1CrowdCompanies.com

By Jeremiah Owyang and Jaimy Szymanski, Crowd CompaniesIncludes ecosystem input from 104 corporate innovation leaders

THE CORPORATE INNOVATION IMPERATIVEHOW LARGE CORPORATIONS AVOID DISRUPTION BY STRENGTHENING THEIR ECOSYSTEM

February 2017

Abridged Report Overview for Public DistributionFull Report Available to Crowd Companies Members Only

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The disruptors move quickly. Google, Amazon, Uber, Airbnb, Bitcoin, Apple, and Netflix innovate at blinding speed, while large companies struggle to quickly turn their

organizations. Enter the “innovation imperative,” a mandate for large companies to launch the next innovation, all while maintaining connections to their customers.

Corporate innovation is an imperative for any company seeking to proactively combat disruption to its business model, product lines, operations, and customer experiences.

Though there are many ways to approach innovation, both internally and externally, advanced companies share a common charge to look toward the future of business rather than sit idly

in the present as easy prey for startups and competitors alike.

Though the opportunities for growth and resurgence are plenty when considering corporate innovation programs, they’re not without challenges. Innovation leaders find themselves in opposition to traditional company cultures that favor predictability over change; scant

executive support in terms of both budget and headcount; and middle management whose concern for reaching short-term KPIs outweighs that of empowering innovators.

Corporations and their change agents are overcoming these challenges and approaching innovation in 10 distinct ways, from building talented teams to investing in the startup ecosystem. Each program type carries its strengths and weaknesses, with the most

critical component of an initiative being a strong tie to both overarching business goals and innovation-centric metrics. Without a clear charter for what the innovation program will

achieve and why, success is futile.

In this report, we focus on innovation best practices from corporations with more than 1,000 employees and $1 billion in revenue. You’ll find real-world examples of companies

that are approaching innovation strategically; useful data on the frequency of their program implementation, budget allocation, and innovation metrics; as well as pragmatic recommendations to bring your corporation’s programs through maturity to advancement.

There isn’t a “one-size-fits-all” solution to steering your corporation’s innovation efforts, but with the help of this research, you’ll be on the path toward successful deployment begotten by a renewed culture, organizational alignment, and clear goalposts for continual improvement.

Executive Summary

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FIGURE 1. TOP INNOVATION CHALLENGES

Change agents within organizations face many challenges when attempting to get innovation programs off the ground.

Peter Schwarzenbauer, chairman of BMW (a Crowd Companies member), is quoted saying, “Innovation is a willingness

not to be understood for a long period of time.” We’ve found that in other companies, the lack of understanding among

senior leadership leads to insufficient budget allocation to internal and external programs. In turn, this results in little

support from middle managers, who are operating against the status quo rather than within a culture of innovation and

early adoption — both within the company and the market.

As part of our research, we surveyed individuals responsible for innovation within their organizations. Survey results

indicated in Fig. 1 show that the top challenges faced include: fostering an internal culture of experimentation and

innovation (57%); juggling competing internal agendas and goals (56%); overcoming the middle management

“permafrost” layer (45%); and moving forward despite deferred commitment and delayed action (33%).

INNOVATION LEADERS ARE CHALLENGED BY CULTURE, BUDGETS, AND THE “FROZEN MIDDLE”

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Our research also included interviews with innovation leaders and strategists from large corporations with more than

1,000 employees and $1 billion in annual gross revenue, as well as industry thought leaders and program service

providers. During our interviews, we uncovered two additional challenges: keeping up with startup innovations and a

steering progress with a lack of clear business goals.

In the full report, available to Crowd Companies members, we explore these challenges and their connection to one another more deeply. Please contact Jeremiah@CrowdCompanies.com to find out

how you can become an innovation council member!

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Time spent in current role

years yearsThis shows that innovators need to

know the business, as well asinternal stakeholders, before

generating new ideas. They must have credibility to sell

up to executives.

