The four obstacles to corporate innovation

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Aug 20 2020 by Michael Ellenby Print This Article

Corporate innovation doesnít come naturally. Itís uncomfortable and unfamiliar, but itís also exactly what your business needs to survive and succeed, even in times of crisis.

Unfortunately, too many organizations are hindering their ability to innovate, both intentionally and unintentionally, and missing opportunities to set themselves up for exponential growth down the road.

Four main obstacles constantly challenge innovation: culture, leadership, organizational structure, and people. Left unchecked, these obstacles can suffocate any potential for innovation within an organization.

Culture

Does your corporationís culture serve as a strong foundation for innovation? First and foremost, corporate innovation cannot flourish without a culture that supports it.

Those that donít support innovation or the creation of spinouts - startups that operate independently of a parent company but originate from that company - are subject to a harsh reality: Their chances of being able to create a culture of innovation are almost nonexistent.

Leadership

While culture is largely defined by the employees within your company, a culture of innovation wonít get anywhere without the support of leadership. Getting buy-in from the C-suite is paramount to innovation success.

Spinouts require support from their respective CEOs because trying to create new businesses takes a major upfront investment and wonít show returns without executive support to back them up. While most companies focus on research and development, mergers and acquisitions, or venture capital, properly supported spinouts can result in a sustainable innovation advantage over the competition.

Structure

Most large companies are built with operational intelligence in mind rather than innovation. Unfortunately, those two items donít naturally go hand in hand. More often than not, operational intelligence comes at the expense of innovation. One way to counteract this conflict is to create a separate organization that is specifically tasked with managing innovation for the core business.

Take a moment to really think about creativity. In most companies, there are two groups: the artists and the soldiers. Artists manage the creative aspects of a business, and soldiers tend to its operational needs. The downfall of innovation comes at the intersection of these two groups.

The solution? Leaders must separate the artists and soldiers, focusing on the transfer of information between the two groups rather than micromanaging projects. Supporting both sides of the business, creative and operational, without interfering with either groupís ability to do their jobs effectively is essential for maintaining a company structure that lends itself to innovation.

People

While leadership buy-in is essential, innovation canít take hold without support from the individuals within an organization. What are these people doing? Are they invested? Is this initiative inclusive and educational for those that feel opposed, or does it exist outside their view?

For innovation to stick, it needs to be rooted in support from the people within a business. That means working toward a shared understanding of innovation, why itís essential, and how it benefits everyone within an organization. Without a shared understanding of why it needs to happen and how it will be executed, plans will get derailed as leaders battle fear and uncertainty in team members. A more inclusive process will be more educational for your people, which makes it more likely that your plans for innovation will become a reality.

To be blunt, innovation is difficult. To increase your odds of success, you must first overcome these four obstacles. It might seem counter-intuitive, but innovation isnít that much more difficult during times of economic crisis or social unrest. In fact, crises often create perfect conditions for innovation to thrive.

A Crisis can be Powerful: Donít Waste It

Amid a global pandemic and protests over police brutality in America, corporate innovation might seem harder than ever. Much like the 9/11 terrorist attacks shocked the country, and the 2008 financial crisis forced companies to focus on the short term, corporations today are struggling to look beyond the coming weeks and months to find paths forward for innovation.

The natural tendency for many businesses is to hold their cards close to the chests, halting any activity outside the scope of core operations. In essence, itís a retreat to the comfort and safety of the more formulaic parts of business.

However, the organizations that refuse to shut down their innovation efforts are going to see an incredible ROI in the long run because they are using this time to establish and increase their competitive advantages. Leading businesses like Apple and Airbnb didnít get where they are by playing it safe; they chose paths of relentless innovation and ended up changing the world.

During periods of recession, the instinct is to cut ďunnecessaryĒ budget items like marketing, research and development, and innovation because these items donít show an immediate return on investment. In reality, this is a nearsighted move that might help you make numbers in a given quarter, but it will affect your company years down the line when there is a product but no pipeline or consumer awareness.

The Silver Lining for Startups

Larger companies can usually weather financial storms, but smaller companies with fewer resources may have to make drastic cuts across the board. Ultimately, this puts those companies in a worse position for the future.

Since early March, startups have had to lay off more than 30,000 employees across the country. Because the pandemic has no set duration and moves at different rates in different areas, its impact on startups is hard to predict ó but that doesnít mean they wonít survive.

Even in a financial crisis, new companies are the net job creators for the economy, which allows them to play a central role in any sort of economic recovery. During the past two recessions, less money was invested, but more companies were funded. In fact, over half of Fortune 500 companies were founded in a bear market or recession.

Innovation comes from intelligent people who know how to get scrappy and start something new. If you shake an apple tree and see oranges and pears fall to the ground but constantly ask, ďWhere are the apples?Ē youíre losing opportunities. Donít let your vision be so narrow that you donít consider possibilities outside the original scope of your idea.

Overcoming the Obstacles

To make it through the crisis at hand and come out on top, innovation must remain a chief priority. Here are four suggestions:

1. Embrace a culture of innovation at all levels. The structure of a typical business isnít always conducive to supporting innovation. To create an environment where innovation feels like second nature, create a separate entity from the parent company that can operate under its own set of rules and procedures. This allows spinouts and projects to make mistakes and fail, learn from those failures, and move forward rapidly without navigating the maze of organizational policies.

Buy-in from the executive level is paramount to the success of startups or spinouts. Without that top-level support, businesses can revert to a model that fears failure rather than embraces it ó making it harder for innovative ideas to come to fruition.

2. Provide funding for innovation. Focusing on core business is an integral part of success. Optimizing processes and streamlining operations is important, but it cannot be your only focus. You also have to look for opportunities adjacent to that core business, such as developing new products and expanding. During recessions, the first thought is to cut funding for things like marketing and innovation. Donít do it.

Navigating a financial crisis forces you to trim the fat from your business. You have to get lean and mean, experimenting and innovating to drive the business forward despite the state of the economy. Teams that do this well are future-proofing their businesses, enabling long-term growth and a competitive advantage over companies that play it safe.

3. Take advantage of innovative ideas. Build, test, and learn. Start over. Knowledge can be a slippery slope for businesses. While you may be an expert in your field, donít assume that you know everything.

Look to the employees in your company and your customers, and then use their insights to drive idea generation and innovation strategy. Experiment with your ideas, making sure that those trials are working toward providing increased value or delivering a new product.

4. Allow failure to be an option. Innovation is as much about succeeding as it is about learning from your failures. You will not have a 100% success rate for all of your spinout ideas. What is guaranteed, though, is education, development, engagement, and growth for individuals, teams, and your business as a whole.

Celebrate your successes, but donít be so tied to the idea of success that you fail to acknowledge the importance of growth and development along the way. Corporate innovation isnít a by-product of business, itís the result of a conscious effort to improve products and services continually to drive your company and industry forward, even in times of recession.

Overcoming these obstacles is the first step toward embracing a culture of innovation and securing a healthy future for your business, but that requires effort. Now isnít the time to shy away. Itís time to get started.

About The Author

Michael Ellenby
Michael Ellenby

Michael Ellenby is the director of corporate innovation at Coplex, a startup studio that partners with corporate innovators to build the next wave of high-growth tech companies.