- Corporations can innovate because of access to connections and resources
- Shell invests US$1 billion in R&D but outspent by VCs who spend above US$80 billion
THE threat that large corporations face against the entry of startups into the industry is testament to the immense power harnessed by new technology. During the Agile Giants: Corporate Innovation panel session at Innovfest Unbound 2018, moderator Prerna Suri posed a question to the speakers: Can big companies innovate?
Hailing from large corporates with a long industry presence, the panellists comprised of the managing director of Shell Ventures, Geert van de Wouw, head of Unilever Foundry, Jonathan Hammond, managing director of Ayala Group, Paolo Borromeo, managing director and head of product development of Citibank, Sanjeev Mehra and chief innovation officer of MetLife, Zia Zaman.
Addressing the question, Zaman affirmed that large companies can indeed innovate, “Historically, 50% of innovation comes from large companies but it just doesn’t get enough press like startups do. We don’t have to look further than this room for companies that have innovated across their portfolio.”
While startups have the benefit of being nimble, corporations have muscle power that the former has yet to develop. As part of MetLife, an insurance firm that was founded in 1868, Zaman adds “Although we may lack agility, we have access to channels, people, assets and brands that we can leverage upon to offer new products to customers or even reimagine our industry.”
Mehra concurs saying “Most of the time when companies say they cannot innovate, it is a cop out.” While he agrees that large corporations are subject to more constraints than startups, he says that there are more than enough untapped resources in the industry.
Equipped with product development experience in 17 markets globally, Mehra says each market has different cultures, market practices and evolves differently from one another. “There’s no one-size-fits-all solution to deploy across all markets. That in itself drives a constant need to be agile, innovative and flexible.”
He adds that companies are starting to realise that there is no way to outthink and outrun the innovators in the market. “What we can do is leverage on our strengths and others in the market. This is why Citibank has decided on its open banking platform.”
Mehra shares “We have put 90% of what a consumer bank does as open APIs. By unleashing this, Citibank will ride the wave of innovation and disruption within the market.”
Nonetheless, corporations are taking heed of the competitive edge startups have over them. Although Van de Wouw believes that Shell’s survival to date is because of its innovation throughout the years, he says “We realise that we cannot innovate solely through propriety research and development (R&D) anymore. We have to reach out to the startup community because we are being outspent and outsmarted.”
Although Shell invests about US$1 billion a year on R&D, Van de Wouw says that venture capitalists spend about US$80 billion to US$120 billion a year. “If even 10% of that is relevant to the energy industry, you’re talking about US$10 billion worth of innovation whether in digital, cleantech, oil and gas or any other relevant area.”
As for being outsmarted, he says a lot of talented young people choose to start their own companies instead of joining corporations like Shell. “We have to engage with the startup community to reach the technology and business models that are relevant to us. The best way to do this is offer startups revenue and connection opportunities to thrive within Shell.”
While it is apparent that corporations have grown largely because of their strengths, corporations are still wary treading into the future and talk about the key factors to further spur growth. As part of Ayala Group, the largest and oldest conglomerate in the Phillipines founded in the 19th century, Paolo shares, “Innovation stems from having leadership that champions a culture of creativity.”
He adds that having a supportive leadership system allows companies to push boundaries of experimentation even in the presence of demanding shareholders. Agreeing with Paolo, Van de Wouw says, “The tone from the top stimulates innovation and willingness to take risks.”
In addition to the management setting the tone, Hammond talks about the importance of having the right people in an organisation. “We need to have a mix of people from different backgrounds such as startups and different industries to really shift the business forward.”
As age-old corporations brainstorm ways and embark on transformation journeys to become futureproof, the path forward is paved with challenges.
According to Mehra, one of the greatest barriers to innovation is the fear of failure. “There needs to be a change in mindset towards a more ‘quick to try, quick to fail’ attitude.” He says introducing this culture into corporations is the toughest challenge.
As for Van de Wouw, he believes that innovation is hampered because employees are not incentivised to take risks. “Usually, the people within organisations are more operational than they are entrepreneurial. It takes time and effort for them to embrace a new business model.”
Furthermore, he adds that companies should first look outside their organisations to see how others are solving problems they are facing. “Before launching an internal research or project, look outside to the startup community or forge partnerships with R&D centres that may have a better solution.”
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