Clayton Christensen has written extensively about why large corporations cannot innovate and are disrupted by entrepreneurial startups. In summary, such large corporations are challenged to understand markets that are not already documented and suitable for ROI analysis based on cost savings. A third reason may be that no one has yet developed and documented a process that the Fortune 500 can use to innovate. Some corporations are using design thinking, but such an approach may be too "touchy feely" and hard to use for widespread corporate adoption.
An alternative approach might be to go back to "business model" thinking and see if that provides an answer. In other words, can we change the business model for an existing product/market and create new value a customer will pay for. Let's suppose we look at five key parts of the business model:
- Revenue growth driver
- Value Creation
- Stakeholder Analysis
In my way to think about the revenue growth driver, there are five drivers--SANDS. 1) Subscribers, 2) Accounts, 3) New Locations, 4)Distribution and 5) Sales people. These are the five basic strategies to grow revenue, which are more fully described in my book. To innovate, consider whether you can change the growth driver or use a different growth driver in a particular market. There are 16 pricing methods (see book). Perhaps adding a new pricing method or two leads to increased value for the customer or perhaps spurs a reconsideration of the product to better match the philosophy of value creation from the new pricing strategy. A similar logic would be applied to distribution to see if a new channel might create value for new customers.
Value creation and stakeholder analysis require a separate explanation because they are harder to do. In value analysis we do a "deep dive" into understanding where the customer (not the company) finds value through face to face research and interviews and focus groups and... Then we look at how we would increase the value for the same or a new customer, wherein lies the innovation if the innovation is saleable.
Stakeholder analysis looks at what value each stakeholder captures in a transaction. Stakeholder is defined broadly to include everybody touched by or touching the product, including regulators, unions and traditional constituencies such as customers, employees and shareholders. Again, heavy lifting analysis. Once the value is understood in terms of stakeholders, then we can examine how to increase that value which results in innovation if the change is saleable.
This approach may not yet be fully thought out, but the notion of revisiting the fundamental parts of an existing business model to identify new value that can be commercialized may be a way for large companies to find innovation.
BCG's 2014 report on innovation, "The Most Innovative Companies 2014: Breaking Through is Hard to Do" focuses on the challenges to create innovation.
The discussion of value creation and stakeholder analysis is derived in part from some work done on design thinking by the Taiwanese Government.
The most recent previous post on disruptive innovation and Christensen is here.