Winter Could Be Coming To Digital Labs And Corporate Innovation Hubs If We Don’t Consider This
The interim conclusion of most of the corporate innovation units and their collabo with startups is devastating and showing first signs of resignation at the C-level. The too widespread claim in the beginning was: Just do it. Now it’s time to re-evaluate the unstrategized provision of capital and talents.
With digital labs, incubators and a lot of venture capital, European corporations and medium-sized companies are trying to pave their own way into the future. Mostly in Berlin, in Tel Aviv or with subsidiaries in Silicon Valley.
Especially car makers using the global startup ecosystem to foster their innovation (see my Medium publication about Corporate Startup Dealmaking). At least this is their goal. Don’t get me wrong. I adore their efforts and my earlier writing explains why - especially Daimler’s pioneering moves. However, a first corporate innovation mover also tells a story or two about failure and what the corporate innovation and startup community can take away. So here are some historical events that shed some light on the innovator dilemmas in the last decade:
Daimler Business Innovation, which will later bring car sharing to the streets, is one of the companies that wants to bring innovation into the company. With Jerome Guillen, now one of the top people at Tesla, a highly talented person was heading the subsidiary. Daimler was raving about the “global innovation machine” and renames it in 2017 to Lab1886, after the birth year of the car. The unit aims to launch four new startups at four locations at once. However, this was a business theory which wasn’t tested or executed iteratively.
Well, then there’s the investment in the air taxi start-up Volocopter and the digital helper Mercedes Me. All of theses initiatives are considered a money burning machine without results, some insiders say.
Numerous European companies had wanted to counter the rise of Silicon Valley and its turbo-digitization with something adequate — their own colorful startup-like cubicles so that innovation could unfold there.
The automobile industry, the media industry, the F&B industry in particular, marked by the Tesla shock, surprised by New York Times’ innvoation cycles and Google’s operating system and news services, tried to catch up in this way with Silicon Valley excursions of managers, when buzzwords like agile working, disruption and design thinking invaded the corporate vocabulary.
The conclusion is that you cannot copy a culture and the mindest of an entire region or a startup and entrepreneurial community.
You simply have to run your own experiments and adopt to the European startup mindset and innovation culture.
Key Take Aways From Last Decade’s Experiments
Disclaimer: Daimler was basically right with creating a decentralized innovation unit.
Decentralized Units — You Don’t Need Colorful Cubicles
According to McKinsey, making innovation networks more decentralized is a good way to improve collaboration and performance (see network map above).
Consider the thought experiment of two geographically separate units that undertake the same activities.
The higher performing group:
A larger leadership group with an open and positive mind-set is a distinguishing feature of the higher-performing unit. Its information network is also more decentralized, with a larger number of connections. Hierarchy is still evident in the higher-performing unit, but its information and knowledge network is more distributed, and more of the members participate actively.
The lower-performing unit: has just one leader, who controls most of the interactions and has a negative mind-set about openness and collaboration, and there are far fewer connections. The network design is more centralized.
People in Innovation Units Are The Battery And Supercharger for Success or Failure.
Here’s a setup of people that works for startups as well as for fast turning innovation units.
Accelarator Programs are failing if this one thing is done wrong
The second major instrument of innovation is the accelerator program which is also going out of fashion. Companies use to bring early stage startups into the company for several months and provide them with mentors and ressources. For five-figure sums one buys a few shares and tries around — mostly unsuccessfully. Microsoft in Berlin, Sky and Scout24 have already discontinued their accelerators; Wayra, a subsidiary of the Spanish telecommunications group Telefónica (O2), has also moved away from the model. “We then had strong teams and good products, but for example the new developments were technically incompatible,” says Wayra’s managing director Katrin Bacic. Also, the period of nine months was too long: “We now know faster whether something suits us.”
“Just like angel investments, accelerator programs need a large amount and variety of startups.” Steve Nitzschner, CEO & Head of Investment Committee at Wildstyle Network
An exception to the craziness of accelerator programs is Axel Springer, which had set up a program with the accelerator service provider Plug and Play from the USA. The investments in digital business models ran over five years until the end of 2017, and Springer has invested in 102 start-ups. Particularly worthwhile: the investment in the digital bank N26, which is now valued at 3.5 billion Dollars. “If the global economy does not collapse, the program will be profitable, with returns above the venture capital average,” says head Jörg Rheinboldt in the Wirtschaftswoche. A clear focus on returns, not the strategy of his investors, is the goal of the program.
Experiments, Trust and Funding Culture
At Wildstyle Network we maintain dozens of playbooks to innovate, build corporate venture funds, go to markets and crisis handling. One playbook evergreen is the answer to the funding question. How much capital shall we fuel into a Future Fund or innovation unit over what period of time? Here’s a simplified answer to the often times executed waterfall funding.
WILDSTYLE NETWORK’S PLAYBOOK DEFINES EXPERIMENTS AS PART OF THE INNOVATION CULTURE
Corporates use innovation hubs to attract acceptional Talents
Senior executives say that making top talent available for projects to meet innovation goals is their single biggest challenge in this area. Some 40 percent of them also believe that they do not have enough of the right kinds of talent for the innovation projects they pursue.
A different view emerges from below. Employees are more likely to believe that their organizations have the right talent but that the corporate culture inhibits them from innovating. We, for our part, believe that defining and creating the right kind of culture, however elusive, greatly increases the prospects for successful and sustained innovation.
About Wildstyle Network’s innovation and corporate venture playbooks
Wildstyle Network is an international management consulting company that takes care of the entire industry experience that is needed to create and maintain modern companies.
With offices in Berlin, Dresden, Shanghai and New York, we have invested in over 20+ startups and have build and incubated new ventures to create a steady stream of innovation. This 15-years-journey with three exits as well as creating two market leaders allowed us to create proven playbooks for modern companies.
We’re proud of the work and purpose we‘re adding to great companies like Microsoft, Samsung, Leica Camera, Here Technologies, Qualcomm, BMW; Porsche and Arvato Financial Services. Join us as a talent or tell us your challenge here.
