Glyn Britton, partner at marketing agency Albion, on what big businesses can learn from start-ups about innovation, and why entrepreneurs don't have a monopoly on creativity.
"A lot of people from corporates suck with a capital 'S' [at innovation] - they're not cut out for it." That view, espoused by Will King, founder of shaving products business King of Shaves, is not an uncommon one.
Every year we hear tales of big businesses who have been living in the past, where they held an unassailable lead, being overtaken and rendered embarrassingly antiquated; Nokia and Blackberry immediately spring to mind.
Corporate organisations are machines for scaling and defending proven ideas. In the past, corporate might could defend a declining market for years, because the barriers to entry were so high that disruptive competitors simply never got off the ground. But that's all changed. Software lowered those barriers to entry in many sectors, particularly intangible ones such as media. Now hardware is undergoing the same revolution, opening up even entrenched product categories - like shaving razors, as Will's business has shown - to disruption.
But, rather than waiting to be disrupted and waving goodbye to billions in shareholder value, the corporate world is waking up to the need to innovate - to disrupt themselves before they get disrupted by others. They're also realising that the way to do that is to borrow the best aspects of start-ups; they need to be as nimble as those who are planning to eat their lunch.
There's no right or wrong way
There is no shortage of evangelists for corporate labs - distinct and often secret innovation-focused research divisions - who swear that no other approach can work. Others say labs are hokum, and only a separate incubator for independent start-ups with bright ideas will do the trick. Others advocate the corporate start-up approach, where the business wholly owns the new venture but keeps it at arms' length with a distinct team and targets.
Telefónica has tried them all, and according to Gav Thomson, creator of giffgaff, a disruptive 'people-powered' network for the mobile giant, there's no hard and fast rule. The precise structure is less important than following some simple principles, he says.
Actually innovate - don't play at it
Lots of businesses are establishing an innovation team simply because it's what everybody else is doing. It's an easy tick on a manager's appraisal form, something that the CEO can talk about at the golf club. But most innovation teams fail because they are not part of the core business.
Executives shouldn't be surprised if all they manage to come up with is a novelty app that bears little relation to the main line of business. Innovation teams will remain incapable of producing anything more substantial as long as they are not able to challenge the fundamentals of the core business.
At Albion, the marketing agency where I'm a partner, the only valid role we see for an innovation team is to coach the rest of the organisation, with a remit to encourage and fund real innovation where they see it happening.
There's no secret formula
Many people mistakenly assume that successful corporate innovators, like Telefónica with giffgaff, or Aviva with online insurer Quotemehappy.com, must have discovered some 'special sauce'. But in our experience, and that of the panel at a recent event Albion held on this subject, that's not true. Instead it's down to common-sense principles, and being willing to give it a real go rather than just talking about it.
The most important of these principles is this: if you measure a corporate start-up with the same metrics as a corporate department, it will fail. It seems blindingly obvious, but too many big companies kill innovative ideas by holding them to the same standards as mature ideas which are delivered at scale.
According to James Bilefield, a corporate innovation expert who was most recently president of digital at Condé Nast, "most big companies are terrible at innovation (because) the culture, processes and quarterly focus are stifling".
At Albion, we think that instead of standard scale and efficiency metrics like cost-per-acquisition, innovating corporates should look instead at how early stage start-ups measure success. That includes growth metrics like week-on-week user growth, and activity measures like monthly active users.
Crucially, executives must give entrepreneurial units the space and permission to experiment with, or even completely overhaul, the business model. Such moves must not be regarded as failure. This is what is most alien to many corporate managers. As Henry Topham, director of Quote Me Happy, "It's the leadership which often makes large businesses poor at innovating; the command and control approach that corporates love".
Try it, you might be surprised
Corporate environments are usually dismissed as risk-averse, with the expectation that attempts at innovation will be shouted down. But the experience of Gav, Henry and James suggests otherwise. As soon as they started talking about their ideas, plenty of people were happy to step off the corporate career ladder, move to a basement in a cheap part of town and try something new.
Much like an entrepreneur searching for co-founders, a corporate innovator needs to make sure that the founding team they assemble has the right experience, talent, guts and commitment to really make a go of it.
With the right ingredients, there's no reason that a corporate can't innovate just as hard as a start-up.
Glyn Britton is a partner at Albion. Gav Thomson, Will King, James Bilefield and Henry Topham were speaking at an Albion Society event on corporate innovation.
Albion Society is a thought-provoking quarterly event where entrepreneurs, business leaders and marketers meet to discuss a range of topics led by some of the UK's most informed speakers.