Sales and Marketing

Why big brands fail to innovate like start-ups

When large companies look outside, everybody benefits. The companies get access to innovations at an early stage, improve their offerings and mitigate the risk of being disrupted. Startups on the other hand get the opportunity to access new markets, expand and grow their business, create employment opportunities and pursue their dreams of making the world a better place. 

If you look at the recent history of disruptive innovations, the powerful ideas that reshaped entire industries have almost always come from industry outsiders. Think Google Map Navigation Vs GPS devices, Uber Vs the taxi industry and the iPhone Vs personal computing (yes the iPhone didn’t just disrupt the telecom industry, it disrupted computing mobility), Instagram vs camera and film, Facebook money transfer vs remittance. The list goes on.

Expertise is undoubtedly necessary for innovations, however in an age where growth is exponential rather than linear, as brilliantly described by Salim Ismail, Michael Malone and Yuri Van Geest in their “exponential organizations” book, we have to change the way we look at sourcing innovation. Traditionally, companies have looked inwards and focused on building innovation centers within the organization. This approach definitely helps to develop innovations incrementally. But this is no longer sufficient or efficient if companies want to achieve exponential growth.

There is overwhelming evidence that it is people working on the margins of their profession rather than insiders who are driving breakthrough business ideas. A case in point is Uber, which has reshaped the entire taxi industry by leveraging what John Hagel III described as the ‘Power of Pull’ in his book by the same name. ‘The Power of Pull’ is all about creating platforms that help people mobilize appropriate resources when the need arises. A traditional taxi company can own and employ a certain number of cars and drivers, while a company like Uber can pull cars and drivers when needed without owning any asset. Scalability is abundant when resources can be pulled on demand.

Aramex, Dubai-based global provider of logistics and transportation solutions, is another example of a company that has thrived by embracing this model. While traditional industry players owned the aircraft they used to deliver packages, Aramex’s asset-light model has allowed it utilize available space with airlines as needed. This strategy has allowed it to avoid the significant costs required to own and maintain massive fleets across global markets and to also scale up and down as demand increases or decreases.

InfoFort is another example of looking outside for innovations. When we wanted to further enhance our solutions and offer document management and workflow systems, we had to choose between developing these internally or looking outside. We chose the latter path and researched and identified potential startups that we can partner with. We eventually ended up acquiring a majority stake in a well-established, fast growing and innovative startup in Turkey (CBK Soft) that had very advanced technology (envision document and workflow management). This gave InfoFort immediate access to talent, new market, and technology. It also gave CBK Soft immediate access to 18 new markets where InfoFort operates, and the ability to accelerate growth. Everybody is a winner.

Breakthrough models like these point to the need to change our approach to innovation. Rather than looking inwards, we need to pull innovation from the outside. The people that are today finding radical solutions to business challenges are not necessarily experts. They are entrepreneurs and smart young individuals who are approaching challenges and opportunities from a different perspective. These are the “crazy” ones that Steve Jobs talks about. These are the ones that Peter Thiel in his book “Zero to One” calls 0 to 1 innovators compared to 1 to n innovators who innovate incrementally.  The former represent creation, breakthrough innovation and disruption whereas the latter represent gradual growth.

The 0 to 1 people are the entrepreneurs and startups that are today getting together informally, even virtually, building something that can one day become a big-bang disruption -something like Instagram or Whatsapp that will take the industry by storm and make traditional players obsolete.

When large companies look outside, everybody benefits. The companies get access to innovations at an early stage, improve their offerings and mitigate the risk of being disrupted. Startups on the other hand get the opportunity to access new markets, expand and grow their business, create employment opportunities and pursue their dreams of making the world a better place.

Here in the region, we have a critical need to foster a vibrant entrepreneurial environment that will nurture the growth of start-ups that can bring breakthrough innovation.

The start-up landscape is still in its nascent stages. There’s a new generation of entrepreneurs who are coming up with outstanding ideas but require a favourable ecosystem to implement their ideas successfully. This requires the active support of funding organisations like venture capital funds, support organisations like incubators and accelerators, service provider organizations, investors and most importantly giving startups and innovators the chance to gain business by believing in them, engaging with them and pulling them into larger organizations.

To thrive in today’s changing market environment, business leaders in our region as elsewhere need to incorporate an innovation-pull culture into their companies and strategies.  The innovation-pull model will allow companies to source innovation from industry outsiders like entrepreneurs and start-ups significantly more efficiently and cost-effectively than if they were to generate it from within. This is where the future lies.

Abed-shaheen

About the author

SPI Group

An integrated platform created to serve entrepreneurs and service providers. SPI engages with over 100,000 Entrepreneurs & Senior decision makers through a unique combination of cutting edge business magazines, high profile B2B summits and conferences, strategic alliances with Govt, business associations and government bodies. SPI also leverages the power of digital marketing and social media.

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