SCALING UP in Corporate Settings: First Achievements and Outlook

First of all, Frank Mattes and I would like to wish you all the best for 2017 – we hope you’ve been starting successfully and innovatively into this new year.

Last September, Frank and I launched a new initiative „SCALING UP: From Corporate Startup to Innovation Impact“. We have been overwhelmed by the huge resonance on this since then. Many corporate practitioners have felt addressed by our call. Up to now, most of them have joined up with us to collaborate on this – still mostly uncovered – innovation issue. A couple of achievements since having started off can be unveiled. Moreover, further activities are planned for this year.

 

Recap: What is the Scaling Up problem ?

Before sharing these points, let’s briefly recap: What do we actually mean by Scaling Up problem?

Working with our clients, we increasingly see modern dual corporate innovation structures, i.e. separated units and vehicles to accommodate exploratory-oriented innovation initiatives, being set up. While this can certainly be regarded as a step into the right direction, we spot a new pain point emerging: Companies are struggling to scale up their decoupled corporate startups / corporate ventures into impactful businesses (exhibit 1).

Exhibit 1 : Delineating the Scaling Up problem.

 

We have also found that corresponding pain points can be attributed to common root causes (exhibit 2).

Exhibit 2: Scaling Up – pain points and root causes.

 

Our conclusion for the underlying key problem has been: To get from exploration to impact, inherent tensions along the scaling process need to be managed well. In particular, the tensions occurring along integrating the corporate startups into the company’s core turn out demanding.

So far, there seems no comprehensive approach for what it takes to successfully cope with this highly critical – and probably most challenging – innovation phase.

Consequently, our intention for the original call to action was to build a „community of interest“ to jointly start working on a comprehensive and systematic approach for successful scaling in corporate settings.

 

What have the findings and achievements been so far?

In response to our call, we have been talking to several practitioners working for corporates in different industries, such as health care technology, consumer electronics, telecommunications, automotive, energy/utilities, engineering and electronics. Our condensed findings and achievements so far:

  • The delineation of the Scaling Up problem above has been greatly validated by the practitioners we were talking to. There is a scaling issue of both internal ventures as well as external startups.
  • Our interviewees highly resonated with the proposed pain points and root causes above. All practitioners experience a majority of these issues in their daily individual Scaling Up context.
  • As of today, we are already in discussion with three 20+ billion Euro companies for collaboration on tackling and solving the Scaling Up issue.
  • Many companies still follow an ad hoc approach to scaling while few having started establishing a more systematic process. However, despite exhibiting different company sizes and degrees of maturity, all interviewees agreed on the critical importance of developing a comprehensive Scaling Up methodology.
  • Meanwhile we have also received further backing for our ideas on the part of businesses, consulting firms and academics. Some cases in point:
    • Bain and Company states that the „Firm of the Future“ needs to be capable of managing two distinct businesses by setting up dual structures. The latest annual BCG „The Most Innovative Companies“ survey notes: To keep up, tech natives and non-tech companies alike must continually be on the lookout for promising new technologies and then incorporate them into their operations in order to realize the market potential of these innovations. These are two substantial and distinct challenges: finding and developing.
    • Another backing from business side comes from Claus von Riegen, Head of Business Model Innovation at SAP. In a worthwile post he puts it straight: […] the capability to reintegrate a successful market experiment into the organization’s standard business model portfolio. This is not simple because by default, the corporate immune system reacts allergically to an attempt to scale a new business model. The degree of this allergic reaction determines the likelihood that a new business model is killed just because it is different to the set of business models already utilized by the organization.
    • Finally, to quote Henry Chesbrough, Professor for Open Innovation from UC Berkeley, on the biggest innovation challenge for established corporations: This connection between the front end of the innovation process and the back end […] is an area that really needs a lot of attention.

Last but not least, we are personally experiencing a soaring resonance with contributions on the subjects of “Dual Corporate Innovation” and “Scaling Up”. This seems reflected by the fact that I have recently been awarded twofold as Top10 and Top20 Innovation Blogger 2016.