Every quest needs a hero, and in the world of corporate innovation, change agents leading the charge are experienced and highly educated. We analyzed more than 140 LinkedIn pro�les of individuals responsible for corporate innovation in varied industries and countries in order to create a persona of the average corporate

innovation leader. Use these characteristics to guide your hiring and talent acquisition process, as well as gauge when leaders may be seeking opportunities for advancement or new challenges.

Percentage with “innovation” in title

Not only do the majority of leaders have “innovation” in their current title, but 40%

also had it in their previous role. This indicates that innovation requires a

groundswell before reaching a level where resources are allocated toward dedicated

leadership. This slow growth trend of innovation leaders reaching senior levels is also re�ected in the fact that only 4% have

the title of “Chief Innovation O�cer.”

A highly educated cohort

have an advanced (master’s or higher) degree

With age and experience often comes higher educational

degrees, as is re�ected in our �nding that nearly half of

corporate innovation leaders tout at least a master’s degree.

Number of industries in career

With experience comes a desire for variety. Our research uncovered that throughout their careers, corporate innovation leaders will apply their

learning to further multiple areas of the business ecosystem.

Duration of career

3.2

61% 46%3

18.63.2

61% 46%3

18.6Corporate innovation leaders aren’t fresh out of college. Rather, they have the experience

and know-how to align minds and departments around change. Corporate

innovation programs often rock the boat, and change agents need to have direct experience

steadying the mast and pushing forward.

WHO’S THAWING THE “TUNDRA?” EXPLORING THECORPORATE INNOVATION LEADER PERSONA

CORPORATE INNOVATION LEADER

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Though corporate innovation is rife with challenges, leaders are paving the way for enterprise-wide efforts through their

implementation of 10 types of programs (see Fig. 2). In this section, we outline the strengths and weaknesses of each

program, the first of which are focused internally on teams and employees, while others look externally to partnerships

with vendors, startups, and the crowd. Corporations often excel in one program initially, then add programs to their

innovation portfolio as they mature and are able to justify related expenditures.

THE 10 TYPES OF CORPORATE INNOVATION PROGRAMS

Dedicated Innovation Team

Innovation Center of Excellence (CoE)

Intrapreneur Program

Open Innovation (Hackathon or Internal Incubator)

Innovation Excursions

Innovation Outpost

Technology Education / University Partnership

External Accelerator Partnership

Startup Investment

Startup Acquisition

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8

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FIG. 2: THE 10 TYPES OF CORPORATE INNOVATION PROGRAMS

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1 1: Dedicated Innovation TeamCorporations often start by staffing an innovation team within the company, which is comprised

of both full- and part-time employees dedicated to developing strategy, managing, and activating

innovation programs. These leaders are experts at internal communications and are proven change

agents. Centralized teams deploy on behalf of the business units, and often act as a governing body

when deployed on a global/cross-functional scale to manage multiple innovation team strategies.

Strengths: With a view into multiple business units, dedicated innovation teams can see areas of

collaboration beyond product R&D, thereby deploying innovation into operations, CX, and new

business model discovery. This positively impacts culture across the company, as departments are

brought together under a unifying innovation charter.

Weaknesses: Dedicated innovation teams may not be as coordinated with the wider enterprise while

making decisions, as they favor pushing forward an innovation growth agenda. Cross-functional

teams can also lack the implementation chops to execute plans, and they require additional resources

to realize each program’s potential.

Dedicated Innovation Teams in Action: Case examples of companies executing this program are

available in the full report for Crowd Companies members.

2: Innovation Center of Excellence (CoE)Innovation Centers of Excellence (CoE) enable innovation across multiple departments within the

company, and members serving on the CoE are also responsible for senior leadership within various

corporate groups. Common departments included in the CoE are marketing/digital, PR, legal, HR, IT,

and product. The goal of the CoE is to standardize and scale innovation across the company, providing

guidance to efforts that do not yet have dedicated teams or leadership.

