Corporate Innovation Management: Board Level Commitment Necessary

As I noted in my recent article SaaS Companies: You Have an Unprecedented Opportunity, there is an amazing level of potential for corporate innovation in the current environment, both internal and external.

Look Within

Any company that has built a substantial business in any software category has core competency within its folds. It has highly capable engineers who have developed some degree of domain knowledge in their sphere. It has product managers who are in touch with customers. It has sales engineers who are in regular and even closer touch with customers. It has sales people who know the customers and the competition well.

You need to establish a methodology for Intrapreneurship that systematically captures the tribal knowledge that is floating in your organization. You need to proactively identify the $50M, $100M, $200M blocks of opportunities that are adjacent to your current product line, and lying latent.

Look Outside

SaaS has been the most prolific area of entrepreneurship in recent times. There are numerous SaaS companies out there. Do you have a systematic process to harness this massive body of innovation that could very well be strategically aligned with your product strategy?

Which of these should you acquire?
Which of these should you invest in?
Which of these should you OEM?

Grassroots Innovation in the Intrapreneurship context, however, will require that the organization categorically commit to long-term thinking as opposed to just hitting the short-term milestones and numbers.

This is NOT a given at all.

In one of the large enterprises I have talked to, middle-management summarily rejected the grassroots Intrapreneurship program because they could not manage their teams effectively. Employees would get excited by the innovation programs and start neglecting their day jobs and project responsibilities.

Unless there is a well thought-through incentive structure that aligns short-term vs. long-term innovation goals, corporate innovation programs would neither be embraced by the organization, nor produce desired results.

As such, Boards need to commit to innovation with a dedicated Innovation Committee that is considered as important and as influential as the Compensation Committee, Nominating Committee or the Audit Committee. Compensation, in particular, needs to be aligned such that starting from the CEO, to the executive team, to management at all levels are incentivized to balance their most precious resource – time – to include innovation agendas.

There could be special bonuses or stock grants for employees who come up with particularly innovative products that have strong business case alignment with the company’s long-term agenda.

Non-financial incentives like promotions, additional leadership development training, and being identified as future leaders of the company are also effective measures.

For those employees coming in through acquisitions, compensation tends to be better designed around earn-outs and such longer-term measures. However, when employees come in through acqui-hires, the goals are not as precisely defined. Google, for example, has been particularly notorious for acqui-hiring tons of talented people and then not giving them specific agendas to fulfill. As such, tremendous intellectual horsepower ploughs Google’s hallways, bored to tears.

All this needs to be thought through by a dedicated Innovation Committee that is tasked with the agenda of figuring out how the company creates systems and processes to go from one product to three products to ten products to twenty products using both internal and external corporate innovation strategies.

This segment is a part in the series : Corporate Innovation Management