Deloitte Survey: the future of Innovation


Deloitte Survey: the future of Innovation
Deloitte’s penetrating and authoritative Annual Survey of Innovation (‘Global 1000’) tells us how big business will do its innovation and what kinds of things they will do – and thus what kinds of things they will seek from early-stage businesses.
Next week: Part 2 explores the kinds of innovations that big business is seeking to fund.
The study reveals that first and foremost companies are seeking to align their innovation strategies with their business strategies, that where the business is going will increasingly determine the innovations they are looking for; and secondly they are seeking to gain better insights into customers’ stated and unstated needs. And it reveals that over the next decade many companies plan to shift their R&D spending mix—from incremental innovation to new and breakthrough innovation, and from product R&D to service R&D.

If you are an early-stage business looking to create rapid value for your business, there is no better indicator of your best strategy than to be working in those areas in which big businesses is working. If you can do what they want, and you can do it better than they can, you have a winning formula – alone or together!
Part 1
Where big business is heading with Innovation
“There has been a strong push over the last 10 years to align what you do in R&D with what you do in the business, and it has gotten better,” says Oliver Nussli, head of project and portfolio management at food and beverage manufacturer Nestlé. “Many companies have streamlined their R&D portfolios because there were too many things going on that were leading nowhere or had little chance of success.”

And over a three-year period, companies that directly captured customer insights had three times the growth in operating income and twice the return on assets of industry peers that captured customer insights indirectly, as well as 65 percent higher total shareholder returns.
The Need Seeker Advantage

In 2007, the Global Innovation 1000 study identified three fundamental kinds of companies, each with its own distinct way of managing the R&D process and its relationship to customers and markets. Every company tends to follow one of these three innovation models; it thus categorized companies as being Need Seekers, Market Readers, or Technology Drivers. Need Seekers, such as Apple, Procter & Gamble, and Tesla, make a point of using superior insights about customers to generate new ideas. They gain this insight through direct engagement with customers (for instance, Apple routinely learns from interactions at its retail stores) and through other means, including analysis of big data. Most important, they develop new products and services based on this superior end-user understanding. Their goal: to find the unstated customer needs of the future, and to be the first to address them. Their cultures encourage openness to new ideas from customers, suppliers, competitors, and other industries, and they prioritize directly generated consumer/customer insights and enterprise-wide launch capabilities. It is estimated that 25 percent of the Global Innovation 1000 companies are Need Seekers.

Market Readers, such as Samsung, Caterpillar, and Visteon, make up some 40 percent of the Global Innovation 1000 companies. They focus largely on creating value through incremental innovations to products already proven in the market. They use a variety of means to generate ideas; most involve closely monitoring their markets, customers, and competitors. This implies a more cautious approach, one that depends on being a second mover or “fast follower” in the marketplace. One of their specific innovation goals is customizing products and services for local markets, and they seek a culture of collaboration across functions and geographies. They prioritize capabilities for managing resource requirements and engaging suppliers and partners.

Technology Drivers, such as Google, Bosch, and Siemens, depend heavily on their internal technological capabilities to develop new products and services. They leverage their R&D investments to drive both breakthrough innovation and incremental change. They hope and expect that by following the imperatives implied by their discoveries, they will naturally meet the known and unknown needs of their customers. Their distinct innovation goal is to develop products of superior technological value, and their cultures reflect reverence and respect for technical knowledge and talent. Approximately 35 percent of the Global Innovation 1000 companies are Technology Drivers.

In general, the most important success factor is how well companies execute on their chosen strategy — whether they align their innovation strategy with their business strategy, whether they have prioritized the right capabilities, whether they have the right culture to enable their strategy, and whether they are using the tools that will help them develop new ideas and processes that are consistent with their innovation model. The quality of the alignment of all these elements is the key, and it trumps the amount of R&D spending.

Increasingly, the Deloitte Survey has come to believe that the Need Seeker strategy is inherently advantaged. Need Seekers, for example, report being better at innovation today than they were 10 years ago at a significantly higher rate than companies following the other two strategies, and they also more often indicate that they are financially outperforming their competitors.

In the 2011 study, Deloitte found that what sets Need Seekers apart is their ability to execute on their strategy—to combine all the elements of innovation into a coherent whole, with a culture that supports innovation. In a study in 2012 in conjunction with the Bay Area Council Economic Institute, Deloitte found that significantly more of the technical leads at companies classified as Need Seekers report directly to the CEO, and that their innovation agendas are much more likely to be developed and clearly communicated from the top down to the rank and file of the organization. They were also much more likely to point to product development as the function with the most influence on their company’s power structure. (That same study also revealed that Silicon Valley firms are almost twice as likely to follow a Need Seekers model than the general population of companies—46 percent versus 28 percent, a consequence of the startup/venture capital mind-set of tightly aligned business and technology strategies.)

While aligning business and innovation strategies will be the most important driver for innovation success, interestingly, this and other key areas are the same ones that Need Seekers are already focused on today.

