A company's size and maturity can actually hinder innovation
Businesses need to rethink acquisition and incubator strategies in order to move forward
In-house marketing agencies could give big business an edge
Editor’s Note: Marc Curtis heads up TMW Labs – the agency’s innovation and R&D department. He and his team ensure that both the agency and its clients are kept up to date with emerging trends in technology.
It’s a function of the size and maturity of a company that, having reached a certain point in its lifecycle, it moves from being a manifestation of the passion of the founder(s) to a servant of the needs of shareholders, financial controllers and investors.
Companies move from being agile, flexible and entrepreneurial towards a business model focused on developing existing products, holding onto market share and on the grind of the year-on-year business cycle.
Even the R&D department still has to operate within the structures of the parent company and it’s impossible to change the shape of a house when you’re locked in the bedroom.
Often companies only realize that they need to invest in innovation when it’s too late and they are losing market share to a slew of small, nimble companies which seem to be listening and responding to customer needs in a way that has become alien to the established company.
Companies that rise to prominence on the back of a single product or platform offering are often in even worse shape.
They have to either radically expand into new areas through acquisition (as with Salesforce and Oracle) or they themselves get acquired.
One solution is to acquire companies which are still in their fast moving phase.
The problem with acquisition
This can inject a temporary sense of vibrancy into a business. However, I do not believe that simply ‘buying passion in’ is a long-term solution.
Take for Microsoft for example. It has just purchased Minecraft-owner Mojang for a reported $2.5billion.
Mojang is a small company with a product that has a huge following (basically Minecraft is online Lego with exploding zombies).
For a short period of time, Microsoft will be cool.
My nine-year-old son now knows who Microsoft is.
He’s actually excited because he’s heard it’s a big company which should be able to make some improvements to the game.
The reality is though, that larger companies don’t tend to change their culture following deals like this.
The concentrated cool of Mojang will soon dilute in the ocean of Microsoft’s corporate blandness (just take a look at any of the latest Nokia ads for evidence of this process).
The tiny beacon of passion that Mojang represents will soon resemble the company that now owns it.
So how can companies escape this cycle of acquisition and assimilation?
The first answer is the incubator, the chosen solution of a growing number of corporations.
BBC, Google, O2/Telefonica and Microsoft itself (through Microsoft Ventures) have all built a structured environment for startups looking to develop their idea into a product or viable company.
Despite this, there is still a danger that the corporation will exert too much influence over the kind of companies they sponsor, but with the right kind of people at the helm, innovative new companies can be mentored and funded all the way to market.
So what’s in it for these corporations?
To start with, they get first pick of some of the most interesting new ideas and products - the sort of things that they would be incapable of coming up with internally.
More importantly it’s good for the corporate soul.
For relatively little investment, the behemoth gets to create clusters of innovation all around its edges, which in turn may even start to inspire and renew the entrepreneurial spark that the company was founded on.
The power of marketing agencies
The second answer, in which I declare an obvious vested interest, is the use of marketing agencies to provide a much-needed alternative view of the world.
Again, there is precedent for this.
Nike’s agency, R/GA created the Fuel Band and Draft FCB created a Bluetooth low energy child tracker for Nivea.
Agencies are in a unique position.
They understand their clients’ business, but are not usually constrained by the same cultural and financial baggage.
It’s part of an agency’s job to be abreast of new technologies, and maintain links with startups, incubators and accelerators.
This is built into the DNA of any agency trying to stay relevant in today’s fast-paced technological world.
The need to innovate has never been more pressing.
Once stable markets are now fluid, and the companies that serviced them have to find ways of thinking what are, in their terms, impossible thoughts or risk being swept away by a tsunami of smaller, more agile, companies selling products and services that consumers didn’t even realize they needed.
If you think this is an overstatement then just Google “Woolworths”, “HMV” or “Blockbuster” - all companies whose failure to innovate cost them dear.
It’s entirely possible that they were always destined to be knocked from the top but, had they been more aware of the need to ride the waves of change, maybe we’d still have pick ‘n’ mix on the high street.
The opinions expressed in this report are solely those of Marc Curtis