First, companies bought into the false premise that they exist to maximize shareholder value — which said “keep the stock price high.”
Second, the leaders of these companies tended to be those who excelled at finance, supply chain or production.
Third, the reason why companies find it hard to innovate is the explosive shifts in technology, platforms and markets that have occurred in the last 15 years–personal computers moving to mobile devices.
Fourth, it’s harder for large corporations to offer disruptive breakthroughs…
Startups have realized that large companies are vulnerable because of the very things that have made them large and profitable: by focusing on maximizing shareholder return, they’ve jettisoned their ability to do disruptive innovation at speed and scale.
In contrast, startups operate with speed and urgency, making decisions with incomplete information. They’re better than large companies at identifying customer needs/problems and finding product/market fit by pivoting rapidly.
Their size lets them adopt flatter and more agile organizational structures while providing incentives that reward risk-taking and collaboration.
Innovation can come from inside the corporation, by adopting Lean Startup language and methods, developing intrapreneurship, and fostering innovation-driving behaviors…
So to succeed, corporations must re-think and then re-invent their corporate innovation model, replacing a static execution model with three horizons of continuous innovation: This requires a corporate culture, organizational structure, and employee incentives that reward innovation.
It requires establishing acceptable risk level and innovation KPIs for each horizon.
And it also requires understanding the differences between executing the existing business model, extending the business model and searching for and disrupting the business model.
• Even the most innovative companies eventually become yesterdays news
• To survive companies need to run three-horizons of innovation
— Horizon 1 — execute their existing business model(s)
— Horizon 2 — extend their existing business model(s)
— And for long-term survival — Horizon 3 — search for and create new/disruptive business model(s)