Source: Visual Capitalist

The other half with struggle with:

• Time spent on scouting and vetting new ideas

• Number new ideas generated / sponsored
• Identify and filtering early-stage innovation ideas
• Number initiatives developed / piloted
• Finding early adopters of products / solutions
• Employees trained / engaged in modern approaches
• Number partnerships established
• ROI of innovations
• Integrating external solutions to internal priorities

Understanding these significant challenges is the first part. The second part (the harder of two),
is building comprehensive processes and approaches to handle innovation development within your
large organization.

Key Pillars of Innovation Management

There are four key pillars to innovation management: Competency, Structure, Culture, and Strategy.
As any new idea can be viewed as innovation, it helps to have these pillars in mind to stay organized.

Let’s take a closer look at each pillar:

Competency
Your core competencies are the things your company does best internally, as well as better than
the competition. However, doing something well does not mean that it is important because your
competencies may not always align with your market’s wants and needs.
In terms of innovation management, it’s helpful to distinguish your employees’ competencies from those
of your organization at large. Your employees may have one-off competencies that apply in narrow
contexts. In contrast, your organizational core competency revolves around its ability to direct and
organize these capabilities around a market solution.

Therefore, for organizational competency, you should look for the following abilities:
• Working with external partners and stakeholders.
• Maximizing the value of your current resources.
• Setting concrete long-term and short-term goals.
• Strategic management systems to achieve goals and review progress.

It helps to have someone within your organization that already has experience with innovation
management. However, with the right mindset and focus on improving your company’s competency in
this area, you can turn it into a major strength.

Structure
Whereas competency has to do mainly with capability, structure refers to the systems and business
processes present within the organization. Innovation control is essential, and the structure is what
makes it possible.

The right structure is greater than the sum of its parts. It can empower your organization to operate
more efficiently and produce more powerful ideas.

For instance, if management treats employee ideas as if the employees were proposing a significant,
wholesale change all at once, the managers may be skeptical and dismissive. Such an attitude would
mean many ideas may never be heard, or they will be rejected without a fair hearing.
The fewer barriers between an innovative idea and your core customers, the better. Innovators are, by
definition, rule breakers—departing from the traditional ways your organization does things.

Culture
When it comes to managing innovation, your culture will either magnify your success or severely detract
from it. The right culture attracts and maintains innovators, whereas the wrong culture turns them away.

The first key in promoting a pro-innovation culture is how you encourage specific behavior while
discouraging other behavior. Behaviors and cultural aspects that aid innovation include:

• The Best Idea Wins - A culture that assures employees their ideas will be evaluated on a meritocratic
basis will foster greater innovation. Instead of bottlenecks and hierarchies determining which ideas
to embrace, anyone can move the organization forward if their proposal aligns with business goals.

• Speed to Market - In today’s world, it’s often the company that brings an idea to the market first
that wins because you can capture market share before competition heats up. You can also iterate
on products and services with a faster lifecycle.

• Ongoing Learning - Encourage employees to take their learning seriously. Teams who are always
learning maintain sharp minds and can identify opportunities to innovate more readily.

• Failure as Part of the Process - One of the biggest barriers to sustainable progress is the idea that a
proposed solution that didn’t work out was somehow “bad.” Not all ideas will be greenlighted, and
that’s okay — but your team needs to know that (and hear it explicitly from your organization’s leaders).
Strategy
In short, your strategy is the long-term planning you have in place for your organization to reach your
financial and other goals.

With the right strategy, you can launch new ideas with confidence and select the right path forward from
several options. Without a clear strategy, you risk running in circles or pursuing concepts or campaigns
that don’t serve your company over the long run.

Strategy also involves resource allocation, and it should inform your innovation management process
based on your available resources. This allocation may change over time as you shift more (or less)
resources toward developing new ideas.

Different Types of Innovation Will Require Different

Management Styles
There are various types of innovation, each with its unique benefits and disadvantages to your company.
These innovation types also require different management styles to enact change effectively.

Open Innovation
Open innovation is an approach that operates with the philosophy of keeping an open mind to ideas
generated externally instead of just those that originate inside the company. This approach is the
opposite of closed innovation, where the focus is only on internal ideas.

