To achieve effective collaboration with entrepreneurs, leadership must be the catalysts for change and ensure that the organization as a whole is willing to rally around new models of innovation. Companies need a clear rationale for which ideas get developed internally, and which should be candidates for external collaboration. A holistic innovation strategy, which defines objectives for both internal and external innovation, is essential.
Delivering agile innovation
Creating value from collaboration with entrepreneurs in retail and consumer products
We live in the age of innovation, driven by the rapid evolution of technology and data which has fundamentally changed consumer behavior. This is creating unrelenting pressure on consumer products (CP) and retail companies to put innovation at the center of their business.
Succeeding in this environment requires CP and retail companies to develop a highly agile model for innovation that accelerates speed to market and helps them to re-imagine business models and transform consumer experiences.
Yet delivering transformation on this scale is extremely challenging. Our survey confirms that innovation is becoming increasingly difficult. Most large companies are hardwired to maximize efficiency, minimize variances and avoid experimentation. This can be incompatible with a culture in which risk-taking is a prerequisite for success.
A growing number of companies are now looking outside their organizations for new ideas. Smaller entrepreneurial firms offer the agility and creative thinking that larger organizations need to unplug innovation bottlenecks.
Yet, in practice, it is very difficult to get these collaborations right. Overcoming the challenges of collaborating will be critical to delivering agile innovation.
The nine principles of agile innovation
Based on our experience, successful collaboration with entrepreneurs and startups requires companies to adopt nine principles.
Click on each principle to read more.
Large companies frequently have a fear of failure and a reluctance to experiment. Initiatives, such as Six Sigma, which are designed to minimize variances, can exacerbate this. Business leaders must nurture a culture in which ideas and experimentation are encouraged and embrace failure as an opportunity to learn, while ensuring the benefits of the Six Sigma model are not lost. The two cultures must co-exist.
Entrepreneurial firms are typically unencumbered by bureaucracy. Many embrace near-lean methodologies, which means they have a very efficient approach to identifying, discarding or pursuing new innovations. Large CP and retail companies should embrace this attitude as much as possible, empowering managers to make rapid decisions. Common agreement and clarity around the problem statement is also critical.
Successful collaborations do not just depend on finding the right entrepreneurs. Large companies also need to identify the right internal team to manage those relationships. CP and retail companies need to look for individuals who have the right mindset and can serve as effective, “multilingual” translators between the entrepreneurial and corporate worlds.
CP and retail companies need a framework that provides the flexibility to allow different engagements, but within defined parameters. Some companies will prefer to use an intermediary, while others will choose an incubator model. Keeping collaborations at arm's length from the core business will typically make sense, to give them space to breathe and the ability to operate under slightly different rules.
CP and retail companies have very different cultures, processes and speeds of working compared with startups. Aligning expectations requires the ability to clearly understand each other's concerns. Both should be clear about their roles, responsibilities and expectations. Open, frequent communication is essential. Successful collaboration requires both parties to embed themselves in each other's business environment so that there is a deep mutual understanding and alignment.
Business processes need to be changed in order to collaborate effectively with entrepreneurs. For example, the large company's procurement processes may take several months to navigate, but that may be too long for the small startup with just a few months of funding to develop a new idea. Business leaders must accept variance from the corporate norm and ensure that these normal processes and rules can be circumvented, without undermining their validity for the core business.
When collaborating with entrepreneurs on innovation, tightly defined performance metrics will not work. Equally, it is important not to obsess over perfection. Developing ideas quickly that are “good enough,“ then testing and refining them in an iterative process, is often a more effective way of innovating than laboring over perfection.
Entrepreneurs have much to teach large organizations about innovation. Their emphasis on rapid prototyping, and willingness to take risks and learn quickly from mistakes are the bedrock of their capacity to innovate. Although multinational CP and retail companies may never have the agility of the startup, it is essential that they embed mechanisms to learn from smaller collaborators, and refine their own approach to innovation by adopting some startup behaviors and approaches.