The Triple Upside of Mitigating Innovation Risks

John ZozzaroAdvocacy, Innovation, Opportunity, Venture Capital

Throughout the history of innovation, organizations that have seen long term success with continued growth have traditionally practiced innovation internally, dedicating large amounts of resources to the practice. There are many variations to how organizations label their practices of innovation, usually better known as R&D, intrapreneurship, and hackathons. Identifying just how much organizations invest in innovation varies drastically, Forbes recognizing an average of 15%-20% of gross revenues dedicated to the practice, while Statista released a study showing the top 12 largest investments averaged $13.08 billion, with Amazon at $22.6 billion and Alphabet (Google’s parent company) at $16.2 billion being the largest of the 12. Strategy+Business also released a very in depth study of what they’ve profiled as the “Global Innovation 1000,” showing an 11.4% increase of revenues invested into R&D in 2018 from the group, totaling $782 billion dollars. With innovation investment increasing year over year, corporations are starting to look for solutions that will help mitigate innovation risks and overall costs, while making sure revenues continue to grow.

In the 21st century landscape of innovation, we are noticing a large increase in programs dedicated to entrepreneurship and innovation. These programs are commonly identified as incubators or accelerators. The very function of these programs is to help launch or scale vetted startups, usually run by a team of startup and/or corporate veterans. Some of the notable mentions are,

  • Y combinator, Mountain View, CA – portfolio worth $80+ billion
  • Tech Stars that runs programs internationally – portfolio worth $80+ billion
  • Founders Institute that runs programs internationally – portfolio worth $20+ billion
  • Mass Challenge the worlds largest nonprofit accelerator, runs programs internationally – have helped startups raise over $3 billion since 2010, while giving out millions in grants.

These four programs alone helped reshape the landscape of innovation and entrepreneurship, being four of the first standalone organizations to essentially productize and streamline innovation. With Incubators and Accelerators growing exponentially in number the past 10 years globally, we’re starting to see more industry and niche focused programs being developed and launched.

Why would corporations look to outsource their innovation efforts in an attempt to mitigate risks? The answer is quite simple,

  1. Don’t need to worry about failed investments showing up on your P&L sheet
  2. Solve multiple challenges or explore multiple technologies at once, in a fraction of the time
  3. Help get startups funded faster and scale properly

Think about it, if you found an innovation program in your industry and you were looking for solutions that traditionally would cost big budgets to solve, this is an incredible and very viable alternative. The outcome is a win either way. Either the startup solves current needs of the corporate partner and you have a potential acquihire, or the startup doesn’t solve the challenge, and the program launches an organization with capital in the bank and a promising future.

There are programs currently helping shape what’s known as “Corporate Accelerators,” Tech Stars, Plug & Play, and Rocket Space are arguably the largest and most well known working with companies like Comcast, IBM, Disney, Amazon, Toyota, USAA, US Bank, GE, Target, to name a few. Outsourcing innovation is helping reshape the economy by providing entrepreneurs insight into large opportunities, while bringing value to corporations by working with programs dedicated to helping entrepreneurs grow scalable organizations.