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Why do corporate innovation strategies fail?

Innovation has become imperative for companies, but the possibility of failure is high for reasons internal to the organisational structure. Limiting risks is possible, and let's see how.

Luca Mascaro

27.03.23 - 7 mins read

The complexity of the world we live in is increasing day by day, and so are the markets in which companies operate. Continuous innovation is necessary to keep the offering relevant and seize the many opportunities behind each change.

There are three main reasons why innovation is essential for companies:

  1. market volatility and fear of not satisfying a mobile and articulated demand;
  2. the speed of technological transformation;
  3. the life cycles of increasingly short business models.

DATA: INNOSIGHT/Richard N. Foster / Standard & Poor’s

The five most popular innovation strategies

In recent years, many companies have adopted specific strategies to respond to constant innovation needs. Each strategy has strengths and weaknesses assessed according to objectives.

  1. Digital Transformation
  2. Building internal capabilities
  3. Innovation Labs
  4. Collaboration with start-ups
  5. Venture building

At a closer analysis, the first two are functional to improve the company's exploit in the short term but have little impact in creating genuine and lasting innovation. They respond to transformative and rejuvenating needs without exploring new possibilities or markets.

Despite the ability to generate concrete innovation, the third and fourth strategies remain limited outside the promoting organisations and struggle to contaminate the original corporate mentality, colliding with implementation difficulties and precluding market landing of the proposed solutions.

The fifth and most recent strategy, Venture Building, has gained appeal due to its inherent ability to maintain the strengths of all others while minimising their shortcomings. It allows practising innovation that integrates both the benefits of exploitation and exploration, proposing radical solutions that incorporate and spread within the starting corporate organisation.

Corporations can pivot their business beyond the traditional one, generating highly permeable innovation and supporting their core business with new vigour.

In light of these considerations, many forward-looking companies are capitalizing on new markets, technologies and behaviours, diversifying their purpose and offer, and creating new ventures capable of raising industry standards. A strategy that has proven to be both more challenging and profitable at the same time, able to contain risks and maximise results in the short and long term.

The three main causes of innovation failure

Among the main obstacles to the success of new ventures, we find appropriate identification of human and financial resources, navigation through complex legislations (especially in highly regulated sectors such as Finance and Healthcare), timely validation of the market through research, testing and competitive differentiation. However, imagining the direct relationship between benefits and risks is easy.

An analysis of the attempts made to date by many companies that have accepted the innovation challenge suggests that the three leading causes of failure are often internal and recurrent:

  • Difficulty in managing the business as usual and innovation simultaneously
    Innovating is complex and challenging in itself. Doing it in conjunction with ordinary activity is dysfunctional because it requires committing the best energies and resources available, neglecting the business as usual, if not the innovation initiative itself.
  • Digitisation suffocates the technological infrastructure
    A long, demanding process that is never definitively concluded. This task almost totally absorbs the IT units, and the company struggles to organise the resources necessary to launch new ideas on the market.
  • Lack of an innovation-oriented culture
    The right mindset is critical for the operations and leadership team. Audacity, initiative, risk management and experimentation are essential skills to succeed. In companies, not all resources are prepared or supported by a culture based on these skills. The trend towards conservatism is high, and cautious - if not restraining - approaches to change are preferred.

Success factors in innovation paths

Awareness of the causes helps to identify the success factors limiting risk. Strategy alone is not enough. Applying fundamental principles beyond methodology is critical, and they transversally involve people, corporate structure and proposed value.

  • Internal culture and leadership support systems
    The more the risk increases, the more difficult it is to decide and lead a team unaccustomed to change toward success. Beyond enhancing skills, procedures, and proven directions, it is essential to facilitate a radical and strategic change of mentality to stimulate the adoption of new behaviours, skills, attitudes and visions.
  • A strategic approach to the future
    Discussing innovation means adopting a strategic approach to defining the future. Reacting to changes without proactively anticipating them means giving up the opportunity to build a desired future, starting from choices now. The advantage is an active awareness capable of converging internal intentions and external change.
  • Multidisciplinarity
    Hyper specialisation helps solve problems we already know so much about, but it lacks effectiveness in contexts of uncertainty that naturally arise on the margins of multiple disciplines. The efficiency earned from an acute specialisation entails an essential exploratory deficiency in contexts of possibilities, and multidisciplinarity becomes the most suitable tool to intercept visions, nuances, and connections triggering innovation.

Venture Building by design

A design approach to Venture Building helps companies become hyper-focused on user needs through multi-stage agile innovation. Empathy, ideation, prototyping, iteration and collaboration increase the chances of success by satisfying users' needs and differentiating themselves in the market.

Making new ventures by design is the most effective approach to innovation for large organisations because it accelerates the go-to-market phase, reduces risks, increases operational flexibility (outsources and sows new principles within the company) and access to multidisciplinary resources and talent, and has a far greater potential return on investment than other choices.

Together with other Bip Group partners, we have defined an articulated and multidisciplinary end-to-end program to support companies in making innovation a constitutive part of their present and future identity.

Write to us to learn how to solve the most complex obstacles together and produce value by innovating.