Source: Samsung

As you can see from the graph above, with open innovation, you are not limited to the ideas of your
workforce. Instead, you can collaborate with external business partners, entrepreneurs, and new talent in
other industries to contribute to strategic growth.

Intellectual property created between you and your vendors, outsourcing partners, and others in your
network can ultimately be shared to benefit both parties.
Open innovation can present a sizable competitive advantage because you have access to a larger flow
of ideas and also new experts and teams to evaluate and implement these concepts.

This approach requires a unique management style that can balance external partnerships with the input
from your employees. At the same time, you must keep strategic outcomes in mind when selecting which
concepts to invest your company resources and time in.

Incremental Innovation
Incremental innovation provides a lower barrier to change by looking to existing tools, markets, and
business processes for opportunities. For this reason, and because it allows greater innovation control,
this method is a common way to begin the innovation journey for many companies.

Your company may already have an incremental innovation management system without realizing it,
as many organizations often lack the systems to monitor, capture, and enhance naturally-occurring
innovative ideas.

Therefore, incremental innovation is easy on the surface but requires astute leaders who understand
the process and the importance of encouraging innovation. Moreover, these leaders must possess the
discipline to put systems in place that evaluate new ideas as they relate to your strategic objectives for
that department or the business as a whole.

Sustaining Innovation
Sustaining innovation seeks to improve current processes and avoid investing too many resources in
“reinventing the wheel.”

This type of innovation jives well with managers who have an in-depth knowledge base of their market.
They know what their customers’ problems are and how to solve them, the only question being how to
do it most efficiently.

Disruptive innovation
Disruptive innovation is a higher risk approach
that involves using technologies or creating
alternative solutions that are new to your
company, and quite often, new to the market
at large, as well.

An example of disruptive innovation is the

iPhone. The first iPhone created an entirely
new category — the touchscreen smartphone.
It surprised other companies and the consumer
market when released and gave Apple a
significant head start.

However, disruptive innovation requires managers who have a high-risk tolerance and the ability to
balance investment in innovations while maintaining current operations that are already proven to
bring in revenue.

Chart Source: Wikipedia

Architectural innovation
Architectural innovation is taking a process or innovation that already works in one area of your business
and applying it across the “architecture” in different use cases.

For instance, you may have a backend technology that you could repurpose to create additional value
for your consumer-facing applications. Since you have already proven that it works in one area, it is
relatively low risk.

Typically, this innovation works well with management styles that focus on consumer needs and
marketing, as the true challenge lies in getting your market to adopt it.

Radical Innovation
While similar to disruptive innovation, radical innovation goes one step further by creating entirely new
industries and consumer habits. This field is sometimes known as category design.

It is high risk because you are performing business “backward” in a sense—creating a desire for something
that no one knew they had. Think of the first airplane, phone, or television. Leaders who have huge visions
and the ability to manage multiple departments are best suited to oversee this type of innovation.

Where Managers Can Source Innovation

Managers can drive innovation from a number of sources. The best option for your organization depends
on your strategic objectives, resources, and organizational DNA (core competencies and culture).

Sources for innovation include:

Internal Innovation
Looking internally for innovation can provide a faster feedback loop and less friction to getting
started. Popular innovation sources from within a company include structured innovation labs and
R&D departments.

For instance, you can create a think tank within your organization. The employees in this group will
be tasked with ideation and brainstorming. They can then hand off their ideas to your technical
departments, who can perform testing to create a new product or business solution.

External Innovation
External innovation is another term for open innovation. As such, this refers to innovation opportunities
sourced from outside your company, which may include promotional partners, supply chain partners, and
sometimes even competitors.

For instance, if you run an ecommerce company, you may look to your manufacturers to help you innovate
a new design mold that passes on lower costs to both you and your manufacturers. This results in greater
profits for everyone involved as long as you have the right innovation management system in place.
Innovation Partners
Innovation partners are still third-party collaborators such as those in the external innovation process.
However, they can provide additional insights because they specialize in or are expressly set up for
producing groundbreaking solutions.

Examples of innovation partners are innovation accelerators and startups. Their focus is on creating
an environment where new ideas and technologies are brought together to achieve a unique value
proposition. Therefore, it is easier to hit the ground running with these partners.