Strengths: The very existence of a CoE requires cultural agreement across the company, meaning that

all departments and executive leadership must be on board with a new approach toward innovation

that involves multiple stakeholders. Assembling a CoE is an effective initial step for companies to align

visionaries and accomplish full-fledged culture change.

Weaknesses: As members of the CoE are not dedicated full-time to innovation, their responsibilities

are in addition to their current role and often fall outside of standard performance measurement

goals. This can lead to leadership burnout if asked to take on too much too soon without adequate

funding or plans for program growth and part- or full-time headcount.

Innovation Centers of Excellence in Action: Case examples of companies executing this program

are available in the full report for Crowd Companies members.

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3: Intrapreneur ProgramRather than rely solely on external programs, internal employees — dubbed “intrapreneurs” — are

given a platform and resources to innovate. These programs invest in employees’ ideas and passions to

unlock everything from customer experience improvements to product enhancements and full-blown

internal startups that are then launched from within the company.

Strengths: Intrapreneurship programs are an effective and cost-efficient way to surface ideas and

shape your business without the need to purchase expensive startups or hire external talent or

vendors. They enable rank-and-file employees to contribute to a culture of innovation.

Weaknesses: Employee trust is an absolute requirement for any intrapreneurship program to be

successful — trust that they will be empowered by immediate and upper management, that they’ll

be rewarded for failure, and that they’ll have a support system (budget and resources) in place to take

an idea to fruition. Without these program elements, intrapreneurship initiatives will not reach their

potential, won’t be widely accepted or utilized, and will ultimately fail.

Intrapreneur Programs in Action: Case examples of companies executing this program are

available in the full report for Crowd Companies members.

4: Open Innovation (Hackathon or Internal Incubator)Hosted inside a corporate office, large corporations invite startups to embed at their physical locations

and “incubate” them with funding, corporate support, and other perks. This can also take the form of

overnight hackathons, demo days, and online open-innovation programs/contests that request — and

often reward — ideas from the crowd.

Strengths: Open innovation programs result in rapid prototyping of ideas and new technology

integrations that would take much longer if implemented in accordance with existing internal

processes and related approval bureaucracy. This results in faster go-to-market time for product

launches. Startups can also bring fresh perspectives to more traditional cultures and industries.

Weaknesses: Innovations derived from internal incubators and hackathons are often siloed from the

rest of the corporation’s innovation agenda. Open innovation programs can also come at a high price

tag, as many are long-term relationships that require a continual budget to support entire startup

teams. Corporations should be abreast of any legal implications around intellectual property and

patents for ideas and prototypes sprung from these programs.

Open Innovation in Action: Case examples of companies executing this program are available in

the full report for Crowd Companies members.

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5: Innovation ExcursionsFrequently, inspiration comes from outside, not within. Corporate leaders tour innovative

organizations, companies, and regions (in Silicon Valley and other relevant tech hubs) to discover

trends in various industries, learn from speakers, meet partners, and be inspired as they immerse

themselves in innovation culture.

Strengths: Innovation excursions quickly educate leadership teams, create a shared nomenclature

and knowledge base, and help to efficiently identify partners in order to change company culture and

push other innovation programs forward.

Weaknesses: It can be difficult to maintain energy and incite engagement with middle management

and the enterprise at large upon returning from an innovation excursion. A lack of action or proven

impetus for change results in efforts being dubbed “innovation petting zoos,” as the only realized

value of the excursion was to see startups in their natural habitat.

Innovation Excursions in Action: Case examples of companies executing this program are

available in the full report for Crowd Companies members.

6: Innovation OutpostAn innovation outpost is a dedicated physical office, in Silicon Valley or wherever innovation

happens in a corporation’s key market(s), staffed with professionals whose job is to sense current

trends and disruptive technologies, connect with local startups, and integrate programs back into

corporate headquarters. Some innovation outposts are host to partners, events, and startups,

thereby overlapping into internal accelerator territory. An innovation outpost is typically managed by

employees, unlike an external accelerator, which is run by a third party.

