As corporates scramble to set up innovation units and corporate startups the most important question often goes unanswered.
As I previously discussed, corporate startup units are all the rage these days. Whatever the initial reasons for deciding to go down that path, it is important that any corporate startup hub (or innovation center, garage, skunkworks or whatever it may be called) has a clear understanding of their unfair advantage.
All companies should have a (not-so) secret sauce. Why will our company succeed in the market, why will customers choose us, why will we do better than competitors, why are we different? The answer can lie in any number of places, e.g. superior quality, lower prices, faster delivery, better service, unique product features, alternative business models, first mover advantage, brand reputation and many others.
While understanding this is crucial in any setting, it is even more vital in the context of startups and ventures. When every avenue is open to you, it is double important to have the guiding light that this provides. Surprisingly often, even senior management can struggle to articulate why their company has a right to play in a space. Employees who have been inside the company for a long time often adopt a sense of entitlement with no specific grounding.
We are the best choice for consumers, because we are.
When setting up a more free-ranging innovation unit, we often end up describing it by juxtaposing it to the core business. It is agile, unbound by red tape, doing rapid prototyping, entrepreneurial and so on. While that may well be what separates it from the mothership, none of these represent an unfair advantage in the market.
Our unique advantage is that we run agile.
The new ventures are not competing with the legacy business. They are competing in the open market. Everybody does agile and lots of them do it better than your newfangled unit will ever do it.
But what about money? Corporates have lots of cash to invest to build long term businesses. Unfortunately (for corporates) money is not that hard to come by. Investors are eager to find the next big thing, lots of early stage programs help startups get off the ground and if anything the sector is overheated.
Corporate startup units can find real and lasting competitive advantages, but it requires a serious effort. Corporates have vast customer bases, piles of data, bargaining power, specialised skills, networks and brands.
However, even when an asset is tangible, it will be meaningless unless it can be applied to something. Just dropping customer numbers and claiming that you can connect a new venture to a massive market isn’t enough.
So the key is to think about how a customer base can be leveraged, how the brand can be utilised, how the company data or other assets that the corporate posseses can be brought to bear. Having stuff is great, but being able to use it is what really helps you succeed.
While these advantages may often apply in adjacencies to the core business, creative application of an advantage can leverage it into a completely new market. This is what Amazon did with AWS, moving into cloud computing once they realised they had built an unfair advantage they could use in that space.
Another important lens is to look for markets that have high barriers to entry and are virtually unassailable by an independent startup, but where the corporate has the key to unlock the gates somehow.
When setting up or running an innovation unit, it is crucial to find your unfair advantage. While having clear advantages and articulated strengths does not guarantee succes (at all) it does increase the chances of it significantly. It provides a clear framework for deciding what the team should be looking at and what should be ignored.
All too often the real unfair advantages are ignored and massive potential goes to waste.
I hopy you enjoyed this take on the corporate innovation unit. Make sure to read the first instalment about why corporate startup divisions get setup in the first place.
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