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Innovate Differently
- 1. Innovate Differently: Rethinking the "How“ of Enterprise Innovation Silicon Valley Thought Leadership Series alex.blanter@atkearney.com @AlexBlanter October 15, 2015
- 2. Over 70,000 books written on innovation – 1,500 new books just in the past 3 months 46 Innovation conferences just in 2015 14,776 LinkedIn Groups on topic of Innovation 99,000 Facebook posts on Innovation 50 TED Talks on Innovation 5,740,000 YouTube videos on Innovation this year I know you all came here to hear some answers… … but let me start with a few facts and a question So, the question is: Do we need another discussion on innovation? Source: A.T. Kearney analysis
- 3. The sad truth is: established public enterprises are failing at innovation by the only measure that matters – Value Creation Public Companies $2,828B $465B $895B $200B 5% 54% 54% 274% 9% 51% 36% 135% Top 20 Largest Top 20 Fastest Growing Top 20 Most Innovative Top 20 Startups Startups Total Absolute Valuation Average Valuation Growth Median Valuation Growth ShortTermLongTerm Return on Assets Down by 75% Tenure on the S&P500 Down by 80% Reach $1B valuation 3x faster Source: A.T. Kearney/Forbes: Innovation Premium; WSJ: Billion Dollar Startups Global Startup Ecosystem Ranking 2015
- 4. Why is it happening? The honest answer: Nobody Knows… Established Enterprises Startups New innovation era 1 2 3 4 New startup environment Incumbency curse IPO discontinuity however, we have some Hypotheses Source: A.T. Kearney analysis
- 5. We are at the start of a new innovation era Innovation Approach Innovation Actors Past Future Random Action Magic (often black) Individuals Bespoke Efforts Art Select Companies Rigorous Methodology Science Select Industries Winning Formula Tribal leadership (or death) Industry leadership Economic growthInnovation Outcomes Rapid Experimentation Culture Ecosystem Right to continue to innovate TODAY 1 Source: A.T. Kearney analysis
- 6. We are in a new startup environment: Easy money that last 2 At the same time, the costs of starting a new high tech start up have decreased 10x to 100x in just the last several years Source: A.T. Kearney/NVCA Yearbook 2015; PwC-NVCA MoneyTree™ ReportCorporate Venture Investment by Year 2011 – 2014
- 7. We are in a new startup environment: Not only easy money… also early money 2 Source: A.T. Kearney/NVCA Yearbook 2015
- 8. Accelerator Incubator Service Provider Services • Funding, expertise, networks, curriculum, community, support • Sometimes small amount of seed funding • Work space • Opportunities to network and mentor with academic and industry experts • Invitations to startup competitions • Funding, strategic advice, back office services, benchmarking, technology • Execution, growth and milestone focused • Advising and mentoring by industry experts • Support with rapid prototyping • Direct services • Fee-based facilities usage • Pay per desk, hour or month • A la carte pricing on support services (e.g., legal advice, meeting rooms, video conferencing) • Opportunity to network with other startups in a casual environment Sponsors • Universities, VC funds, Independent • Universities, VC funds, Independent • Independent Cost Structure • Equity, Fee, Free • Equity, Fee, Free • Fee, Free Duration • Fixed short term (weeks) • Variable medium term (months) • Unlimited We are in a new startup environment: The proverbial startup garage is now a full service valet parking… 2 Source: A.T. Kearney analysis
- 9. … that comes in many different stripes – e.g. Incubators galore Local Economic Development Incubators Academic and Scientific Incubators Corporate Incubators Private Investors’ Incubators Business Model • Non-profit • Non-profit • For profit • For profit Objectives • Job creation • Economic development • Development of SMEs and local clusters of capabilities • Commercialization of technologies • Civic responsibility • New sources of finance • Keeping talent • Access to new technologies, business models, and markets • Profits • Profits Targets • Small service and manufacturing companies • Projects internal to institution prior to company creation • External projects • Internal and external projects, generally related to the activity of the company • Start-ups Offering • Hosting and shared services • Administrative assistance • Coaching, training, networking • Access to financing • Concept testing and technical support • Intellectual property help • Seed capital • Management & strategy advice • Access to investors & networks • Financial resources • Prototype and testing • Access to markets • Long-term partnership • Access to competencies • Management & strategy advice • Several types of financing • Personal networks • Support services 2 Source: A.T. Kearney analysis
- 10. We are in a new startup environment: Entrepreneurs are everywhere and are ever more diverse Silicon Valley Tel Aviv Los Angeles Seattle New York City Boston London Toronto Vancouver Chicago Paris Sydney Sao Paulo Moscow Berlin Waterloo Singapore Melbourne Bangalore Santiago Rank (high to low) • By race: non-white – 41%, a 78% increase • By age: > 45 – 52%, a 37% increase • By education: college grads – 33%, a 38% increase Entrepreneur demographics 2 Source: A.T. Kearney/Kaufman Foundation; PitchBook Venture Capital Monthly Report (August/September 2014); Startup Genome Startup Ecosystem Report
- 11. Becoming a public company seems to result in reduced innovation performance, in spite of longer time-to-IPO Average in Years at IPO 2000 – 2014Biggest IPOs (High Tech) IPO Valuation $193B $104B $14.2B $7B $12.5B IPO Date Sep 2014 May 2012 Nov 2013 Dec 2011 Nov 2011 One-year return -30% -31% -9% -74% -85% Nasdaq return +7% +26% +20% +19% +12% 3 3.2 4.9 5.3 7.7 2000 2005 2010 2014 Average Years +143% Source: A.T. Kearney analysis; USA Today Research, 30 Sept 2015; NVCA Yearbook 2015
- 12. The incumbency curse is real: Large public enterprises face many challenges in being repeatable innovators • Stable – and somewhat frozen – business models • Complex regulatory environment – and resulting risk aversion Addressing these challenges one by one is a losing proposition – A Change in DNA is Required 4 • Legacy infrastructure and processes – and significant costs to re-platform • Accumulated complexity – in markets, channels, infrastructure, products and services • Culture of a large organization – with its premium on current performance and business stability • Complex organizational structure – with multiple operating companies, P&L owners, decision- makers, and interfaces • Organizational clock speed measured in months and quarters – rather than in days and weeks Source: A.T. Kearney analysis
- 13. The old innovation methods will deliver the old innovation results – The new innovation DNA is required Incubate with gusto at scale – don’t just play… do Venture wildly – for a meaningful place in the ecosystem Run multiple business models in parallel Establish real constraints… couple with real rewards Drive for ecosystem dominance first, financial returns second Play the long game, but fast Innovate deliberately, with clear strategy Source: A.T. Kearney analysis
- 14. This document is exclusively intended for select clients of A.T. Kearney. Distribution, quotations, duplication, and excerpts are not permitted without A.T. Kearney’s prior written consent. The content compiled in this report is for presentation only and does not represent the complete findings or total documentation on the topic represented.