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Don’t Innovate Like a Start-up
En Bref
  • As companies balance running their business today with retooling for a post-coronavirus world, innovation will be critical to getting ahead of industry evolution.
  • In established companies, innovation must tie to strategy and leverage corporate assets in ways that help grow their best ideas to scale.

In times of crisis like Covid-19, there is so much pressing work to be done to preserve a business and protect its employees that companies may be tempted to downplay innovation. But innovation gives a company options, and as leaders begin to plan for the post-coronavirus future, options will be important.

How a company approaches innovation is what makes the difference between a valuable investment in new approaches and an unnecessary distraction.

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It’s become conventional wisdom that the best way for an established company to innovate is to carve out an internal venture group and apply the Lean Startup methodology to it. That’s how you replicate start-up speed and ways of working, the thinking goes. It’s even helpful to create a VC-type funding pitch.

There’s logic to this idea, but certain hallmarks of Lean Startup technique—rapid experimentation, test and learn, and rapid failure among them—don’t come naturally to many big companies. Big companies excel at executing a known business model, consistently and at scale; rapid failure is simply not in their DNA.

Plus the Lean Startup model was invented to help independent start-ups succeed despite a paucity of assets. For an established company, on the other hand, exploiting its advantages is the reason for doing this exercise in the first place. If you’re not tapping into those assets, then by definition any new idea would be better pursued in the start-up ecosystem. The corporation really shouldn’t be sponsoring it.

Assuming an innovation can benefit from access to a company’s existing assets, its path is made smoother when the company and key leaders focus on three factors.

The first is ensuring that this new innovation aligns with the broader corporate strategy. This is critical when appealing for funding and executive support. Unlike a start-up pitching to VCs for access to talent and resources, corporate venture teams pitch internally, hitting a tone halfway between a business case and a VC pitch. A clear and specific connection to broader corporate strategy will be essential.

Established companies don’t fail to innovate because they can’t start things. They fail because they can’t grow them. So in addition to lining up with the broader strategy, internal start-ups must also be able to take full advantage of their parent company’s assets if they hope to hit scale. This might include repurposing physical assets, or leveraging the strength of its brand, or tapping into the company’s talent pool and know-how. It may, as well, take advantage of outside partnerships that the parent company has forged.

Finally, the venture must search for and discover through experimentation the right corporate assets to use and how to best access them. Until actually tested in its repurposed form, any asset’s suitability for accelerating the venture is unknown. 

Existing assets such as brands, customers and channels can all give innovations percolating within large companies an enormous head start. When Australia Post started an e-commerce fulfilment business, it utilized the parent company’s talent, warehouses and distribution network, as well as its strong brand and reputation.

Historically, Australia Post had focused mainly on package delivery services for e-commerce merchants. Merchants managed their own warehousing and fulfilment. But as e-commerce grew, these sellers began to look for new ways to compete.

Recognizing an opportunity, in 2017 the company launched Fulfilio, one of a portfolio of separate ventures designed to innovate and create new engines of growth for the parent company. These ventures were given autonomy and freedom to test different business models and learn from those tests, but they also benefited from being part of Australia Post. Leveraging its parent’s nationwide warehouses and network, Fulfilio developed a faster and more efficient solution that provided merchants with an all-in-one pick, pack and deliver direct to the consumer service. Aided by Australia Post’s strong brand, Fulfilio soon struck major deals with companies like eBay and Deliveroo.

Today the Covid-19 pandemic has hit Australia Post’s traditional business hard, with traditional letter volume, products like passports and international mail all down sharply. E-commerce parcel delivery has been one countervailing strength. New business ventures like Fulfilio and other e-commerce innovations that Australia Post has incubated over the years have kept it relevant during these unprecedented times.

By carefully orchestrating their competitive advantage, established companies like Australia Post can help a venture get up and running quickly, and then scale successfully. The trick is to tap into those assets while also cultivating an understanding in the broader organization of the innovator’s need to quickly test new ideas, learn and try again.  

It’s important that the parent company set up structures, governance and ways of working that enable innovation. Cultural alignment and special venture capital–style funding sources can also help.  At Australia Post special “innovation guardrails” allowed venture teams to deviate from corporate standards, as long as specific criteria were met. If the venture had a small number of customers, was spending a small amount of money and was up-front with its customers, it was free to experiment and learn.

Corporate support is critical, but it’s also possible to offer too much help to a start-up, something executives call “loving it to death.” Too much funding and too many resources raise unrealistic expectations. Like any parent, the company will need to strike a fine balance between offering support and letting go.

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The global Covid-19 pandemic has extracted a terrible human toll and spurred sweeping changes in the world economy. Across industries, executives have begun reassessing their strategies and repositioning their companies to thrive now and in the world beyond coronavirus.

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