According to an Accenture study of 1,000 large enterprises, big companies struggle with innovation.
The biggest barrier is not a lack of vision but because, by definition, big companies are mature. Organizational structures and processes are in place to guide the company towards efficiency. Seasoned managers steer their employees from pursuing the art of discovery and towards engaging in the science of delivery. Employees are taught to seek efficiencies, leverage existing assets, and listen to their best customers. Such practices and policies ensure that executives can consistently deliver positive earnings to Wall Street, but they also minimize the types and scale of innovation that can be pursued successfully within an organization. No company ever created transformational growth by doing what they do a tiny bit better and a tiny bit cheaper.
According to the Harvard Business Review, big companies can innovate by embracing the following best practices:
- Create autonomous business units.
Most big companies fail to successfully build new businesses or products within their existing structure. In his bestseller, The Innovator’s Dilemma, Clayton Christensen points out that for disruptive innovations to be pursued effectively, they require autonomous business units. What’s more, his solution applies not just in the case of disruptive product innovation, but also to the business model innovations that companies repeatedly fail to embrace. The constant need to drive towards operational efficiency can be avoided through the creation of new organizations.
- Incentivize for long-term viability.
The most common assumption behind corporate innovation is that companies have assets that can be unleashed to create value. However, in the process of unleashing that potential, leaders must make sure new initiatives are built with sustainability in mind. Giving away too much free access to the sales force, manufacturing capacity, marketing budget, and support can backfire when it’s time to scale and the underlying cost structure is far from being free. Leaders must manage internal transfer pricing to ensure the development of viable business models.
- Develop and verify quickly.
In recent years, the lean startup movement has gained traction in the entrepreneurial community. The lean startup approach suggests systematically testing your business model against the assumptions you are making. If you can move from uncertainty to certainty using the fewest dollars and in the shortest period of time, your chance of success substantially rise. Big companies must encourage staff to test early and test often. Incrementally, they can turn a hypothesis into proven results. As ideas gain supporting evidence, the team can justify requesting additional funds.
- Exercise leadership beyond numbers.
Alfred Sloan, the late CEO of General Motors, was known for his focus on maximizing return on investment (ROI). Despite his love of ROI, Sloan periodically invested in innovative efforts that couldn’t possibly be justified by the numbers alone. Sloan created an R&D unit to develop platform technologies for GM, protected the decentralized operations of his brands, and invested heavily during World War II with the hypothesis that capacity needs would pick up. When strict adherence to ROI didn’t make sense, Sloan relied on business acumen. Creating financial guidelines is helpful but intuition based on experience will always play a role in management. Vision can be invaluable in forecasting where profits will flow if the world changes. So when common sense and the numbers don’t line up, exercise good judgement that takes a holistic view.
Is Your Company Ready to Innovate in the Internet of Things?
The World Economic Forum predicts that the Internet of Things (IoT) will usher in the Fourth Industrial Revolution. BI Intelligence forecasts 34 billion devices will be connected to the internet by 2020 (up from 10 billion in 2015), of which IoT devices will account for 24 billion. In economic terms, nearly $6 trillion will be spent on IoT solutions over the next five years. Businesses will be the top adopters of IoT solutions for a number of reasons: 1) lowering operating costs, 2) increasing productivity, and 3) expanding to new markets or developing new product offerings. Governments will be the second largest adopters of IoT ecosystems.
Pursuing innovation inside a big company is tough. Effective leaders understand the importance of partnering with experts, and with the potential opportunities offered by IoT, there is little reason to go alone.
Learn more: https://amyxinternetofthings.com/