High growth startups – and in some cases, new industries like social networks and internet content marketing – rely on breakthrough ideas to create new products. Established firms can benefit from the management ideas that guide these startups, and leverage them further due to an important advantage: their access to resources and networks that startups lack.
Combining the insights and risk-taking behavior of startups with the access to networks gives established firms the ability to address much larger innovation opportunities such as healthcare, transportation, or smart cities. Startups can come up with breakthrough products; established firms can transform markets and industries .The Startup Corporation combines the advantages of high growth startups with access to rich networks and resources . In a new book called The Innovation Paradox: Why Good Businesses Kill Breakthroughs and How They Can Change, together with Marc Epstein, I describe how to design and run the Startup Corporation. A common mistake in established firms is to think that all innovations are the same and that one innovation process is all that is needed.
But incremental innovation is very different from breakthrough innovation. The former manages lots of knowledge. Designing a new printer uses a lot of existing knowledge, about technology, consumer preferences, price points, and features. In contrast breakthrough innovation is about managing ignorance. How will technology and the business model for driverless car look like? Will we own cars or we will just call them when needed? (This would significantly reduce our stock of cars—nowadays our cars are idle most of the time.) What will space tourism look like? How about improvements in healthcare and ageing? Or how will the internet of things change our lives? At this point we don’t know the answers.
Breakthrough Innovation from the Bottom
Another important distinction is whether innovation is driven from the top or is allowed to bubble up from the bottom. Apple under Steve Jobs is an example of a company pursuing breakthrough innovation from the top.
A few companies innovate this way and it is important for them to have a highly aligned and responsive organization. But this type of innovation is risky. It bets on the insights of top managers to guess and shape the future according to their vision. Because innovation is so concentrated on few people at the top, if these people are wrong, the company is driven against a brick wall.The Startup Corporation is about breakthrough innovation from the bottom . Companies have many people within and in their networks that are geniuses in their fields. The Startup Corporation brings together their talents to create breakthroughs. They take advantage of the entrepreneurial spirit to create new markets and new industries.