December 15, 2016
We live in an era of digital Darwinism, a time when technology and society continually evolve. The reality is that innovation is now a constant, and the net result sets the stage for disruption. Every day, startups continue to push industries and technologies forward. As they do, new trends shape and reshape markets. Enterprise organizations now increasingly face a new reality where doing nothing about it or operating is a surefire way to get disrupted and eventually become obsolete.
To compete in an era of digital Darwinism requires companies to think beyond “business as usual” and to start exploring new areas of opportunity for emerging expertise, technology, and insights. One of the most promising trends in the evolution of business is the rise of corporate innovation centers. Part of the challenge companies face in doing so is that it’s very easy, almost natural, to apply legacy thinking, processes, and models toward innovation. This anchors new possibilities to yesterday’s standards, which then limits or inhibits the return on innovation. But that isn’t stopping corporate innovation centers from rising in technology epicenters all around the world.
In 2015, CapGemini’s Jerome Buvat and I set out to explore the shift from R&D centers to innovation hubs. We published our findings in one of the first detailed reports on the subject, “The Innovation Game: Why & How Businesses are Investing in Innovation Centers.”
In part two of the series, “The Rise of Innovaiton Empires,” we track the evolution and expansion of innovation centers around the world since 2015. Here’s what we found:
Innovation Centers Are Everywhere
Silicon Valley is no longer the sole breeding ground for innovation. Innovation centers are taking root all over the world and are no longer concentrated in a handful of technology hubs. The top 10 most favored locations for innovation centers only represent 35 percent of total innovation centers, indicating that the growth of tech hubs is becoming uniform globally.
Our previous research analyzed more than 300 innovation centers opened by the top 200 global organizations. In the six months following our initial report, 56 new innovation centers opened in 20 countries with an additional 11 centers in development.
Silicon Valley and Western Europe have also strengthened their position as leading hotbeds of innovation. Since the last report, five and twelve new innovation centers opened in these regions respectively. Additionally, within the Eastern US, three new innovation centers have opened in Atlanta, and two have opened in Boston. Around the world, India (Bangalore) now hosts four new innovation centers and in Australia, two new innovation centers have opened in Sydney and Melbourne.
Majority of New Innovation Centers Operate as Accelerators
Organizations see a lot of value in operating their innovation centers as internal accelerators. 55 percent of new innovation centers, opened or announced between July 2015 and February 2016, are in fact, accelerators. So what’s the difference?
Accelerators engage with the local ecosystem, cultivate relationships with startups and entrepreneurs, and provide them with opportunities to collaborate on technology solutions.
In-house innovation is the second-most favored model, representing 33 percent of new innovation centers. Serving as the innovation engine for these companies, in-house innovation labs are typically large in size, and perform all corporate innovation activities from inception to prototyping, all using an in-house approach.
Very few innovation centers favored ‘university residence’ and ‘innovation outpost’ models that witnessed only 7 percent and 2 percent of new innovation centers adopting them respectively. This means that organizations are maturing in their corporate innovation models from experimental to more structured approaches that require significant monetary and resource commitments.
Financial Services Leads Other Industries
The Financial Services industry has fast caught up with others in terms of opening up new innovation centers. Our new research shows that 42 percent of top FS organizations now have innovation centers against 28 percent in H1 2015.
Between July 2015 and February 2016, the number of innovation centers grew the highest in Financial Services (by 145 percent), overtaking Manufacturing (which grew by 48 percent) and Consumer Products (which grew by 33 percent). Further, financial technology, also known as fintech, emerged as the second-most important focus area for new innovation centers with 13 percent of new innovation centers focusing on it. This is noteworthy, as fintech was not listed in the top six focus areas for innovation centers identified in July 2015.
Digital Technologies Remains on Top
Disruptive technology is at the forefront of work in all innovation centers. The Internet of Things, fintech, digital healthcare, and cloud services and software have emerged as the top three priority areas for innovation centers.
On the other hand, big data and analytics has fallen from grace, as just 10 percent of new innovation centers cite big data and analytics as a focus area compared to 51 percent identified until July 2015. That’s a notable drop.
Corporate Innovation Centers Plug into Startup Ecosystems
Organizations are also realizing the importance and value in partnering with relevant startups and ecosystem players over just gaining access to new technology. After all, nothing says innovation like a company that wasn’t around a year ago.
‘Partnering with ecosystem’ emerged as the key objective of new innovation centers contrasting our previous finding, ‘gaining access and exposure to latest technologies’, which was the main mission of innovation centers in our previous research.
Innovative Approaches to Innovation is Proving Necessary
While R&D investments are also increasing, returns have shown decreases over recent years. In certain sectors, more than 85 percent of new products fail with only 5percent of R&D staff feeling highly motivated to innovate.
In the last six months however, innovation centers have opened or expanded to tech hubs where localized expertise align with a company’s digital transformation road map. These innovation centers seek expert talent to develop new products and services that enhance the digital customer experience. More so, these new investments are creating new products and services that are unlocking new value and opportunities for businesses to compete more effectively in a digital economy.
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