Innovation and Large Enterprise – Part II: Acquisition and Investment based innovation
In Part I of the Innovation and large enterprise series, we discussed the fact that innovation is not just innovating the next biggest thing, rather it can often be based on existing products and creating new innovative offerings based on the existing business. Think of the thousands of apps Blackberry would have had, if the RIM philosophy had been more app store vs closed/proprietary based. I am sure you can think of many other examples. Innovation also does not need to be very complicated. Last month I wrote about the Square revolution and the partnership with Starbucks. Irving Wladawsky-Berger also has a great article called Revolutionary-Ordinary Innovation which I encourage you to read. We both make the point that ‘innovation’ does not have to be esoteric, complex or extraordinary. Most often it is the ‘what-if’ right in front of us. All it takes is a personal choice to wonder, explore and experiment and to put things together. For example, millions of iPads are used for business, people have to pay by credit card-> the ordinary but revolutionary innovation: A way to put the two together!
Most of the large enterprises I work with have great existing product lines. Imagine the possibilities if nothing else- we do the ordinary revolutionary thing: Put things together across silos to develop new innovation. Extraordinary comes from how creatively we look at the possibilities not that it has to be something no one has ventured to do before.
In Part II of this series on innovation, I want to discuss innovation based on acquisition and via investments in innovation (ie startup technologies). First acquisition. In ProVoke, I have a chapter dedicated to acquisition based innovation. In principle, acquisition is a phenomenal way to bring IP, technology, talent and revenue (customer base) into companies. I am sad to see that often this is driven by revenue vs. innovation purposes. Unless we have a strategy ahead of time, acquire for a purpose, and ‘integrate’ the new acquisition into the existing framework of the company, we are simply buying companies and growing the company. That is fine, as long as we don’t have the ‘illusion’ that we are increasing the innovation capacity of our company. Acquisitions create tons of distraction for the existing staff and incoming staff. For those of us having been through an acquisition, we know that planning is critical ‘before’ the acquisition. On the upside, if done right, it could be phenomenal. Technology companies often succeed in using acquisition to bring in foundational technology to build upon. When done right, it is fantastic. Often it is done rapidly in order to get ahead of competition, or to be able to have the “me-too” offering and much is lost in translation!
As an external measure, some companies invest in startup or tech companies. I talked about this recently in my blog about SAP’s philosophy. There are times that this is purely a business function such as Intel Capital, a multi billion dollar venture firm inside of Intel, which allows Intel to be involved in many deals but almost none of these investments are integrated with the business of Intel, so arguably does not (nor was it intended to impact innovation at Intel). We also have one off investments the likes of those done by SAP and many others, like Microsoft investing in Facebook. These are purely financial investments and do not impact innovation in these companies. Nothing wrong with investing but this is NOT innovation. Microsoft did not become more innovative by purchasing Skype. It simply made a very expensive acquisition for market share gain.
Investing in tech companies can work ONLY if it is done to actively bring in, nurture and enable innovation which was not possible before. I see a lot of this in telco companies. Samsung and Android (hmm- a very hot topic of discussion these days). But, everyday while I am with my large enterprise clients, I look around and I see tons of acquisitions, but equally I see great dysfunction in integrated innovation or new combined product offerings. The possibilities are massive, but because the acquisitions are not planned as an integrated strategy to start out with, they do not increase the innovation capacity of the company, rather they increase the portfolio. Often years post-acquisition, not only are folks still thinking as if they are with the old company, but the overall integrated product and innovation portfolio of the mother-company have not changed. Within these gaps lie huge possibilities for massive innovation and it is always a pleasure when we find the hidden innovation gems!
In summary, while both acquisition and investment in technology companies can bring innovation into a company, acquisition by itself it does not make a company more innovative. That can only happen if ‘innovation’ is center stage, planned for accordingly and has company wide participation. This is the Culture of Disruption and the Culture of Innovation which I invite you to be a part of!
