4 Predictions
for Corporate Innovation

DUNCAN LOGAN

April 15, 2020

In years past, Corporate Innovation used to be a luxury enjoyed by exclusively large corporations. As markets peaked, Fortune 500 companies would satisfy their innovation needs through auxiliary activities to their business such as making massive investments in glass and steel buildings, training their staff on design thinking, agile or kaizen, and holding pitch days from startups they would never integrate into their core business but gave them a sense of how startups think. 

However, I think that is about to change for two reasons:

1. Competition at the top has come from upstarts. I don’t think I have to tell anybody now that Hilton didn’t have to worry about Marriott, they had to worry about Airbnb. Ford didn’t have to worry about GM, they had to worry about Tesla. Disney didn’t have to worry about Comcast, they had to worry about Netflix.

2. It’s about to be a buyer’s market. There has been an enormous amount of venture capital pouring into startups in the last 10 years with ever-increasing valuations. However, valuations are expected to take a hit for a number of factors that extended well-before COVID. COVID was just the catalyst for a correction that many have seen coming for a long time.  Said another way, “Innovation is on sale, get it before it’s gone.”

Because of these two factors, I am excited to start my role at Nex Cubed as Chief Strategy Officer. My primary focus is to connect corporate partners to the insight we have gained by investing in and launching over 80 startups with tight vertical theses in industries such as Digital Health and FinTech. Whether or not the particular companies in our portfolio interest you, I assure you that the wisdom of the border mosaic of trends we see most certainly will. Be it to educate about real innovation, identify appropriate partners, or figure out a joint venture together, I think the opportunities are endless.

In my previous role as CEO and Founder of Rocketspace, I saw firsthand how corporations and startups collaborated for nearly a decade. That said, I think this next chapter will be markedly different and was a large motivation why I moved from being a Board Member of Nex Cubed to a member of the team. I think we are well-positioned to take advantage of four predictions I foresee in this area:

1. What used to scale is the biggest threat to future scale. A restaurant with 500 locations is now serving fewer customers than a pop-up delivery service out of a Dark Kitchen. One will see 5000% growth this year, the other will spend more time and effort trying to renegotiate leases and staff contracts. This week Uber moved more meals than passengers. Think about that. How many restaurants saw Uber as a threat?

2. Small and mid-market corporates will try to compete with large corporates for innovation – Because of the legacy scale problem and technology acquisition continuously falling, there will be a space for small- and mid-market firms to not just compete, but lead with innovation. As a case in point, Umpqua Bank, hardly a national name, has shown how you can be a leader in Digital Banking through its Human+Digital solutions. What’s more, their Go-To platform as been once of the most pitch-perfect innovations for the COVID-19 crisis, and stand to solidify long-term gains for their efforts.

3. Partnerships are going the way to scale quickly – Just as distributed networks have transformed how we get transportation, our lodging, and our currency, there’s no reason to think it won’t happen to how companies do business in sourcing innovation and technology. As a case in point, you can look Illumina, a leader in DNA sequencing and array-based technologies. They built a vibrant ecosystem of partners to enable long read applications with other biotech companies. 

4. Corporates are going to make a lot of bad acquisitions – I surmise that valuations for many startups will tumble and VCs will start to look for exits for their portfolios. Corporates still flush with ample amounts of cash on their balance sheets will be looking for quick, easy wins. However, these hasty acquisitions may eventually be seen as a loss if they don’t consider the fuller operational consideration of how this acquisition can help their business the day after the deal closes. 

Former Cisco CEO, John Chambers once said, “Most corporations don’t go out of business for doing the wrong thing. They simply do the right thing for too long.” This rings truer than ever today since the world has changed more dramatically than ever — socially, economically and physically. 

Thus, corporate innovation organizations are at an important crossroads. On one hand, they hold the keys to the future success of the company. On the other, many innovation organizations can get bogged down with innovation talks about lean and agile it and miss the best opportunities. Planning now makes for a great decade starting in 5 years. To illustrate, do you think Facebook regrets buying Instagram or WhatsApp? Do you think Amazon regrets buying Audible or Whole Foods? 

I think the future will hold that the most successful corporations make intelligent innovation decisions rapidly, and I can’t think of a better place to be than Nex Cubed to help make that future a reality.

Duncan Logan is Chief Strategy Officer at Nex Cubed.

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