October 6, 2015

How a big company can innovate like a startup

Taneli Tikka

Head of Innovation Incubation, Data Driven Businesses, Tieto

Can big corporations create disruptive innovations or is this possible for startups exclusively? Startup veteran and leader of our Internal Industrial internet startup Taneli Tikka crushes the myth and explains the three most important factors that enable disruptive innovations in big companies.

A disruptive innovation is an innovation that vastly improves or totally replaces an existing product or service with new technology. Kickstarter, Birchbox, Square, Tinder and Uber are all examples of innovative companies that have permanently changed our world by creating completely new markets and value networks. And they all have one thing in common—they were all startups.

But is it possible for big corporations to create major innovations? Yes, it is. Does this type of innovation require changes to the current company structure and organisation? Absolutely.

To successfully innovate, big companies must adapt and embrace the startup mentality.

Our solution has been to disrupt our previous model of organisational structure through so-called internal startups within our organisation. Currently we have two startups focused on our main growth areas: Industrial Internet solutions and Customer Experience Management.

In this post, I share what we have learned from our internal startups—the three factors necessary for innovation.

Factor 1: Support from management

The most important factor to ensure innovation is systematic support from the management. If management is not committed to supporting internal startups, forget about innovating altogether.

Innovation springs to life from great ideas. These ideas exist in companies already. To unlock them, businesses need a management-led culture and system for gathering, supporting, developing and rewarding great ideas. Without systematic support from management, ideas will never develop into new products or services. If you don't have strong support from the management already, work for it until you do. The role of management is to align innovation with the overall business strategy.

Harnessing great ideas today is easier than ever before, thanks to digital collaborative tools and workspaces that support co-creating and sharing (both inside and outside of the organisation). For example in our X Hub, we gather clients around a table to create new business concepts in real-time.

Factor 2: Autonomy

Disruptive innovations are rarely brought to life within typical organisational structures. Growth-oriented startups require a different kind of organisation; it is unreasonable to place them in the same planning and reporting cycle as other business units.

The key is to make operations as easy as possible for startup units giving them the appropriate level of autonomy and removing any obstacles to innovation. A good and flexible way to direct the activity of internal startups is through internal startup boards that exist to test ideas and solve key problems.

For example, our internal startups are led by an internal board of directors with CEO Kimmo Alkio as the chairman. Because the startups report directly to the CEO, there is a tremendous shortcut to innovations, which helps innovations avoid getting stuck in the operative planning pace of the normal business units.

Factor 3: Continuous learning

The third most important factor is continuous learning—internal startups must be able to react to changes and embrace new things quickly. Accordingly, we use the lean innovation methodology. In practise, this means that new ideas are quickly turned into prototypes that are tested and iteratively developed in cooperation with end-users. One example is CXHACK, a 24-hour hackathon event during which new ideas and solutions were validated with end-users.

Although innovation is concentrated in startups, it is extremely important that progress is not trapped there. Internal startups can enable an entire company to learn and adapt. This has already happened in our organisation; working models from the startups (for example administrative routines) have been copied to other business units.

The power of internal startups

Internal startups have a tremendous advantage over real startups. Big companies can reap the benefits of internal startups almost immediately as they already have both resources and customers—as well as legal, HR and marketing departments. By definition, startups must start all of this from scratch.

It is quite likely that all companies will soon be working like startups or at least adapting organisational models from startups. Business must be done differently and utilise digitalization as much as possible. Right now, internal startups are new to big companies, but many will soon discover the necessity of internal startups in the modern marketplace.

Stay up-to-date

Get all the latest blogs sent you now!