The economic outlook for business around the world is pretty challenging right now. The impact of the Covid-19 pandemic continues to paralyse the economy, international trade wars are putting the brakes on globalisation efforts, and within just a few months the way most organisations operate has fundamentally, and often irreversibly, changed.
As with most crises, there is only one way out: ruthlessly efficient and impactful innovation. But this time around, that is just part of the solution. Organisations that want to successfully navigate the challenging economic times ahead and thrive in the process, need to radically rethink how they achieve these innovations. The pandemic has made it clear that returning to business as usual simply isn’t an option.
An existing problem laid bare
Large corporations continue to be a suitable breeding ground for innovations, with their extensive networks and resources. But, historically, these organisations have struggled to adapt to rapid change. They often lack the expertise to plan, build and scale digital business models at pace. Launching a fund and creating an accelerator or innovation lab to support a couple of startups over a short period of time won’t cut it anymore. The output simply doesn’t justify the resources required to get these initiatives off the ground and the results are also often lacking the impact and longevity needed to bring about meaningful change – particularly in complex areas such as climate or health.
Tech entrepreneurs, on the other hand, are nimble, agile and visionary. Coming up with fresh ideas that shake up the status quo and transform whole industries is part of their DNA. But what they often lack are the resources (networks, capital, know-how) necessary to scale at pace, particularly in sectors that have swathes of regulation to navigate, such as energy and health. Ironically, between climate change and the pandemic, these are the areas most in need of entrepreneur focus. About two-thirds of journalists, researchers and academics believe that tech entrepreneurs will make a bigger contribution to solving social challenges in the years to come than governments in Europe, according to Atomico’s State of European Tech report. Yet, there is a limit to their innovative power. We cannot bet on them alone.
The solution – at least in theory – seems obvious. We need to channel an entrepreneurial mindset and use the power of corporate organisations to rapidly develop, implement and scale these innovations. Such hybrid ventures redefine what collaboration between tech entrepreneurs and enterprises needs to look like to be successful. But to implement this in practice requires a radical rethinking of how businesses have operated to date. The spirit of innovation needs to become firmly ingrained in a company’s ethos and seep through every department and business division.
New alliances to overcome innovation inertia
The aim of these hybrid initiatives is to build new digital business models and come up with fresh ideas, usually under the umbrella of a new innovation unit led by skilled tech entrepreneurs with extensive experience of quickly and efficiently solving challenges. This unit operates independently from the core business to identify and drive the organisation’s future investments. While this independence is a key success factor for such initiatives, the core business in the form of its leadership team needs to have a level of involvement in the development of these innovations. This is where the Entrepreneurial Growth Board as a link between the innovation unit and the corporation comes in.
The board brings together the senior executives and key decision-makers of the group with the tech entrepreneurs and heads of the new ventures. Collectively, they discuss and decide on the strategic direction of the organisation’s innovation unit and which skills – in the form of experienced tech entrepreneurs – they might need to bring in to provide additional support. This new corporate structure gives both the core organisation and the tech entrepreneurs leading the innovation team a say and creates essential alignment between all parties involved.
This best-of-both-worlds approach is called Corporate Venture Building (CVB) and has already resulted in some impactful and long-lasting innovations. Vattenfall, the multinational power company, has used CVB to create Solytic, a firm that deploys AI and data analytics to optimise solar panel performance and now operates over 100,000 solar panels in 42 countries.
The new normal for innovation
Corporations have a fantastic opportunity to draw on Europe’s experienced tech entrepreneurs to channel their radical entrepreneurial spirit, and create new business models. Collectively, they will be able to come up with innovative solutions to some of our biggest challenges. But the time to act is now. The lack of impactful and sustained innovation is not a new problem. The pandemic has just increased the urgency with which we need to address it.
We need speed. We need scale. We need strategic direction. We need a new approach of building digital businesses so that we can make best use of our technologies to solve the big challenges that lie ahead of us. We owe it to the next generation to innovate in a sustainable way and prevent them from having to pay back huge coronavirus debt and bail out failing healthcare systems because of our complacency at this critical time.
Technological innovation holds the key to all of this. But only if we unlock its full potential through a collaborative, effective and impactful approach to business innovation can we address and successfully master the pressing economic, social and even environmental challenges of our times.
Felix Staeritz is the founder & CEO of FoundersLane. He is also a member of the World Economic Forum’s board of digital leaders, and author of bestseller ‘Fightback’.