If you haven’t read the Innovator’s Dilemma by the late Clay Christensen I highly recommend it. For those who work in innovation, this book is a wealth of knowledge on how to structure your company to embrace new technologies. Prior to joining the startup world, I spent nearly 9 years at a large S&P 500 corporation where I witnessed firsthand how slow and cumbersome these giant companies are. We held significant market share in many of the niche categories we dominated but slowly it became clear that insurgent brands (startups) wanted a piece of the pie. When large incumbents want to innovate it can sometimes take years to get a new product to market and ultimately the customer (which sometimes can be a buyer at a large retailer) may not even want it. A Harvard Business Review study estimated that at least 75% of internal new business endeavors fail – and this assumes R&D is even a priority. In 2018, less than a half of the S&P 500 companies recorded any R&D expense. The reason for this? Blame share buybacks. Over $200b more was spent on buybacks in 2018 than R&D and one would argue that this has little to no influence on the productive nature of the company. Hedge funds and activist investors chasing short term wins are further enabling this behavior.
Meanwhile tech companies who are spending in R&D are reaping the benefits. Startups are getting products to market 3x faster than incumbents (Bain & Co: 2018). So as a corporation, you must refine your innovation strategy into three parts under a buy, partner, build scenario or be left like one of these folks.