SOURCE: Innosight

Innosight

March 07, 2012 10:15 ET

Big Companies May Soon Out-Innovate VC-Backed Startups

Once at the Mercy of Nimble Upstarts, Giants Like Microsoft and GE Are Developing Transformational Innovation Capabilities, According to Innosight Analysis

BOSTON, MA--(Marketwire - Mar 7, 2012) - Milestone innovations -- developments that make the complicated simple or the expensive affordable -- have usually been launched by startups. But today, many incumbents, including large companies, have quietly deployed tools, language and mindset that enable them to reach new customers and markets by competing in fundamentally different ways.

That's according to Scott D. Anthony, author of The Little Black Book of Innovation: How it Works, How to Do It (Harvard Business Review Press, January 2012) and coauthor of "The Empire Strikes Back: How Xerox and Other Big Corporations are Harnessing the Force of Disruptive Innovation" published in Technology Review. He is also Managing Director and head of the Asia-Pacific operation of innovation consulting firm Innosight.

"Big companies have the thing that NGOs and startups have to fight so fiercely to create -- scale. They are also recognizing how to approach innovation in much more systematic and successful ways. Moreover, it's probable, based on our research, that big companies will be the place to go to have positive impact on big problems -- like overly expensive healthcare, depleting natural resources, the lack of clean water and so on," said Mr. Anthony.

"Think about the transformation of Xerox, which was on the brink of irrelevance a decade ago. It's morphed from a copier and printer company being surpassed by rivals with cheaper products to a disruptive powerhouse that profitably handles complex, burdensome document management processes for corporations and law firms," he added.

According to Innosight analysis, only about 25 percent of disruptive innovations came from incumbents in the 1980s and 1990s. During the 2000s, 35 percent of disruptions were launched by incumbents.

He points out that Microsoft created Kinect, the gesture interface system for those who don't like joysticks for gaming; GE has developed inexpensive electrocardiogram devices for rural China and India; Qantas has launched Jetstar, now a leading discount airline; eBay acquired PayPal and made it into a second core business, finding a new market major banks and credit card companies hardly knew existed.

Big Companies' Road Back to Innovation Leadership

Large organizations are learning to trump startups when it comes to disruptive innovation by...

  • Upping the ante on market focus. Market-based insights drove Xerox CEO Ursula Burns's strategy to shift the company toward organizing around customers and the jobs they needed to get done, and away from organizing around product lines.

  • Taking a more "holistic" view of innovation. Significant innovation requires moving beyond purely technological innovation to developing new ways of creating value. Apple's success doesn't just come from innovative technologies; it also comes from iTunes, the App Store, new pricing models, innovative retail stores and novel marketing.

  • Learning to manage the old and the new differently. U.S. airlines like Delta and United stumbled when they tried to create airlines within airlines to compete with discount carriers. Qantas created a completely separate business that leverages some Qantas capabilities but is not swamped by them.

To arrange a conversation with Scott D. Anthony of Innosight and/or receive a copy of The Little Black Book of Innovation: How It Works and How to Do It, contact Katarina Wenk-Bodenmiller of Sommerfield Communications, Inc. at 212-255-8386 or katarina@sommerfield.com.

ABOUT SCOTT D. ANTHONY
Scott D. Anthony is the managing director of Innosight, Asia-Pacific. Based in Innosight's Singapore office, he leads its Asian consulting operations and its venture-capital investment activities. He has worked with clients ranging from national governments to companies in industries as diverse as healthcare, telecommunications, consumer products and software. He is the author of The Little Black Book of Innovation (Harvard Business Review Press, January 2012) and The Silver Lining (Harvard Business Review Press, 2009). He is the co-author of Seeing What's Next (Harvard Business Review Press, 2004) and The Innovator's Guide to Growth (Harvard Business Review Press, 2008).

ABOUT INNOSIGHT
Innosight is an innovation and strategy consulting firm with offices in Boston, Singapore, and India. It works with companies to devise growth strategies, discover new, high-growth markets, and create disruptive new products and services. Its comprehensive, end-to-end approach converts the quest for innovation and growth into a predictable and reliable process. For more information, visit www.innosight.com.

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