Why Corporate Innovation Programs Fail (and How to Succeed)

Matthew Bushery

The excitement around corporate innovation programs, when initially announced by leadership, is often palpable at large-scale organizations. Employees see their C-suite making an effort to act on existing (and interesting) intellectual property and generate new ideas to bring to market.

This even sparks interest among current members of the workforce in transitioning from the main business to the innovation team running these programs to advance their careers and take on new, meaningful work opportunities.

Put plainly, when substantial investment dollars are given to these innovation teams, including the hiring of professionals with a demonstrated history of developing cutting-edge products for previous businesses, it can lead to positive culture changes.

But too often these research and development programs devolve into innovation theater:

Hosting hackathons and idea competitions for the sake of ideation instead of actually moving forward with one or more compelling ideas generated from those sessions into a formal innovation sprint that leads to legitimate value creation

Some of this is due to a lack of innovation team resources. Other times, it is due to disagreement on which idea(s) to move forward with. And sometimes, management that funds these units just doesn’t have the patience to see innovation projects through from start to finish.

In short, there are many reasons why corporate innovation programs fail.

If your enterprise has started such an initiative or plans to in the near future, it’s worth understanding what causes innovation programs to falter so yours can avoid the same fate.

Let’s explore why some offshoot R&D projects fall flat by covering common issues with the modern corporate innovation lifecycle and learnings that can help your innovation unit thrive.

How corporate innovation programs go from passionate fervor to complete failure

The corporate innovation lifecycle will vary from one business to another. However, the general steps included are:

  • Ideation: Coming together as a team for a brain dump of potential problems to solve
  • Selection: Narrowing down your ideas through validation and analysis of concepts
  • Development: Moving one or two strong ideas into a sprint to craft a business model
  • Execution: Agreeing upon a venture option, and moving full speed ahead to productize
  • Launch: Going to market with the offering in question with the instituted founding team

Your corporate innovation program may solely feature these foundational stages. Or perhaps it’s more intricate and nuanced, with sub-stages that feature different stakeholders. (Sometimes even external ones, like interviews with customers of the main corporation or industry analysts.)

  • With unsuccessful research and development initiatives, you’ll see the opposite. Execs who give the green light to proceed with R&D programs don’t clearly communicate expectations when they get going or post-launch. This leads to misalignment on goals and desired outcomes and the creation of silos. Without a clear map provided by their corporate C-suite, innovation teams are left digging holes in the dirt randomly, so to speak, and may end up with nothing to show for months of hard work, believing they had the latitude to take their time on seemingly worthwhile projects.

Here’s an example of a poorly backed corporate innovation program.

Some execs who champion corporate innovation programs make big promises about what their innovation teams will achieve (“This will deliver massive growth! We’ll penetrate X market!”).

Then, once agreed-upon concepts are explored and eventually validated, corporate often invests in temporary (and pricey) consultancy services to offer insights into the opportunity in question (e.g., where other ventures went wrong, what the total addressable market is).

Despite all this investment and encouragement from the C-suite and board, there inevitably comes a period during which senior officers and other high-level decision-makers check in on the status — and existing and predicted ROI — of the ideas actively being explored.

If they don't like what they see, they start to rethink the investment. This is especially true during down economic periods. Layoffs and hiring freezes typically occur in these times.

The first business units targeted for reductions in force are perceived cost centers, including diversity, equity, and inclusion teams running DEI initiatives, talent acquisition specialists in human resources, and — you guessed it — innovation team members overseeing corporate innovation programs.

What poorly run corporate innovation program lifecycles look like today

There are many other factors that affect the launch outcomes and long-term success of corporate innovation units and the products (or even startups) they build.

Here is what you can expect to see from innovation lifecycles at enterprises that don’t properly invest in their innovation teams, the negative repercussions of their lackluster investment, and why this vicious cycle often repeats itself.

Corporate innovation lifecycle for poorly executed programs

As is the case for the first venture creation or product enhancement proposal for just about every innovation program, stakeholders sign off on the first idea they believe is worth pursuing. Once chosen, sprint week begins, and the team moves one critical step closer to launch.

Everyone is optimistic.

But since leadership hasn’t given their innovation teams the necessary budget and/or personnel or connected them with proven partners (e.g., venture builders with ample experience guiding venture creation sponsored by corporations), they move slowly on execution.

“Corporate innovation teams work tirelessly to create value for their organization,” said High Alpha Innovation Managing Director Matt Brady. “But if there isn’t alignment on why they exist and what they are supposed to pursue, their efforts will be in vain.”

Matt noted how, in time, cynicism for innovation almost always grows throughout a company, and resources are viewed as in competition with (or in conflict with) the core business.

“The first key to success is defining a North Star for innovation that distinguishes between core, adjacent, and transformational innovation,” Matt added. “The second key is defining pathways that distinguish between unlike things. For things that are truly new and transformative, a startup is a more powerful pathway than internal incubation.”

Sluggish progress with and insufficient support for their project(s) leads to diminished enthusiasm for on-the-ground innovation team members. (And, often, voluntary attrition.)

Meanwhile, their corporate leadership remains undeterred, believing their work will yield high-performing (and, in time, highly profitable) ventures. We’ll call this the “arrogance phase.”

It’s only when R&D efforts inevitably stall and deadlines are missed that execs begin to worry.

They update their boards, who have skin in the game investment-wise with the corporate innovation program, and have to relay the little (or no) headway made with their projects.

And finally, we land at the “We’ve-seen-enough” stage. This is where the C-suite at the enterprise in question, either on their own accord or based on direction from the board, formally ends the innovation team and its ongoing endeavors, leading to layoffs of the entire staff.

Why this ineffective corporate innovation approach repeats itself

You’ll notice the final stage of this (admittedly simplistic) lifecycle model includes not only innovation team staff members leaving the organization, but, oftentimes, the CEO who championed the studio as well. (And, in the eyes of other leaders, failed).

In their place eventually comes a new CEO with their own approach, agenda, and outlook. That said, these individuals commonly fall into the same trap as their predecessor:

  • They look back to see what initiatives the prior chief executive undertook and notice that corporate innovation programs became a big priority at one point.
  • They try to speak with anyone who had knowledge of said programs, but — as noted — they’ve all been let go or quit. (And any C-suite member who remains likely had limited insight into product-enhancement and/or startup-building activities.)
  • They think they can do a better job of implementing a more robust innovation program and pitch their proposal to fellow leaders to get their thoughts.
  • They get the green light, share the news of the upcoming team, start to form their innovation group, and schedule hackathons and related ideation sessions.

And so, the vicious cycle, of sorts, repeats itself once again.

Bottom line: Without structural changes to how corporations approach in-house innovation team formation and empowerment, they just end up in the same situation as before:

Wondering why their R&D arm failed to produce a groundbreaking venture that positioned the company at large as a trailblazing innovator and helped them tap into new, sustainable revenue streams and enter burgeoning markets

Corporate innovation, as it pertains to your core business, rightfully gets the attention it deserves to keep your organization moving in the right direction from a growth and revenue standpoint.

But failing to recognize the value of adjacent and transformational corporate innovation programs to test new concepts and create new, potentially novel businesses will leave your leadership wondering what could’ve been.

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