What Happened in the World of Corporate Innovation in 2024?

Senior Leaders Will Ask For an Explicit Return On Investment - Alexander Osterwalder

Last year, Alex Osterwalder predicted that more senior leaders are going to ask for an explicit return on investment for their innovation investments.

“I was right, but a bit different than I thought. Actually, there are two camps. There are those who are continuing to invest in innovation and are asking explicitly for how are we making money from those investments. And then there's the other camp… They just stopped. So it's right that they're asking for return on investment, but actually by killing the entire thing.

Getting innovation metrics rights starts with measuring how teams are making progress from an idea to something that could really work. Ultimately, you build a portfolio of innovation projects and some will succeed. That’s how (and when) you really calculate your return on investment.

We worked with one organization that has hundreds of teams out there experimenting. Part of the innovation process is also to kill projects, so that you can focus your investments on the projects that are working. You can't have 500 teams working forever, because then the investment becomes too big. It's very costly, but also you don't want teams to work on something that isn't making any sense. When there's no evidence, there's no customer jobs, pains and gains, you want to be able to kill those projects.

Accept the failure, but see it as a positive thing. You start to experiment, you learn, you fail, you kill the project. So you reallocate the money into those projects that are working. Ultimately, only maybe 1 out of 50 turn out as huge successes.

That's the way you invest in innovation projects, by starting many and let the winners, the best ideas and the best teams bubble up. And you continue to do that over time, so you continue to produce winners all the time. That then allows you to calculate return on investment

I do repeat what I said last year- we can't get away from just doing stuff. We need to show return on investment. Otherwise, as an innovation community, as innovation leaders, we're not doing our job well.”

Leading Strategic Innovation Initiatives - Gina O’Connor

Gina O’Connor explored the theme of strategic innovation, which we might also know as transformational innovation or activity along the H2 and H3 horizons. This is the innovation discipline which turns new ideas into new platforms of business, bringing significant value to the market and therefore back to the organization - but the high levels of uncertainty associated with this work require a different approach. As Gina noted, finding experienced leaders to manage strategic innovation successfully can be a challenge.

“There are a few more leaders who have experienced strategic innovation initiatives in some companies, who have then jumped to other companies to lead the effort there. So we are beginning to see experience in strategic innovation, with repetition and expertise development. It’s a very thin layer, but it is emerging. In some instances they move at a promotion, from a member of the strategic innovation team in their first company, to a leader of the initiative in the second. There I find that their confidence levels do not always align with the needs for change in the new organization.

The same is true of newly promoted internal personnel who are taking on the role of Chief Innovation Officer. The confidence is not yet there to advocate strongly enough, and they can tend to rely on outsourcing the work of strategic innovation to others in some cases, rather than developing an in-house capability.

I’ve tried to help these leaders build that confidence and show the return on investment associated with these initiatives, so that they can continue to advocate and promote it with the executive leadership of their organizations. In general we find that it takes about three years to build a fully functional capability for strategic innovation.”

Monitoring the Health of Corporate Startups - Frank Mattes

With corporate startups now operating closer to the core business, Frank Mattes stated that it’s now incredibly important to keep a pulse of their performance. With many corporate startups taking inspiration from sources such as Steve Blank’s book The Lean Startup, which was never designed for the context of a large organization, are they in fact doomed to fail?

“I stated the thesis: “as corporate startups need to be linked more closely to the core, monitoring startup health is crucial.”

Under this thesis, I predicted 3 things for corporate innovation in 2024:

1) No more Innovation Theater, 2) a changed view on growth and financials, and 3) more emphasis on de-risking.

Now, as we are entering the last quarter of 2024, we see:

The risk appetite has gone down but due to insufficient validation maturity, the music in the innovation theater has not stopped playing.

Since budgets for out-of-the-box innovation are smaller than they used to be, scaling-up ambitions have become smaller as well.

More companies are becoming better at involving the core in validation and use their customers and partners to collect more and better de-risking data points."

Tackling Sustainability and ESG Issues (For Real) - Dan Toma

Dan Toma commented that over the past ten years of corporate innovation, there’s been a lot of hope that all the hype around the topic would snowball into real impact for businesses and society. Yet what we’ve actually seen is innovation theater instead of real innovation, with most companies who’ve invested in innovation efforts seeing minimal results.

Now, with the market’s focus shifting towards ESG and sustainability, are we about to see the same thing happen again? Are we replacing innovation theater with ESG theater? Can companies who’ve failed to do innovation successfully really be expected to tackle ESG?

“While the topic of ESG has firmly established itself within some boardroom discussions, the translation of ESG commitments into tangible actions remains a gradual process. Companies are increasingly recognizing ESG as a strategic priority, with some of them even incorporating it into their long-term goals, reporting frameworks and business models.

However, implementing real ESG initiatives is inherently time-consuming. For example, decarbonizing supply chains requires significant operational changes and investment. The slow pace is often due to the need for in-depth planning, stakeholder engagement, and adjustments in company practices to ensure meaningful impact rather than superficial compliance.

Moreover, the outcomes of these initiatives are not immediate. For instance, a company launching a renewable energy transition plan may need years to fully transition to greener technologies and infrastructure. Similarly, the impact of social initiatives, such as equitable hiring practices or local community development programs, becomes evident only after sustained effort and monitoring.

While board-level focus on ESG is crucial, it is the long-term dedication to these practices that will eventually yield measurable results. This lag between commitment and visible outcomes underscores the need for patience and continued prioritization of ESG at the highest levels of corporate governance as well as tighter connection with the innovation departments.”

Big Choices and Smart Experiments - Jennifer Riel

Jennifer Riel's prediction was that 2024 would be a year of big choices and smart experiments when it comes to innovation and emerging technologies.

“In 2023, we saw a massive leap forward in broad understanding and application of Generative AI. In these moments of significant technological change, it is tempting to either say everything will change (and jump into trying to drive that change, at scale, immediately) or to dismiss the hype (and do little, assuming things will blow over soon and we can go back to business as usual).

My argument was that the most productive response for most companies would be to strike a balance between these extremes, by placing longer-term strategic bets on emerging technologies and taking action on emerging technology now via experiments and tests.

I do think we've seen that play out as the use cases for AI have gotten clearer. I think many organizations are now well into determining how AI can help drive out costs and create efficiencies. The bigger question of how AI can create new value feels less well answered today (beyond the big tech companies who are touting their AI services at scale). For many of us, 2024 was a year of learning, upskilling and application across different kinds of emerging technology - and their application to innovation, the core business and beyond."

The Role of AI in innovation - Alf Rehn

Alf commented on our current era of augmented innovation - where the innovation world is caught up by the promise of technologies such as the metaverse, quantum technologies, and of course AI. Although these technologies have potential, we need to look beyond the hype at what they are actually capable of today.

According to Alf, the way generative AI is used today is typically a mediocrity engine, producing average, predictable results - exactly the opposite of what innovators need to produce truly transformative work and tackle some of the world’s biggest problems such as climate change.

“Whilst AI is still an interesting technology, we’ve come to realize that it works best in fairly basic use-cases, and struggles with things that require excellence or mastery. It has not made great inroads into innovation practice, and still stands more for potential than actual performance.

My critical comments regarding innovation in general, namely that AI is perfect for sticking to shallow innovation and what we need is more deep thinking around critical global issues, also holds up. If anything, 2024 is feeling like a missed opportunity, a year in which increasingly amazing tech is used for ever more trivial things.”