“Because things are the way they are, things will not remain the way they are.” — Bertolt Brecht
One month into 2021 and we are still not sure how this year is going to turn out. However, one thing is for sure, 2021 is an evolving concept and, as different as 2020 was from 2019, 2021 will also leave its own enduring mark. Change is the only constant, and those that learn how to change faster will be better positioned to win going forward.
In this year of change, I’ve gathered a series of thoughts of how I see corporate innovation evolving throughout 2021. Given the unpredictable nature of change, these predictions will probably be wrong, but I’ll still cast them out there to see what sticks.
- Corporations to Play Digital Catchup
- Rapid Innovation on Changing Customer Needs & Experiences
- Corporate-Backed Startups Attack Entrenched Markets
- Management Focus on Tracking/Measuring Innovation Progress
Corporations to Play Digital Catchup
When the pandemic hit in the Spring of 2020, the vast majority of companies were caught flat-footed, and ended up spending most of the year moaning about their predicament, trying to figure out what was happening and making plans for when it all would be over.
This opened a window for rising digital natives to fill the gap. E-commerce and online entertainment platforms rose to meet “stuck-at-home” consumer needs; digital financial solutions and online communication tools rushed in to keep businesses running smoothly. According to Euromonitor, in 2020, goods bought online globally grew by 24% while stored-based sales declined by 7%. While incumbent companies tried to cope with the uncertain circumstances, new challengers surged ahead and left them in the dust.
However, as these traditional incumbents have settled into the post-panic pandemic mindset, 2021 will be the year that they battle back to reclaim their slice of the customer’s attention. This will go beyond advertising campaigns or website/app improvements; rather corporations will double down on their front stage and back stage digital investments to try and sneak their way back into picture.
Rapid Innovation on Changing Customer Needs & Experiences
Sectors have been flirting with the concept of digital and digitalization efforts for years. The events of 2020 simply forced them to fully commit, or get dumped into bankruptcy. According to an industry survey from Euromonitor International in November 2020, 72% of retail professionals said the crisis accelerated their digitalization plans by at least one or two years with 21% saying it fast-forwarded plans by at least three years.
However, 2021 will not just be more of the same call for digitalization. It will be the year when companies finally embrace the concept of bionic, leveraging the gains made in digitalization last year while still connecting with customers in physical contexts.
In 2020 companies came to grips with the need, and difficulty of digitalizing their workforce, their channels, their key activities and even some of their products & services. It was hard, but they made it through. Now, as 2021 progresses, customers wıll slowly trickle back into physical stores, into offices, into face-to-face meetings, into global travel, forcing companies to adapt again to blend those two approaches into a single, cohesive, value-generating experience. The post-pandemic world will not simply be a reversal to the pre-pandemic world.
The pandemic offered unique opportunities to fast-moving, adaptive businesses to cater to a home-bound, digital-only economy; however, in the post-pandemic era, people will yearn for the person-to-person interactions of yesteryear without forgoing the convenience and cost-savings of the digital universe, meaning new market opportunities for digital to go quasi-physical, or for physical to re-establish their presence in the quasi-digital.
Corporate-Backed Startups Attack Entrenched Markets
CVCs (Corporate Venture Capital) has been on the rise globally, with over 2000 corporations engaging in VC investments, and here in Turkey, and increasingly the share of startup investments by corporations has grown to 27% in 2020. However, in many of these investments, the integration with the mother ship has often been lacking.
This year, corporations will take a more serious look at how to leverage corporate resources to better accelerate the growth of their startup investments to redefine competition in existing markets. Realizing the weaknesses of their internal digital initiatives, corporations will take a longer look outside, seeking to fund and scale their current startup partnerships as a way to save their core businesses. Specifically, they will seek out fast followers in emerging digital markets, adding financial and resource fuel to help them leapfrog current leaders.
Furthermore, I see corporations making digital-oriented corporate startup spinoffs a priority in 2021. While growth markets like e-commerce, on-demand delivery and online entertainment are too mature for new startups, with established competitors and high barriers to entry, these markets are still accessible to corporations with a little patience and deep pockets. Corporations can leverage their existing infrastructure, wide customer base, and credibility in the marketplace to build alternatives that gain immediate market share. Moreover, they can reap financial rewards via synergies across business units, i.e. Disney pushing their own brands & characters via Disney+ in order to increase brand loyalty and purchases in other channels, that extends beyond the profits of the corporate startup itself.
Increasingly we are seeing large corporations launch startup spinoffs in order to jump in on growing market opportunities, achieve higher valuations, and leverage partnerships with global investors. I believe this is more than a fad, but rather a slow-cooking trend that has been simmering for years and now just finally entering the public spotlight.
Whether via integrated startup investments or homecooked startup spinoffs, corporations will be taking a dive into digital markets in 2021.
Management Focus on Tracking/Measuring Innovation Progress
Up to now, innovation has always been the corporate family’s ugly cousin — the department/unit exists in every corporation, it shows up on every management report, but management don’t pay it very much attention. More often than not, innovation is perceived internally as more of a hobby than an actual, serious business unit.
However, 2021 will be the year that management begins treating innovation as more than a side hobby with PR benefits, and starts to get involved in tracking its day-to-day operations and KPIs.
While innovation projects and the innovation unit have been implementing lean startup principles for years, the VC portfolio-based thinking of lean startup is only just finally penetrating management practices. Without clear metrics, frameworks and experience, management doesn’t know how to manage Entrepreneurial Growth Boards will help to fill that gap.
The concept of growth boards has been floating around for several years, but only a handful of forward-thinking corporations have implemented them successfully. In 2021, growth boards will start to become the mainstay of innovation management practice, combing innovation accounting with VC thinking to strengthen corporate startups and startup partnerships.
In summary, in 2021, I believe corporations will…
- wakeup and aggressively attack the digital opportunities they missed out on, pushing to reinvent customer experiences via both physical and digital touch points,
- embrace the startup approach, seeking to increase their competitiveness via startup partnerships and corporate spinoffs,
- do better at tracking their innovation metrics via growth boards, accelerating the innovation efforts they already have.
What do you think?
Make Innovation Work
Core Strateji is a strategy consulting firm that specializes in supporting leading companies to transform into ambidextrous organizations. Are you ready to move your innovation activities forward?
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