Top Challenges in Innovation Management

Managing innovation is not easy, and you are bound to come across roadblocks both internally and
externally in your journey. Let’s look at some of the more common challenges and how to navigate them.

Top-Down Management Frameworks

Old-school management frameworks such as “top-down” will create challenges for any company looking
to innovate. The world is very different than it was just ten years ago, let alone several decades ago when
many management systems were invented.

Instead of following the traditional route, it’s better to promote a “flat” company culture when it comes
to progressive ideas. This allows communication to remain transparent so that great ideas don’t get
squashed before they have a chance to provide value to your business.

Culture Lacks a Growth Mindset

There is a marked difference between company cultures that work with the view that “things are fine just
the way they are” and cultures that possess a growth mindset. If you don’t have a growth mindset within
your organization, it filters down to everything you do.

For instance, employees lack the motivation to work on themselves (continual learning) or your product
offerings. And the same applies to your marketing team when looking at your target audience. Instead,
make it clear that a growth mindset is required, not optional, within your organization.

Poor Infrastructure
You can give innovation all the lip service you want and claim that it is crucial to your company. However,
without investing in the proper infrastructure to capture and test your new ideas, you will rarely
implement innovative solutions.

While a top-down approach is unfavorable in some ways, the onus is still on the C-suite to provide their
teams with the resources, technology, and opportunities that innovation demands.

No Strategy
If you don’t know where you’re trying to go, then most of your efforts will likely be wasted. A lack of
strategy is a highway to mediocrity or even a failed business.

Innovation doesn’t happen in a vacuum—it needs guidance in the form of strong management and skilled
team members who share the company’s vision.
With a strategy, teams have a much better chance of overcoming issues, as they can optimize their
resources and direct their creativity to find solutions together. Everything should serve your higher
business goals, or else the efforts are a waste of resources.

KPIs for Measuring Innovation

You can’t manage what you don’t measure. However, measuring progress is easier said than done when
it comes to innovation. Here are some key performance indicators that allow you to organize and more
effectively measure progress:

Input Metrics
Regarding innovation management, input metrics are quantifiable aspects of your process—for instance,
the percentage of your R&D budget for innovation.

However, just because you have input doesn’t mean you’re getting the outcomes you want from that
innovation. Therefore, it is also essential to connect inputs with their associated outputs.

Output Metrics
Output metrics are quantifiable metrics that have to do with actual results that you can see. For instance,
the number of new products you bring to market over a certain period is an output metric.

Another example is the amount of new revenue generated from your innovation process. Likewise, cost
savings by enhancing business processes are measurable and allow you to see if your efforts are moving
you in the right direction.
04 Innovation
Partner:

An Undeniable Path to
Sustainable Business Growth
According to research, over 50% of today’s S&P 500 companies may be replaced in the next decade. In-
novation is critical in order to avoid this fate, but many companies don’t have the time or people in-house
to set up internal innovation labs or teams.

Speed is everything when it comes to innovation. With the right strategy, you can move quickly to get
the edge over the competition. If you don’t have the resources inside your company, one of the most
effective solutions is to look outside.

This article will discuss the best strategy for innovation — connecting with an external innovation partner.
We’ll find out why these partnerships are so essential and how you can select the right innovation
partner. That way, you can help each other with mutual interests and grow your bottom line.

Let’s get started.

What is an Innovation Partner?

An innovation partner is a platform, organization, individual, or location in which several companies or
creators work toward mutual interests to uncover new approaches to solving existing market problems.

The use of the term “partner” is not by happenstance — this is a relationship, not a transaction.
Innovation is helped by having a partner by your side throughout the entire process. This dynamic is
distinctly different than simply using services or products from a vendor.

Open innovation with an innovation partner can bring several benefits. It helps you expand your
perspective, enter new fields, and gain access to new technologies and subject matter experts.

Your innovation partner should be committed to helping you accomplish your goals. Ideally, they will
possess the tools and skills to conduct excellent research and development in your market. They should
also be excellent communicators, as you will be passing ideas, deliverables, and project tasks back
and forth.

