Labs, research and incubation practices within large companies are growing in importance and influence. For this reason, I’m starting to pull together information on how innovation is being pursued by large technology and media companies, while raising some questions about these approaches in the process.

There’s no doubt the sourcing, development and scaling of innovation will become a way of life for the company of the future. Consider the following statistics which speak to the significance of the matter for large companies:

• A recent study revealed that 72% of corporate executives believe their primary source of competition in 5 years will not be the company which is currently the main competitor, according to Bain & Company and the Economist.
• The well-known author Chris Zook, also of Bain, published data predicting that 10 years from now only 1 out of 3 companies will resemble what it looks like today (one of three will be acquired/bankrupt and the other third will redefine the core business).
• By 2000, the average tenure of a firm in the S&P 500 had declined to 10 years from its historical level of 66 years.
  

Yes, the half-life of market leaders is headed in a clear direction and that’s downward.

Since the nineties, a lot of growth has been predicated on acquisition strategies, but even that is beginning to fade as the fail-safe vehicle for entering new markets. Zook studied the success rates of different strategies when the rules of the core business are in flux (business turbulence). Large/transformative mergers yielded a 5-10% success rate in contrast to a 30%-40% for initiatives where companies re-positioned around new platforms. These are defined as hidden, internal assets which are developed into market-facing platforms. That’s a humbling or encouraging comparison depending upon how you look at it.

We’re living in a time where traditional disruption has become more manageable through known and repeatable business processes. Today’s anxiety is being driven instead by the Black Swans, who lurk without prior knowledge, waiting to upset industrial economics before you know it.

So what the models for innovation and the trade-offs between them? I’m starting to look at some current examples and attempt to glean the best practices. Read more »

• Yahoo Research Homepage
• Cisco Reinvents the Corporate Incubator
• Microsoft's adLabs
• Delivering Innovation at BT

Filed under: Google, Innovation, Traditional Media | 1 Comment »

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