Fortune 5000 companies need to be in Silicon Valley and make it work!
Setting up innovation outposts in global technology clusters, such as Silicon Valley, Boston, and Tel Aviv, is highly popular among Fortune 500 corporations. The logic is that if you are present where new trends, ideas, talents, and start-ups are generated you might be able to recognize and assimilate them into your firm’s innovation pipeline. And, of course, it looks cool — both inside the organization and to outsiders.
Unfortunately, all these grand ambitions and substantial investments are likely to have limited returns. Being close to the action doesn’t guarantee a piece of the action. My experience suggests that outposts fail for a variety of reasons. Perhaps the most frequent is the isolation of the outposts and their detachment from the rest of the company. So, even if the outposts manage to absorb local value they usually fail to propagate it back to the organization, which means they fail on the ultimate reason for their existence.
To make innovation outposts work successfully, companies need to:
- Map out local relationships in a CRM with full notes.
- Propagate intelligence and insights and channel to the proper and groups within the larger organization.
- Speed up corporate decision-making and deal making processes
According to Steve Blank and venture capitalist, Evangelos Simoudis,is to respond to identified threats and potential opportunities in five ways:
- Invent: They establish project-specific advanced development efforts like Delphi Automotive’s autonomous car navigation project or broader Horizon 3 basic research efforts that take advantage of, or investigate, technologies and business models the innovation ecosystem is known for in order to create new products and services. For example, Verizon’s Silicon Valley R&D center focuses on big data and software technologies, as well as online advertising-based business models. Sometimes these Horizon 3 research efforts may be associated with a moonshot the corporation would like to pursue as is the case with Google (Google Car), Apple (iPhone) and IBM (Watson).
- Invest: They allocate a corporate venture fund that invests in startups working on technology and/or business model innovations of interest. For example, UPS recently invested in Ally Commerce in order to understand the logistics opportunities arising from manufacturers selling directly to consumers rather than through distributors.
- Incubate: They support the efforts of very early stage teams and companies that want to develop solutions in areas of interest–for example, Samsung’s incubator focuses on startups working on the Internet of Things—or they experiment with new corporate cultures and work environments –for example, Standard Chartered Bank’s startup studio.
- Acquire: Companies buy startups in order to access both the innovations the startups are developing and their employees, and in the process inhibit competitors from getting them. For example, Google acquired several of the robotics startups that had what was considered the best intellectual property.
- Partner: Collaborate with startups in order to develop a disruptive new solution using their innovations along with the corporations or to distribute innovative solutions the start up has developed. For example, a few years ago Mercedes partnered with Tesla in batteries for electric vehicles.
See the full, related posts here:
How Corporate HQ Can Get More from Innovation Outposts
by Alessandro Di Fiore, Havard Business Review
How to Set Up a Corporate Innovation Outpost That Works
by Steve Blank and Evangelos Simoudis