Types of Innovation Partners

There are various innovation partners to choose from, each with its pros and cons. However, we can
determine the true value of any innovation partner by gauging the return on investment (ROI).

Let’s look at some of the best options for innovation partners:

Entrepreneurs / Startups
Entrepreneurs and those involved in startups are excellent partners for innovation because they already
have the expertise, vision, and innovative drive required to stand out in a market.

Specifically, these individuals offer a high degree of technical knowledge and commercial experience.
In the digital age, these two currencies are invaluable.

Companies can improve their chances of finding a successful partnership by looking for entrepreneurs in
accelerator programs. Corporate accelerators often attract some of the best talent and brightest minds,
facilitating excellent networking opportunities for companies looking to bring in new partners.
Open Innovation (Crowdsourcing)
Crowdsourced open innovation invites industry experts, researchers, and entrepreneurs from all fields to
generate new ideas and solutions, often with the incentive of a prize. Typically, this is either cash, media
coverage, or the chance to partner with or make a pitch to a relevant corporation.

However, keep in mind that there is little to no quality control or “authority” for these ideas. Therefore,
the proof-of-concept, MVP (Minimum Viable Product), and vetting are left to the R&D that you perform.
As such, these crowd-sourced services aren’t usually the best solution for all innovation partners. Rather,
they can help you with the initial ideation, assuming you have the human resources or partnerships on
the backend to see them through.

Consultancies
A consultant provides technical expertise and specialist strategies to solve problems. As these
professionals operate on a fee-based service, the transactional nature of this type of partnership can
inhibit true innovation.

Therefore, consultant partnerships are often less dynamic or responsive to problems if they evolve
beyond the consultant’s usual scope of expertise.

Universities
Universities excel in providing top academics skilled in science and technology and the lab resources to
perform testing. However, they usually lack “real world” commercial experience (i.e., selling to business
and consumers).

Due to the lack of commercial experience, many university partners overlook the business context of
new ideas. There may be non-aligned or conflicting interests between the business and academic side of
things as well.

Why Corporations Should Work With Innovation Partners

Corporations that are well established tend to get stuck in the same pattern of conducting business at
the expense of innovation, content to rest on their laurels. While they have considerable resources, they
tend to move slowly, causing issues with a lack of genuine, game-changing innovation.

This status quo often comes in the form of innovating on the same products instead of staying on the
cutting edge of the industry. This lack of agility leaves corporations vulnerable to disruption by up-and-
coming startups who use lean innovation strategies.

78% of the companies surveyed in the “Managing Open Innovation” study stated that they have been
practicing open innovation for several years. The pressure to get involved grows with each passing year.
Corporations must embrace a culture that is inherently competitive and innovative, actively seeking ways
to improve their business model. This approach allows you to remain sharp and agile in the face of ever-
growing competition in a global marketplace.

The increasing dynamism of the marketplace means that corporations who don’t disrupt their own
business model will inevitably be disrupted by someone else. You need to take ideas and resources from
your established company and apply an open innovation strategy that involves partners who can see
concepts from another angle.
Innovation partners enable your company to sustain development and creativity without taking away
from the core, proven products, and services you already offer.

Advantages of External Innovation Partnerships

There are numerous advantages of an external innovation partnership. Let’s take a look at some of the
most important benefits:

• Identification of New Business Opportunities - Two heads are better than one. With an external
partner, you can uncover ideas that otherwise would have remained latent and unseen by your team.

• Better Product / Market Fit - Compared to closed in-house innovation, open innovation with an
external partner will bring more results for you to evaluate and test in the market. These external
perspectives help create more targeted products, which, in turn, are more likely to result in
successful outcomes.

• Lower Risk of Failure - Corporations are known for being risk-averse. The good news is that by
bringing in external innovation partners, your risk is actually lower. You can test more ideas, more
innovative ones, and do it faster so that if you fail, you can quickly move on to the next idea in a
cost-effective way.

• Valuable Networks - Building business networks that are long-term and well-aligned is crucial.
Bringing in external innovation partnerships via startups curates these relationships and expands
your network to add value to your business solutions and expand into new verticals. It also makes
you more resilient to market changes.