Strengths: Innovation opens up at an outside location in the wild startup frontier where

corporations can better enable observation and trade knowledge with the startup community.

It’s a conduit for partnerships and test-and-learn environments that poses little threat to the core

business prior to integration.

Weaknesses: Many corporations build and staff an innovation outpost in Silicon Valley without

first considering the goals of the outpost and the responsibilities of its employees. Look to other

metropoles outside of the Valley that may be more relevant to your market or line of business.

Innovation outposts can also be limited if they become detached from the mothership, creating an

inability for new technologies to integrate with enterprise operations.

Innovation Outposts in Action: Case examples of companies executing this program are available

in the full report for Crowd Companies members.

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7: Technology Education / University PartnershipThrough an educational partnership, corporations can tap into new university graduates, early-stage

projects and companies, and the network of an established educational institution. In addition

to traditional universities, there are new private versions opening up that are dedicated solely to

technology training, like Galvanize and General Assembly.

Strengths: Partnering with educational institutions provides corporations with a first look at breaking

technologies (without having to purchase them or a startup) and how they’ll impact our culture

through an academic lens. These partnerships are also an effective way to secure new talent about to

enter the marketplace.

Weaknesses: Corporations often do not own the intellectual property (IP) from these observational,

educational deployments. This can make integration difficult. Long-term university relationships can

also carry a hefty price tag.

Technology Education / University Partnership in Action: Case examples of companies

executing this program are available in the full report for Crowd Companies members.

8: Accelerator PartnershipCorporations partner with third-party accelerators to provide sponsorship and/or funding in

exchange for relationships with startups and integration opportunities. Corporate innovation

professionals often embed themselves in accelerator offices, fostering relationships with local

startups. These external accelerators are run entirely by vendors (investors, advisors, etc.), unlike

innovation outposts, which are managed by employees.

Strengths: External accelerators can help supplement corporations in areas of limited internal

expertise or capability, as many also offer educational opportunities around startup investing and

acquisition strategies. With so many startups under one roof, these facilities are the perfect place to

efficiently find a partner or acquisition under the advisement of professionals.

Weaknesses: Corporations are limited to the direction of the accelerators in terms of which startups

they’re examining, which ones they believe to have potential, and any other trends of interest that

may not align with corporate vision or mandate.

Accelerator Partnerships in Action: Case examples of companies executing this program are

available in the full report for Crowd Companies members.

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9: Startup InvestmentCorporations place bets among the startup ecosystem, with both small investments for early-stage

startups and larger amounts of corporate funding that yield market data, create opportunities for

follow-on investments, and block competitors. Intel Capital is a recognized leader in corporate

investing, raising $1.28 billion in funds and making 1,094 investments in 769 tech companies to date.1

Strengths: Investing in a startup is often a cost-efficient form of research and development for

corporations, as allocating resources internally toward innovation takes time, resources, and human

capital.2 It’s a strategic way to guide the development of a technology, product, or service that could

eventually be added to the corporation’s offerings through acquisition.

Weaknesses: Long-term investing in startups is costly, and, if not acquired, corporations may lose

precious data and insights to competitors at the end of the investment term. Startup culture is much

more nimble than corporate leaders are accustomed to, which can also lead to issues in managing

workflow, processes, and collaboration.

Startup Investments in Action: Case examples of companies executing this program are available

in the full report for Crowd Companies members.

10: Startup AcquisitionRather than build innovation from the inside, corporations acquire successful startups and integrate.

While expensive, the startup is often already successful, and the acquisition can help the startup

scale further. According to recent studies cited by Global Corporate Venturing, only 5% of corporate

venture capital (CVC)-financed startups are acquired by the backing parent corporations.3 A new

study from MassChallenge also reveals that 23% of corporations see working with startups as “mission

critical,” and 67% say they want to work with earlier-stage startups.4

Strengths: Acquiring startups showcases a corporation’s focus on the future and evolving its

products, services, and customer experiences to meet new expectations. Stanford also shared with

us that some companies experiencing a hard time hiring software talent have used “acqui-hiring”

to bring people into the company. It can be a useful way to acquire talented employees along with

new technologies.

