Breakthrough innovation, by which we mean developing and launching radically new products, services, or businesses that deliver significant value, is the holy grail of innovation management. Today, it is an essential part of any large company’s innovation effort, complementing incremental and shorter-term approaches that usually focus on the core business. In this Advisor, we explore some of its challenges.
Systematic, repeated breakthrough innovation often poses a challenge to large companies because it is inherently risky and frequently requires competencies and approaches that divert from the mainstream of the organization. In many large companies, internal bureaucracy and red tape tend to stifle the required creativity, and internal R&D teams may struggle to think sufficiently “outside the box.” Creating a stand-alone, semi-independent breakthrough team focused on step-out/adjacent opportunities or grand challenges is a common first step that companies take to address these barriers.
Increasingly, companies are also looking to startups to access emerging technologies, bring in fresh thinking, and introduce more innovative ways of working. This has led to a major increase in the application of startup incubator, accelerator, and corporate-venturing schemes. “Intrapreneurship” approaches and competitions to encourage entrepreneurial activities within the company are also becoming more commonplace. However, despite some success, many companies are finding that these initiatives still fall short of expectations in terms of significant new business creation.
In our work with clients on innovation strategy, we encounter some common reasons for this shortfall, many of which have to do with the fact that companies tend to place too much emphasis on the front end of the innovation cycle, and too little emphasis on the end-to-end business creation process. Common failings include:
Limited scope of internal breakthrough innovation units. These units usually focus on ideation, concept exploration, and product development as far as the prototype stage. The prototype may be successful in itself, but all too often the next stage of scale-up, launch planning, and commercialization falters when conducting more thorough market/consumer testing, or when properly assessing the practicalities of large-scale material sourcing and manufacturing.
Internal rejection of radical new products. Many large companies have built-in “antibodies” that hinder or reject radical new innovations. They are seen either as immaterial (“won’t move the needle”) or threats to existing business (“cannibalization”). Truly radical innovations also require resources, management styles, and funding mechanisms that are, at best, unfamiliar to many organizations. External startups have similar issues to deal with, but they, at least, are driven by entrepreneurs with a mentality and ambition that are all but absent in most corporations. In other words, it is very difficult to find or create the ideal environment for a great but radical idea to prosper.
Brand constraints on breakthrough innovation. In most B2C and some B2B businesses, brand is king. Sometimes great new innovations are killed prematurely during the development or scale-up stages because they don’t easily fit within the existing portfolio of brands. Brand constraints can limit the scope and novelty of innovations and introduce an unwanted bias into the assessment and evaluation of new concepts. Moreover, companies can be nervous about testing new products in the marketplace if their corporate identities are recognizable due to the reputational risk and the possibility of competitors rushing “me-too” products into the market once they get wind of what’s happening.
Scale-up risks. In many companies, concepts and prototypes stay on hold for years and are either never properly commercialized or finally killed off. This can be due to the investment required versus the residual risks of failure, or the lack of a powerful champion to garner the required internal stakeholder support. Stagnation is especially a problem when prototypes are passed along to marketing, commercial, and operations after the prototype stage. Even if there is cross-functional representation on new product development governance committees, the barriers can still occur upon assessing the scale-up and operational requirements in more detail — and especially if there is no clear “home” for the prototype.
In our experience, it is these practical downstream issues — rather than any lack of creativity, good ideas, or technical ingenuity — that tend to be the real barriers to effective breakthrough innovation.
[Cutter Members: For more from the authors on this topic, see: “The Breakthrough Incubator: A Radical Model for Innovative New Business.” Not a Cutter Member? For a limited time, you can download it here.]