• Fix Operational Blindness - Partners help you see what you can’t. It is natural for every business to
have operational blind spots. After all, you can’t see and know everything — or your company would
have more revenue and equity than Amazon and every other corporation combined.

• Utilizing Economy of Scale - When you have external partners, you can combine your resources
for more purchasing power. You can invest this increased financial means in your innovation and
testing activities.

• Image Enhancement - Why do you see celebrities on boxes of cereals and endorsing other products?
— Because perceived success or competence by association is real, and it affects how much
credibility you have in the eyes of your market.

How to Select the Right Innovation Partner

As you can see, external partnerships bring several advantages to your corporation. If a partnership
doesn’t work out, you can always part ways. With that in mind, let’s take a look at how to make sure you
make the right choice in the first place.

Establish a Culture of Trust

The first step is to ensure that you trust your potential partner and that your goals are aligned — this
is the basis for mutual support and communication. Your partners should be able to help you get key
stakeholders on board for co-innovation.

Remember that this is not a competition. You will be sharing resources, both financial and creative.
Your team should not feel that they are being overstepped or taken for granted. Instead, communicate to
them the potential positive impact on their productivity and workflow (and ultimately, their paycheck).

There is a certain sense of pride in making something in-house. To bypass this issue, you need to layout
the benefits in clear terms, and your partners should have the competency to help you do that.

However, this type of communication for projects is typically not your R&D team members’ primary skill.
It’s one thing to solve a technical problem. It’s another thing to communicate the solution to executives.
And it’s yet another to communicate the solution to the marketplace.

Identify Incentives
Your co-innovation partner should provide plenty of incentives — after all, this isn’t a charity event. Be
sure to discuss incentives (and non-starters) at the beginning of your discussions with any potential
innovation partner.

Both you and your external partners should clearly see how working together will boost your respective
innovation capabilities, bottom line, and prominence in the marketplace. As such, the whole will be
greater than the sum of its parts.

Sustain the Partnership

To ensure that both sides benefit over the long-term, you need to monitor the relationship. Use KPIs as
milestones to ensure that the partnership is a continued success rather than failure.

These periodic reviews will keep you on the same page as your innovation partner. With consistent, open
communication, it will be easier to resolve issues when they arise. Moreover, the partnership is more likely
to continue producing viable ideas that you can bring to market.

Think of it this way: The longer you can sustain any innovation partnership, the less time and money you
need to spend looking for new innovation partners. Instead of wasting time on the ground floor, you can
stay busy driving business growth by producing profitable products and services.
05 Partnering with
MassChallenge:

A Look at How the Global

Network of Innovators
Drives Corporate Innovation
Working with startups is difficult for large organizations; MassChallenge makes it easy.

MassChallenge works with corporate and industry leaders to build and accelerate their innovation
practices and drive business growth. The accelerators offer the global scaffolding for corporations to
accelerate and connect their technology and talent initiatives with the external innovation ecosystems.
The dedicated Partner Success team works in lockstep to empower our Partners to maximize the benefit
of the MassChallenge Global Network.

Why Corporate Innovation Teams Partner with MassChallenge:

• Visibility into innovation ecosystem
• Speed at which a company can innovate
• Decrease the cost to innovate
• Expand external innovation efforts
• Brand alignment, market visibility and awareness in the innovation ecosystem

Who MassChallenge Is Perfect for:

• Large corporate innovation and technology teams
• Digital Strategy, Innovation, Transformation, & CVC
• Newly formed innovation teams
• Industry disruptive leaders
• Corporations looking to grow their startup community

Driving Corporate Innovation with MassChallenge

MassChallenge firmly believes that startups and enterprises can accomplish more together than alone. As
the global network for innovators, MC works to ensures direct, unbiased focus on the specific interests of
each of its partners and startups.

Rooted in a non-profit model, MC offers a range of industry-specific and industry-agnostic solutions

that are tailored to meet their partners’ goals while pushing the boundaries that connect corporate
innovators, entrepreneurs, and communities to drive business growth and transform economies.
Case Studies

Integration into the Innovation Community: How Mass-

Mutual Partnered with MassChallenge HealthTech

Our approach was to identify a few creative

and talented people, regardless of job
description or department, and really focus
on creating a team of innovative thinkers.
With this team, we were able to help define
business challenges across the enterprise.