Weaknesses: Startup acquisitions are expensive and come with no guarantees on the success of

integrating with the corporation’s product line, brand, or company culture. These challenges are

especially apparent if the startup already has its own branding and customer base.

Startup Acquisitions in Action: Case examples of companies executing this program are available

in the full report for Crowd Companies members.

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Through our survey, we found that dedicated innovation teams (79%), innovation “centers of excellence” (61%), and

technology education / university partnerships (54%) are the most commonly deployed corporate innovation programs

(see Fig. 3). This shows that companies are first focusing internally on building the right teams, getting governance and

processes in place, and educating current and new employees on emerging technologies before spending time and

resources on rolling out external programs or investing in the startup scene.

FREQUENCY OF CORPORATE INNOVATION PROGRAMS

0% 10% 20% 30% 40% 50% 60% 80%70%

Dedicated Innovation Team

Innovation "Center of Excellence"

Technology Education / University Partnership

Intrapreneur Program

Startup Investment

Innovation Tours

External Accelerator Partnership

Startup Acquisition

Innovation Outpost

Open Innovation (Corporate Accelerator or Incubator)

Percentage of survey respondents who marked this challenge as one of their top three; N= 57

78.9%

61.4%

54.4%

50.9%

49.1%

49.1%

40.4%

38.6%

38.6%

35.1%

FIG. 3: FREQUENCY OF THE 10 TYPES OF CORPORATE INNOVATION PROGRAMS

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Through our interviews and examination of survey data from corporate innovation leaders, we found there to be

five distinct maturity phases that corporations navigate when implementing innovation initiatives: novice, starting,

intermediate, mature, and advanced (see Fig. 4).

FIVE PHASES OF CORPORATE INNOVATION MATURITY

AdvancedInnovation advocacy that bene�ts the entire ecosystem

MatureProgram roll-out and coordination

IntermediateTrials with focus

StartingTrials without focus

NoviceMonitoring the ecosystem without action

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3

4

5

1

2

3

4

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FIG. 4: FIVE PHASES OF CORPORATE INNOVATION MATURITY

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Customers

OperationalInnovation

Business ModelInnovation

Customer Experience Innovation

Product Innovation

FIG. 5: CORPORATE INNOVATION IMPACTS CUSTOMERS IN FOUR WAYS

As companies climb the ladder of maturity, they begin to clarify which of the four innovation goals (product innovation;

operations; CX; or business model) they’re setting out to achieve (see Fig. 5) — both within each program individually

and in their innovation charter for the company overall. When pursuing a new corporate innovation program, setting

clear goals that answer “why this program?” is paramount to choosing the right initiative.

Advanced companies build their capacity for innovation by approaching innovation goals separately at first (avoiding

the trap of too-early ROI expectations), each with its individual programs and support mechanisms. Then, as the

corporation matures in its efforts, its programs will strategically progress to fulfill all four innovation goals within a culture

of innovation that serves as the lifeblood of the organization. The most common metric we found attached to innovation

program success is increased revenue (66%), though that can be a fallacy metric if weighed too heavily too soon, before

innovation programs have the chance to prove real ROI. In the meantime, corporations should focus on other KPIs, as

outlined in Fig. 6 (on next page).

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FIG. 6: TOP INNOVATION SUCCESS MEASURES

In terms of staffing, enterprise-sized organizations are, on average, dedicating at least 200 employees full-time to

innovation and 700 employees part-time. These numbers can climb even higher as a company matures in its innovation

efforts, as we’ve seen some corporations’ innovation talent pools reach the thousands.

