The last few years have seen conferences, books, articles, even TED talks on the 4th Industrial Revolution and the tremendous changes that are affecting societies and how we work.  The narrative is one of the winds of creative destruction on steroids, and if companies don’t innovate they will be swept away by more agile peers. How successful are companies at doing this?  The evidence suggests the picture is mixed.

For instance, a recent survey from Accenture found that very few organizations are generating a decent proportion of their income from new activities.  You may kinda get the impression that the big disruption is always just around the corner rather than ever present in the here and now, but the vast majority of companies see such a shift on the horizon. This hope in a brighter, more innovative future is driving a considerable investment in innovation across the corporate world.

A study published last year by The European Academic Network for Open Innovation highlighted the extent of involvement in innovative activities, with nearly all large companies now doing something or other.  One of the most popular forms of innovation activity is partnering with startups in some way. The rationale is clear, that startups are the engines of creation that have the will and the means to disrupt and create, and by partnering with them, some of that magic will rub off.

Agile innovation

This core strategy has seen a wide range of companies join or create dedicated innovation facilities, where corporates, startups and academics rub shoulders to hopefully create great things together.

One such facility is Here East,  a 1 million square foot campus on the old Olympic site in east London.  The £100 million innovation hub aims to allow startups, corporates and academics to work alongside one another and hopefully create great things.  The center, which has a focus on smart mobility, has corporate clients such as Ford, working alongside academics from Loughborough University and University College London, and startups such as Signal Noise and Infinity.

The facility is certainly impressive and has many of the fixtures and fittings becoming of a hip and happening place for startups to do startup’y things, but to date the evidence of actual innovation coming out of it is mixed.  Gavin Poole, CEO of the facility, informs me that as the facility is just two years old, it’s too early for such fruits to be borne, but the evidence is little better for more mature facilities.

For instance, a recent study of incubators and accelerators in Britain, Germany and the United States found that although they very much looked the part, they were not motivating at all for startups, and almost did more harm than good for their growth prospects.

Not only do corporate sponsors often regard the very presence of the incubator as proof of their innovation prowess, but startups often regard acceptance into the incubator as job done.  Most people will readily accept that innovation is a long and fractious process. However, the evidence seems to show that innovation facilities further enhance this by giving the participating businesses a sense of complacency that stems from the expectation that since the facility is built, innovation shall automatically come.

Streamline the Way to ROI

This is perhaps not all that surprising.  A recent report from the UK government looked at just what startups need in order to scale, and cool coffee machines and foosball tables were not among them.  It found that the number one factor was a strong management team, with the most important qualities of that team being passion, resilience, drive, adaptability and ambition.

Alongside a strong management team, it also regarded strategy, vision and a robust demand from the market as key elements to underpin the scaling of a startup, with an overseas growth plan a common strategy.

Putting startup and corporate together is insufficient if there is no clear pathway to collaboration.This is where technologies such as that provided by Israeli company prooV come in.  

They provide a solution for running proof-of-concepts (PoC), with the idea being that corporates can test startups on a platform that replicates their real-life technological environment and business challenges.  

The expedited testing process and realistic conditions mean that there is a very clear ROI at the end of the PoC process. Tailored proof-of-concept environments and actionable analytics give concrete results to move forward with.

This isn’t regarded as a ring-fenced, standalone process but something with scaling up solutions very much in mind. It gives big businesses and the startups they test a new proof-of-concept experience that is streamlined and centralized — discovery, testing and evaluation all in one place.

Toby Olshanetsky, CEO of prooV, says that more and more enterprises are realizing that open innovation is key to continuously moving forward. The demand is high for a more streamlined way of collaborating with startups and, most importantly, a way of running proof-of-concepts with them to prove their solutions’ validity and relevance.

“There is no reason for proof-of-concepts to be a slow process anymore,” Olshanetsky said. “Startups want to scale by working with enterprise clients, and enterprises want to offer more innovative solutions by using startup technology. The need is there on both sides, all that was missing was the technology to simplify and improve the process.”

Scaling Up Innovation

Creating and scaling up market-shifting innovations has to be the ultimate prize here.  It’s not good enough to be doing innovation for the sake of doing innovation. As John Hagel and John Seely Brown advise, when you locate the edge of your business, it has to be something that has the potential to scale up rapidly.  prooV helps to support this by empowering streamlined testing of vendor solutions to give corporates quantifiable insight into what works and what doesn’t.

The challenge for enterprises looking to make strides then is to back up their innovation strategy with the organizational capability to scale up the experiment.  Hagel and Seely Brown advocate a seven step process:

1. Locate your edge, which is likely to be an emerging business opportunity that has great potential to scale up rapidly.
2. Identify your changemaker/s who fully understand and will embrace this opportunity.
3. Position this individual/s outside the core of the organization.
4. Take a lean startup style approach and experiment relentlessly in order to accelerate learning.
5. Deprive the team of much in the way of support or resources.
6. Encourage the team to connect and partner with other parties outside of the organization to gain the support they need.
7. The new venture should look to create a new product or service and not cannibalize the core business, at least to begin with

So rather than focusing on providing nice physical facilities, innovation centers could really help to facilitate innovation by supporting this process.  They should be looking to help ensure that startups have the environment to conduct proof of concept experiments with corporate partners, and then the skills, leadership capability, finance and access to market required to truly scale up.

Scale up expert Sherry Coutu believes that most innovation facilities today are failing in their duty to help startups and corporates work effectively together and bring products to market at scale.  Whether in terms of running successful proof-of-concepts, giving access to talent and finance, or even providing the hardware required to scale up their work, these things are traditionally lacking from the modern incubator.

“Pilots should be testing assumptions.  You put some money in and run an experiment.  If your intervention works then you should scale it up, but there needs to be a central mechanism for working with these experiments and for scaling them up,” she told me recently.

This is a fundamental part of the lean startup methodology, that experiments are conducted continuously to test assumptions, and action is then taken with the learning that results, either in scaling things up or scaling things down.  It’s a level of experimentation that seems largely lacking in innovation facilities at the moment, but if true collaboration is to occur between startups and corporates, it’s something that urgently needs addressing.