 

How could a solution to the Scaling Up problem look like?

Working with the feedback of our interviewees, we have been able to discern three major cornerstones by now, contributing to solving the Scaling Up problem. While two of them are rather conceptual in nature, another one turns out to be more operational-related.

Identification and breaking down of „Areas of Tension“: Along the transition from a to-be-scaled-up unit towards an established business, typical areas arise where tension between these two opposing poles needs to be managed (exhibit 3). For almost all companies, those areas turn out to encompass similar issues.

Exhibit 3: „Areas of Tension“ and process design – conceptual cornerstones for a Scaling Up solution.

 

Process design: Successful management of the “areas of tension” requires a multi-phase process with defined milestones (exhibit 3).

Stakeholder alignment: There was consistent agreement among the interviewees on the imperative for continuous alignment of all stakeholders involved in the Scaling Up process.

At this point, we believe, these cornerstones are likely to make up a „minimum viable framework“ for solving the Scaling Up problem.

 

What are our ambitions for 2017?

Our aspiration is to get a grip on Scaling Up throughout this year. To keep momentum and move the initiative further, we have a couple of activities in the pipeline for the months ahead:

  • Accompanying master thesis on the Scaling Up issue: As of beginning of this year, our initiative will be joined by Dr. Harald Rauter who is currently completing his Executive MBA. The thesis targets at driving qualitative and quantitative understanding of the Scaling Up problem and levers for its solution by examining this issue in selected companies. We expect first results in May this year.
  • Online survey: We are planning to conduct an additional online survey in Q1 this year. Its purpose is to quantify and broaden our data set. This serves as an improved basis for fitting solution development.
  • Peer Group process: We are setting up a Scaling Up Peer Group process. This process aims at bringing together practitioners from some 20 companies. The process will comprise workshops, online platforms, virtual meetings and bilateral work. As the circle’s goal by end of year, we propose the finalization of an implementable solution/framework that helps all partners manage their individual Scaling Up environment more effectively.

 

You are a corporate innovation practitioner and interested in joining up with us? Just ping us on LinkedIn (Dr. Ralph-Christian Ohr or Frank Mattes) or leave a response to this post. We look forward to discussing how you and your company could become part of the Peer Group process.

About Ralph-Christian Ohr

Experienced innovation management and corporate development professional. Consulting on organizational and personal capabilities for high innovation performance. Integrative thinker. T-shaped.

, , , , , , , , , , , , , , , , , ,

2 Responses to SCALING UP in Corporate Settings: First Achievements and Outlook

  1. Kevin McFarthing February 9, 2017 at 6:44 PM #

    Hi Ralph – a very good article. It seems to me this is a similar issue to “crossing the chasm”, except the chasm is internal. Instead of funding being the issue, the chasm is one of criteria.

    Usually the criteria and associated thresholds for an explorative business are different to those for an exploitative one. Scaling up the former requires it to beat the thresholds for the latter. So for example it might need to have sales in year three of $Xm, a gross margin of Y%, a geographical coverage of Z countries etc. This is often a tough call.

    Managers in the core business rarely get rewarded for diluting their margin or failing on launches!

    So I suggest you include the subject of criteria and associated thresholds in your model.

    • Ralph-Christian Ohr February 15, 2017 at 2:39 PM #

      Hi Kevin,

      thanks for your comment!
      In fact, the “Scaling Up” issue definitely contains “crossing the chasm”. As such, it is likely to be a major “Area of Tension” (in between validated value proposition and fully established business model/operations) in itself along the scaling transition.
      Including criteria and associated subjects is a valid point. In general, our idea is to define certain criteria for relevant areas facing opposing requirements on the part of venture and established business and map them onto the scaling process (milestones). Other examples: Engagement/support of core personnel, orgdev/culture of venture itself, performance measurement,…

      Makes sense?

Leave a Reply