At the final stage of maturity, an advanced corporation affects the entire ecosystem with its innovation program, not

just its company’s margins and product offerings. Yes, this even includes competitors! This “common tides raise all boats”

approach to innovation benefits the entire market, which will, in turn, elevate the bar for innovation for an industry.

Ultimately, this benefits the initial corporation, as it can push further into disruptive territory to reach new customers and,

more altruistically, positively impact society as a whole.

Case studies of advanced corporate innovation programs are available to members only in the full report. To become a Crowd Companies member, please contact Jeremiah@CrowdCompanies.com.

0% 10% 20% 30% 40% 50% 60% 70%

Percentage of survey respondents who marked this KPI as one of their top three; N= 57

66.0%

54.5%

45.1%

38.0%

35.2%

31.6%

21.4%

20.0%

Increased revenue generated by new products/services

Greater customer satisfaction

Faster time to market for new products or improvements

More projects moving along the innovation pipeline

More focused culture of innovation

Improved operational ef�ciencies

Learning about the innovation ecosystem

Greater number of ideas generated

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RECOMMENDATIONS FOR BUILDING AND EXECUTING AN ADVANCED INNOVATION PROGRAM

To read Crowd Companies’ recommendations for advancing your corporate innovation program, you must be a council member. Contact Founder Jeremiah Owyang at Jeremiah@CrowdCompanies.com

to learn more about joining Crowd Companies!

You can also find out more about the Crowd Companies innovation council online at www.CrowdCompanies.com.

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Ecosystem InputCrowd Companies interviewed 46 executives and innovation leaders from Fortune 500 companies, innovation ecosystem

partners, and educational institutions for this report. Companies interviewed are listed below:

We also surveyed 126 innovators in varied industries, with 58 respondents from companies with more than 1,000

employees. We examined career paths of corporate innovation leaders through more than 140 of their LinkedIn profiles,

and conducted secondary research from reputable sources on corporate innovation programs and ecosystems.

500 Startups Accenture Achmea Adobe

ADT AXA Cisco Colgate-Palmolive

Comcast Electrolux Fujitsu Galvanize

GE Hallmark HP Ideation

Intrapreneur Lab Johnson & Johnson Leroy Merlin MasterCard

Migros Nestle Nexxworks Panasonic

Pilot44 Labs PostNL Protiviti, Robert Half Rocketspace

Stanford University Swisscom SwissPost TD Ameritrade

Verizon Visa Walt Disney Co. WDHB

Wells Fargo WL Gore

Endnotes1 https://www.crunchbase.com/organization/intel-capital#/entity2 http://www.hec.edu/Knowledge/Finance-Accounting/Corporate-Finance/Venture-capital-why-corporations-invest-differently-

from-traditional-funds3 http://www.hec.edu/Knowledge/Finance-Accounting/Corporate-Finance/Venture-capital-why-corporations-invest-differently-

from-traditional-funds4 hhttp://fortune.com/2016/08/09/startup-fortune-500-corporations/

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About the Authors

Jeremiah Owyang, Founder, Crowd Companies

Jeremiah helped major companies navigate the first phase of sharing, called social media, and he’s

committed to helping companies through the second phase of sharing, as people share and create

the physical world around them. Over the course of his career, Jeremiah has identified big trends

before they happen, and helped major companies through the transition. He was a founding partner

and research director at Altimeter Group, where he is currently on the board of advisors. Jeremiah

spent time as an analyst at Forrester as well, covering social computing for the interactive marketer.

Jaimy Szymanski, Research Analyst

Jaimy is a digital experience analyst, providing contracted research consulting services to Crowd

Companies. Working as an independent advisor, she explores how organizations adapt core

digital strategies to reach the new “connected customer.” With a background in research and

analysis, marketing, and social media consulting, Jaimy’s career is driven by the desire to further

the evolution of companies’ that are adapting to digital disruption. Jaimy and Jeremiah worked

together at Altimeter Group, where Jeremiah was the Research Director.

www.crowdcompanies.com