Mohammed Dastigir
Head of FinTech and HealthTech Partnerships,
Ecosystem Development at MassMutual
Read the full story here

MassMutual then used these identified challenges to “reverse pitch” startups during our application
period, vying for a spot to act as the startups’ mentors and partners with a focus on entrepreneurs and
solutions that could possibly benefit their business.

MassMutual, a founding MassChallenge FinTech partner, has forged several relationships with HealthTech
startups through their reverse-pitch approach over the last two years. Just a handful are highlighted below:

1upHealth is an inclusive data platform for patients, providers, researchers, and

app developers to automate data integrations with health systems and wearable
devices within 1upHealth’s EMR integrated application.

Pixm is the world’s first award-winning, anti-phishing protection that uses

deep learning computer vision to detect phishing attacks in real-time at the
point of click.

Posh is a Boston-based, conversational AI startup that enables developers to

efficiently build and deploy conversational agents and text and voice channels.

UDoTest’s SaaS platform designs and personalizes an at-home disease testing

kit and collaborates with insurers, physicians, and labs.

From a broader perspective, MassMutual has been able to strengthen the Boston healthtech ecosystem
as an innovation and collaboration leader.
 How Givaudan’s Innovation Teams Collaborate with
MassChallenge Startups Before the Pitch Stage to
Tremendous Success

Givaudan keeps an eye on all the startups coming

through MassChallenge, regardless of industry and
each year works with MassChallenge to focus on
areas that are of interest to their innovation teams.
Focus areas vary each year, and have included
food sustainability, fragrance technology, and
digital expansion.

With the startup Microcaps, a 2019 Switzerland

finalist, Givaudan focused on microencapsulation
for flavors and fragrances.

Givaudan’s approach made it very

compelling for us. Even before the pitch,
they made it clear which Givaudan team
members we were going to be working
with, and this makes the pitch much more
targeted and focused on Givaudan’s needs
instead of us trying to intuit their goals.

Michael Hagander,
Co-Founder and Co-CEO, Microcaps
Read the full story here

Microcaps solves a common problem with

microencapsulation - the trade-off between high
throughput and precise particle size, a crucial
factor for increased stability and controlled
release. The startup has developed a novel
technology that solves this problem by enabling
precise microencapsulation at industrial scale.

How often does this method generate a successful

collaboration? “It has happened every year,” said
Alexandre Bastos, Global Director of Innovation
at Givaudan.
 Integration into the Innovation Community: How
Columbia Threadneedle Investments Partnered with
MassChallenge FinTech

The Goals
One of the foundations of Columbia
Threadneedle’s culture is collaboration, where
experts challenge and debate their best ideas
to make better decisions for their clients. This
includes constantly harnessing the power of
innovation, both internally and externally.

Upon learning about the MassChallenge FinTech

program, Columbia Threadneedle recognized an
opportunity to access cutting edge technology
and entrepreneurial ideas that could advance their
internal development and thinking.

In addition, Columbia Threadneedle could help

foster and expand the FinTech ecosystem in Read the full story here
Boston, which thrives on relationships.

The Success
After key stakeholders met with 12 selected FinTech startups over two days late last year, Columbia
Threadneedle identified two different FinTechs with novel approaches and technologies that matched
with their previously identified goals.

Coalesce.ai - is an Intelligent Process Automation software product that

simplifies risk and compliance workflows in the financial services industry.
Coalesce learns directly from business users without any programming, so the
Compliance team can spend more time on the issues that matter and less time
sorting through data to find the issues.

ForwardLane - an AI-powered API platform to empower financial professionals

in wealth management, asset distribution and commercial banking by surfacing
news and research with leading NLP for Finance that is personalized and highly
relevant for clients.

The fast-paced entrepreneurial spirit of the program created a sense of urgency and drive to advance a
working relationship with the selected startups. Two POCs were accomplished in an expedited time frame.

Collaboration with the FinTech community through MassChallenge provides fresh perspectives on
how we do business and how we can further innovate and evolve our uses of technology and data,
which is vital for the success and growth of our business.

Jay Leopold,
Head, N.A. Investment Risk at Columbia Threadneedle
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