Invest in Start-Ups for Innovation?

September 3, 2012

I want to focus in on Jason Yotopolous’s following point in this Venture Beat article: SAP gives startups millions of dollars worth of software:

At a recent SAP innovation conference, Jason Yotopolous, the executive vice president of global research and business incubation at SAP, hinted at the company’s reasoning. “We are building startups within SAP,” he said, and he added that they work in a “co-innovation fashion” with these companies.
“Innovation is a challenge within a big company,” he admitted.

Innovation is big companies is hugely important and very challenging. The essence of my book ProVoke is about disruption and innovation at a personal level and especially where I spend most of my time when working with large enterprises. First of all, we have found that one of the major obstacles to innovation (experimentation, new product introduction) is the pressure of the enterprises to sell MORE OF what is selling. Clearly a new innovation has a small revenue opportunity, so most often lost in the noise. Secondly, we need to build a culture of disruption and innovation that not only recognizes that innovation is important but expresses this organizationally, from the top down. It is extremely difficult to be inspired to innovate as a brilliant engineer in a large company if your CEO talks the ‘innovation’ talk but does not walk the walk. Every time you are about to think ‘out-of-the-box’ and introduce a new innovation, you encounter resistance, skepticism and concern from the CEO.

So, folks for innovation in a large company to work is has to be top-down and bottom-up with a strong ecosystem to push the innovation mindset forward. Hana is a perfect example of possibly a great innovation that did not see the light given SAP standard massive product sales. How could SAP have rocked the world with Hana? What other areas might SAP have played in which is does not today? Yes, innovation is difficult but by no means impossible in large enterprises and is an art that all should participate in, in order for it to work.

As for the  the comment about investing in start-ups: Absolutely, that is fantastic! Large technology players can fuel start-up innovation in a significant manner. However, does this change the culture of the company to innovate? I wish I saw that more often. The inherent culture of an enterprise does not change just because the enterprise invests in, or acquires a phenomenal startup. Often integration is late in coming and poorly planned at best. To leverage the mindset of innovation from investments or acquisitions into the nature of an enterprise requires an active effort to determine apriori ‘what’ element(s) of the startup will bring best value, how to make the integration work, and inspire both sides to participate. In theory, while millions of dollars are invested by Microsoft, Intel, SAP and others, I would offer that they think carefully: Does anything change in these companies? Does SAP become more ‘innovative’ because it acquires?  Hey, I am all for this, but let’s not confuse the action (investment in startups) with the desired outcome (innovation)! To change the culture to that of innovation is very active effort which requires much more internal work than simply investing in startups. For a fact, we all know of large companies who have made acquisitions and investments whose challenge is to innovate. I salute SAP and Jason for their honestly about the difficulty and critical necessity of innovation in large companies! SAP is taking the first step for sure.

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