Part 2 next week is on Big business and the future of Innovation
Open Innovation’s innovations

Corporates are articulating their needs and opportunities for innovation; and using intermediaries to search for innovators with ideas, and to provide candidates with a period of intensive development. Jan 2015. (

Unilever and Canary Wharf’s ‘Cognicity’ both invite you to come and help them crack a world-wide problem, but… Corporates are seducing startups into giving them their good ideas, but the odds and the risks against getting your rewards are less evident than they should be. April 2015. (

Cambridge Service Alliance
A global alliance between leading businesses and universities that brings them together to work on the complex service solutions of tomorrow. (

The full version of the Deloitte Report can be found at‎

John Whatmore April 2015 (


Startups like Red Riding Hood should beware of corporate wolves


Unilever and Canary Wharf’s ‘Cognicity’ both invite you to come and help them crack a world-wide problem, but… Corporates are seducing startups into giving them their good ideas, but the odds and the risks against getting your rewards are less evident than they should be. There is a solution.

Here’s a new but increasingly familiar slant for startups – from a big corporate (Unilever). We’ll identify some specific key issues, they say, (in this case how data can be used to attract people to live more sustainably). You come along and work with our staff to suggest ways to crack such issues – at a Hackathon. Our staff will provide background – marketing, sustainability, IT and consumer research, together with one-on-one mentorship. One winner gets £5,000 in prize money, and may be invited to participate in a paid pilot with Unilever, with £31,000 made available to help develop and test their idea.

Level39 at Canary Wharf’s ‘Cognicity’ has launched a similar challenge. Smart City technology companies have been invited to apply for one of six streams – each about a specific aspect of ‘the city of the future’. For each stream, six teams were to be selected to enter an Accelerator with leading technology companies and Canary Wharf Group partners – to develop their technologies and solutions. In each stream, one would receive a £50,000 prize, and ‘pilot their solutions in the ongoing development of Canary Wharf and create a showcase connected city’.

It’s hard to tell whether these are impact enterprises or commercial ventures. Each competition has only one winner; and the costs and benefits of being involved in any pilot are unknowable. There is no mention of who owns the ideas nor who shall have the rights to them. And there is no one there to protect your rights. So if you have a good idea, you would be at risk of being seduced into a process in which, whether you win the prize or not, your ideas may have lost any protection.

Nesta, some time ago in an open innovation pilot, acted as intermediary for P&G by eliciting and selecting relevant ideas and then providing a period of support and development with the help of a VC for their originators (including ensuring adequate protection and the writing of a business plan) and enabling the best to be pitched to P&G. Ultimately, one of these was felt by P&G to have very considerable market potential. ( This process, known as the ‘Air Lock’ is run regularly now for many different companies by its creaters in Nesta in ‘100%Open’: it builds up communication channels and trust, and it protects IP.

Young businesses in accelerator programmes run by organisations like Techstars and Startupbootcamp expect to get from idea to marketable proposition in 13 weeks (for which the latter take around 7% of equity in return). At that point they are in a position to negotiate with users as investors on a commercial basis rather than simply on the terms dictated by a corporate.

Accessing creative start-up talent is increasingly necessary for larger companies who want to capture the best ideas, people and technologies. As scouting by corporates for good ideas becomes more common, they must not be allowed to play the Wolf to Red Riding Hoods. They should recognize that they do not know what they will be able to catch in their fishing net: vagueness simply raises suspicions.

John Whatmore April 2015

Managing support for early-stage ventures


Managing support for early-stage ventures – a fast emerging role
In Silicon Valley support is everywhere, and it is increasingly immanent in London’s entrepreneurial world, with some high profile examples – promoted by a new breed of support managers. But there are other areas where it is still a distant prospect. Join us in exploring how best to manage support.
Next week: The Future of Innovation – nuggets from the Deloitte Annual Survey of organisations’ views – about how they will do it and what kinds of things they will do.

The most distinctive features of Accelerators (as short periods of intensive development for small groups of early-stage ventures) are the proactive nature and the amount of support that they provide for the businesses they nurture – especially in the form of mentoring (in many programmes mentors are in a ratio of at least half a dozen per team), yet many startups and SMEs even in Incubators and Science Parks are lucky if they have a single one.

Mentors tend often to be appointed simply because they provide a hand to hold, so is it failure to match mentors to individual needs that holds mentoring back? While the Business Growth Fund normally appoints a couple of Directors and then on their advice from time to time finds appropriate experts, advisers and mentors (, the London Stock Exchange has launched its Elite programme of support with Imperial (, one or two VCs like Octopus Ventures ( have evolved sophisticated regimes of support; and Accelerators like Startupbootcamp ( and Bethnal Green Ventures ( are highly proactive in the management of their mentors and of their programmes.

One of the most telling accounts that I have written recently has been about what startups in Accelerators said they valued most (they cited: supervisory facilitators, proximity to their fellow travellers, access to their various mentors, and the inspirational speakers they met ( I am running a project whose aim is to learn more from those on the receiving end about what it is that works best in terms of support for early-stage ventures – e-mail me if you are interested to participate.

