Interview with Dan Toma, author of the book “The Corporate Startup”.

Transforming corporations is really hard – what is the main reason behind that?

I call the syndrome you are describing the infamy of success syndrome. Other thinkers refer to this as the innovator’s dilemma.

But before we dive into the why, we should clarify one thing. Saying that large organizations (whether they are private or public) are poor at innovating is an arrogant overstatement. All corporations are good at innovating, but only when it comes to incremental innovation. Unfortunately, in today’s world, incremental innovation is no longer sufficient to stay relevant. The challenges corporations are facing, and the speed at which these challenges appear is exponential. One can’t hope to succeed in an exponentially changing environment with linear solutions (i.e., incremental innovation).

Getting back to the why, companies find it hard to invest in breakthrough innovation for several reasons:

  • They don’t know where to start.
  • They don’t have the right people to start. People that are great at ‘milking cash cows’ are often times poor innovators. They are just not hardwired to move things from 0 to 1. Most people who work in corporations were hired based on their exploitation capabilities, not their exploration ones.
  • In the absence of a clear top management mandate fully endorsed by other parts of the organization, innovation seems a distraction.
  • There is no clear ROI, and also the risks are higher. Basically, corporations face the dilemma of whether to invest a given amount in the core business with a marginal but guaranteed ROI or invest in breakthrough innovation with a high potential dividend yield but at tremendous risk. In most cases, when one’s bonus and promotion is decided based on the ROI they offer to the company, the decision becomes trivial.

Where and how should companies start, once they decide to go for the transformation?

Probably the first step would be understand what they want to become and then try to sell that vision that everyone involved, from employees to shareholders. I think that the next step would to have a clear plan for their transformation making sure they touch on all aspects of this:

  • creating a digital strategy,
  • creating a portfolio of digital business models and changing the existing ones to digital ones,
  • making sure that all the enablers of the transformation are in place (ie: analytics, technologies, talent & culture, processes, leadership).

What kind of skills and attitudes does transforming corporations require – what does the internal team need?

This one is really straight forward. I’d say that humbleness and curiosity are the a must.
Humbleness to be able to say ‘I don’t know what I don’t know and I will find out’ – this kind of attitude and mindset will enable real customer centiricity.
Curiosity is needed to explore all the options out there before committing to any.

How do you see the state of innovation in companies around the world? What % of companies does have innovation departments and why don’t we see more of them?

It’s hard to give a % figure 🙂
What’s important to note is that companies need to move away from the idea of a department that deals with everything related to innovation. This mindset will trigger the wrong narratives such as ‘us vs. them’, ‘not invented here’, and ‘not my job’. Innovation is everyone’s job, and a dedicated department should only supplement existing efforts and address the disruption end of the innovation spectrum more intensely.
Most companies that relied solely on an innovation department for all their innovation efforts came out disappointed after a few years and reverted back to the old behavior of investing only in ‘faster horses’.

What is the biggest advantage of startups and corporations working together?

Oversimplifying, for startups would be access to a wider client base, increase in reputation and obviously money. For corporations the advantages revolve in general around improving innovation performance, reduced development risk, time to market and improving portfolio distribution.
Startups can also act like market trends probes, or barometers corporations can use to understand where the consumers’ preference is heading. Or they can provide a good option for investment for the companies that have an active corporate venture capital arm (eg.: Telekom Venture, Bosch Ventures, etc.). Last but not least, they can become great partners for building new technologies or exploring new markets (examples).
But corporations seeking startups collaborations need to be aware of the unpredictable road ahead.

Interested in attending the workshop in Ljubljana with Dan Toma? Attend a 4-hour workshop with Dan Toma on 17th of September in Ljubljana and gain first-hand experience on how to innovate successfully – apply here.