With an historic transition underway to an increasingly information-based economy, organizations are investing significantly in IT innovation. While disruptions across industries have happened for a long time, the recent capability to quickly leverage technology that helps companies embrace and benefit from disruptive movements brings a significant increase of such occurrences. At every opportunity, start-ups can now develop and release expedient, pioneering solutions. Strategists at legacy businesses face the challenge to keep up with these industry transformations by developing new solutions at a break-neck pace and adopting new business models.

Strategies of Large Organizations that Meet this Challenge: 

1. Expanding R&D capability: Typically involves an increase in research facilities by adding new equipment and skills or by building a new department within the R&D organization. This approach faces the challenge of how to innovate without bringing fresh talent into R&D.
2. Buying innovation: Legacy companies have begun to purchase innovative companies with products instead of developing their own in-house. While acquisitions can be a good way to fill an innovation deficit, each deal is fraught with the challenge to maintain the innovative spirit of the acquired company and to avoid burdening it with non-value-added processes.
3. Establishing independent innovation centers:  Companies increasingly create small independent groups that can cultivate a culture of innovation since they are unsaddled by the practices of the larger organization.

(I will offer some examples of such centers later in this post.)

Providing environments for team building in an independent innovation center is an important factor in improving chances for success. For example, DotLoop is a company that operated solely out of Cincinnati. When they transferred a segment of operations to Silicon Valley, founder Austin Allison stated, -The culture in Cincinnati just isn’t ideal for an entrepreneur. While he clarified the company’s intent, his comment reflects efforts by several other companies that are building a presence in Silicon Valley.

Examples of Companies Building Innovation Centers:

1. GE (General Electric): As a conglomerate, GE has R&D facilities tied to individual business units. The increasing use of software to change business models and the ability to develop a common set of patterns can bring huge improvements to large businesses. The commonality of solution components has GE investing in a software and analytics center at San Ramon, California. The company is faced with integrating the needs of a diverse organization to develop innovative solutions, and the San Ramon facility is somewhat disconnected from the heart of Silicon Valley. Time will tell if GE will be successful in this initiative.
2. Wal-Mart: The retail industry is facing unprecedented challenges from companies like Amazon and EBay and customers who want to purchase a wide variety of goods from home or from mobile devices. To counter this challenge, Wal-Mart launched a team known as Wal-Mart Labs in the Silicon Valley and augmented it by acquiring a string of early stage startups. The challenge that Wal-Mart faces is to combine these acquisitions to develop cohesive solutions that can fundamentally change commerce.
3. NTT (Nippon Telephone and Telegraph): While we are familiar with large US-based companies, few know about conglomerates in Japan outside the automotive industry. After Samsung and Apple, NTT has the highest revenue in the world among technology companies and is made up of diverse divisions. With the acquisition of Dimension Data and OpSource, NTT has accumulated a strong portfolio of cloud solutions. In order to bring its strategy together, NTT announced last April the formation of NTT Innovation Institute Inc. based in San Mateo. Though still in start-up mode, support from its corporate arm will make this institute worth watching.

Apple experienced a string of losses in the 90s that were staunched by Steve Jobs who returned to lead the company back to a dominant position in the tech sector with innovative new products. Innovation is increasingly viewed as a major component of a business strategy used to adjust to rapid change. The manner in which companies meet the challenge of rapid change depends on their cultures but incorporating strategies like those mentioned above will define the companies that succeed and those that fail.