Entrepreneurs may be passionate and determined people, but they do not necessarily know what they are missing. The managing of support is a new role: it entails keeping in very close contact with developing businesses, understanding what might help them at different moments, the ability to corral a host of potential supporters, and to bring supporters and entrepreneurs together successfully (see

Help us! We are looking at ways in which people who play this evolving role can contribute their experience to its development – on topics such as building a bank of supporters, identifying startups’ needs, finding specialised experts, matching mentors to startups, curating cultures of inclusivity, and programme management. If you are interested to participate in this, please e-mail me.

John Whatmore
March 2015-03-20

Are there any limits to the scope for Accelerators


Are their any limits to the scope for Accelerators?
Hallowed publication ‘Nature’ reports on a nine-week ‘Biotech Boot Camp’ in the US, funded by the National Institutes of Health, which aims to get entrepreneurial scientists to get out there and ask potential customers what they want. Its author used to think that his method was applicable in all industries except one – Bioscience! Should the Stevenage Bioscience Catalyst and even the Wellcome Foundation be funding their own Boot Camps?
Next week: I enumerate persuasive examples of intensive support for early-stage ventures; and suggest that a lot can be learned from one another on key aspects like the recruitment and the management of supporters.

Steve Blanks’s I-Corps (Innovation Corps) runs a Boot Camp – a nine-week course designed to teach business skills to entrepreneurial scientists in technology-based startups – that has now been rolled out for biomedical firms as part of an experiment by the US National Institutes of Health (NIH).

Its ruthless pitching tests have encouraged some of the participating companies to change course drastically and others to abandon promising science for something more market-savvy. “You can be a great researcher and you can think you have great ideas”, said one Congressman, “but until you’re forced to talk to a potential customer, you never really know.”

Nineteen teams formed last December’s first cohort. ‘Each morning was spent presenting, and then re-presenting the ten-minute team pitches. Each afternoon, the teams raced to interview experts in their fields, then reported back for more workshops. Nights were filled with class readings, homework and preparations for the next day’s presentations and interviews.’

The interviews are central to the process. Teams needed to talk to scientists, pharma company reps, regulators, doctors, billing specialists and more – essentially any person with expertise in what it takes for companies to get their products to patients and get paid. A time-consuming process, and Blank insists that the interviews be conducted face-to-face, to build rapport and allow interviewers to better gauge their subject’s emotions. If an expert cannot be met in person, the team must hold a video-conference. “For commercialisation, being able to explain it to your mother is what matters”, said Blank.

Steve Blank is a college drop-out who wandered into Silicon Valley in 1978 and has launched eight technology companies there – not all of them successful. From his introspections, he crafted a curriculum for tech entrepreneurs, to teach them to think beyond their own technology and to dive early and deep into the details of commercialisation: who the customers are, what they need and how much they are willing to pay. The technique is said to have swept through the tech industry, though it needs to be guided in order to obviate its tendency towards focusing on incremental rather than revolutionary improvements.

The US Small Business Research Programme had been concerned that top earners of grants were rarely focused on commercialisation, sometimes being used not to further a business, but to continue research. The National Science Foundation was the first to offer the programme to scientists on the threshold of launching a company, and since 2011 about 500 teams have taken the course. Then the NIH followed, first with the National Cancer Institute (NCI).

At first, Blank believed that his method was applicable to all industries except one – life sciences – where the gestation period was too long. But life science companies have cut back on in-house research in favour of early partnerships with smaller firms, effectively turning big pharma [and in the UK the Wellcome Foundation too] into early customers. So startups must deal with the difficulties created by heavier regulation, the importance of intellectual property, and the challenge of payment services.

In order to assess whether to get more companies involved, NIH is tracking the teams’ success over the next five years, monitoring how many partnerships with major pharmaceutical or medical-device firms the companies form, and whether they receive funds from other investors. The NCI is expected to decide within the next two months whether to continue its programme. In the meantime, 82% of participants said that they would recommend the programme to others.

The US Department of Energy has announced a similar project and the Department of Defence is also considering one. Several university technology-transfer offices in the US are interested in Blanks’s methods for aiding academic entrepreneurs; and Imperial College has adopted a similar programme – for startups based on synthetic biology. The Cabinet Office’s second round of funding of Accelerator programmes has been for startups in Healthcare; and its participants recently made their final presentations at an event in London.

There is no shortage of opportunities for these kinds of programmes, but there is a risk that they will not be appropriately adapted to their sector and their purpose, and that there are too few people with the necessary expertise and experience the ensure their success. They have a long way to go.

Biotech Boot Camp’ Nature, 26 March 2015

See also: ‘i-Teams: the teams and funds making innovation happen in government’ tells the stories of 20 such teams in various countries.
Nesta, June 2014.

John Whatmore
April 2015