Corporate leaders are concerned about innovation, driven by the fact that growth through innovation is the route to superior performance. 77% of CEOs surveyed by BCG in 2013 said it was their top strategic priority or one of their top 3. In the US, innovative companies generate 3 year total shareholder return premiums of 6.7% over their peers. The spread is even wider in Asia where innovators enjoy a 14% three-year premium!
In search of game changing new ideas, many companies are broadening their quest for growth-driving innovation beyond the traditional R&D and M&A routes.
This new innovator’s toolkit enables companies to take a holistic view of growth that includes core, adjacent and non-core activities. It accommodates diverse methods of collaboration and startup support. Many forward-looking companies are already using all or some of this suite of tools to gain an edge. These companies are leveraging their business-incubation, venturing, and partnership activities to widen their search fields and find innovations in corners of the business world that they had not previously explored.
When correctly applied, these tools enable companies to engage with other organizations in various stages of development, from startups still in product development to companies in their early growth stages to mature enterprises. They also enable companies to commit to a range of timelines with differing levels of financial investment.
Many companies have recently raised their game by means of incubators and accelerators. These tools allow them to engage with early stage startups either over a relatively lengthy period of intensive business development or though a shorter-term structured curriculum.
BCG’s analysis of companies which have adopted these tools across 6 different verticals reveals that 43% of the top 10 companies have established incubators and accelerators.
Companies need not set up these tools themselves and/or in house. Many companies have teamed up with independent incubators or accelerators often favouring those that are vertically focused e.g. fintech, healthtech, etc. Companies need to keep in mind that in-house incubators or accelerators often suffer from lack of autonomy from the core, misaligned expectations, no dedicated or committed resources or simply do not have the right skillset in-house to foster innovation.
Companies seeking short-term product development, commercialization and rollout innovations typically opt for strategic partnerships with already established startups. The typically strategic partnership involved creating a new legal entity to hold the partnership’s assets and oversee operations.
We, at aha! (Asia Healthtech Accelerator) favour and recommend this type of partnership model when we engage with companies.
When executed effectively, strategic partnerships enable each partner to expand or deeply penetrate its market with products that complement its own product portfolio, without having to invest in non-core activities. Partnerships are especially valuable to companies seeking quick entry to a particular market or business line because of technological disruption, ne market entrants, or aggressive moves by competitors.
As innovation leaders step up and fine-tune their activities, BCG observes that the distance between the leaders and their slower moving rivals is widening. BCG’s concluding comment is that the train is leaving the station, and companies that don’t climb aboard will miss out on the growth that these innovation tools unleash.
For further details, please refer to bcg.perspectives
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