Say you’re a big company. You recognize that you need to innovate to stay in the game, to keep from being unseated by all of the upstarts around you. You create a team to do it for you, building and launching new, separate products almost as though they were startups.
They’ve figured out how to sort ideas, discover which are good and which are bad, execute on them, etc.
The problem then is: what is the exit for the successful products?
With startups it’s easy: the exit is either acquisition or IPO. In either case, the people who funded the product get a clear return on their investment, and everyone is happy.
With innovation inside a big company that’s not the case: there is no buyout at the end. The product has to either be a) absorbed by the core business and managed by them, or b) it has to be permanently staffed and run as a new arm of the company, or as a spinoff.
If you think about it, those two options are actually like the startup ones of acquisition and IPO. The difference is that:
- For a product to be absorbed by the core business, the core business has to a) be set up to absorb them and b) has to perceive real, immediate value to acquiring the product. This requires foresight and planning on the part of the company, and also maybe makes truly disruptive ideas less likely to get absorbed (disruptive products will not be perceived as having real, immediate value to the core, which will be focused on sustaining innovation).
- For a product to be permanently staffed, it has to be far enough on its way to turning a stable profit that the company will fund it – it has to be near the light at the end of the tunnel, which is tough place to get to for any truly new product.
Both of these create challenges for finding a real “exit” for innovations at big companies.
And yet, if you’re that big company, you recognize that you have to innovate to stay alive. So what’s the answer?