Maybe the image is becoming outdated.
So would say Scott Anthony, managing director of Innosight and the author of the recent Harvard Business Review article The New Corporate Garage.
Anthony argues a dramatic shift is underway in corporate innovation with significant ramifications for venture capitalists. Many VCs view their startups as fast moving disrupters poised to turn an industry’s business model on its ear, or as the R&D arms of lumbering, bottom-line-obsessed companies.
In a recent interview, Anthony said that VCs who hold onto the notion that portfolio companies are disrupters ready to put entrenched competitors out of business might need to re-think their mindsets.
“I don’t think that is a safe bet anymore,” he said. Increasingly, large corporations are waking up to the need for change.
This, in turn, offers new opportunity. If large companies are becoming both smarter and more innovative, it stands to reason they will better recognize innovation in small companies. A new level of partnering could result.
“I suspect you’re going to see more symbiotic relationships,” Anthony says. “The startup community is going to have to work more with the large companies instead of just attempting to disrupt or disembowel them.”
The new corporate focus can be traced back as the mid 1990s, when Netscape and the development of the World Wide Web changed business thinking in a hurry. As the Internet grew up, the talk of business model innovation spread. The financial crisis of 2008 and 2009 made it more urgent. How else could a company drive growth?
The paradigm of corporate innovation today of course is Apple with its innovative iPad and iPhone products, and its iTunes and the App Store business model innovations in the mobile phone market. But other examples are compelling in their own right. In The New Corporate Garage, Anthony cites IBM’s Smart Cities initiative as an example of product and business model innovation. He points to Unilever’s efforts with its Pureit water filtration business as an effective of product innovation.
And Google’s AdSense advertising model, an example not highlighted in the article, shows how a business model innovation can be profitable.
Behind this new corporate focus are some of the same trends sparking innovation at startups. The cost and ease of innovating have fallen, especially on the Internet. Corporations also have begun to reply on less hierarchal management structures and integrate entrepreneurial behaviors, Anthony says.
Up to now, business model innovation appears to be about 50% of what is taking place. About 25% is product innovation and 25% is a combination of the two, says Anthony.
Photo courtesy of Shutterstock.