The Innovator´s Dilemma of Innovation Labs and Corporate Accelerators

Overcoming the
Innovator’s Dilemma of
Innovation Labs and
Corporate Accelerators

Field Study: about 50 Labs and Corporate Accelerators
Research: about 200 international Reports, Books und Studies
Interviews: 10 Corporate Innovation Experts (September 15)
Reach: over 85.000 Slideshare Views (January 17)
Im Rahmen einer Masterarbeit an der Universität der Künste Berlin  
in Kooperation mit der Universität St. Gallen.  
Betreuung durch Prof. Dr. Dr. Schildhauer und Dr. Nancy Richter (HIIG.de)
Manuel Funk
© Honeypump GmbH

Why
Innovation Labs and
Accelerators fail? *
© Honeypump GmbH
*Don´t get me wrong: This is NOT an argumentation against Labs and Corporate Accelerators. 
In contrary: We strongly belief, that corporations need protected environments for experimentation
and radical innovation beyond R&D departments.
Nevertheless many innovation centers do not fulfill expectations and we´ve been curious  
to research the reasons behind this observation.

Thesis 1:
Established companies
underestimate the destructive
power of Technology

Its harder than ever to stay on top
In 10 years 40% of the Fortune 500 will no longer exist
Olin School of Business at Washington University
© Honeypump GmbH / Innosight

German (over-) Engineering:
German companies are World Champions  
in the field of Sustainable Innovation
© Honeypump GmbH
What is missing:
Speed
Startup-Culture
Moonshot-Missions
Disruptive Innovations

Report: Digital Vortex 
How Digital Disruption is Redefining Industries
Key insights from a survey of 941 business leaders around the world in 12 industries:
„Digital disruption has the potential to overturn
incumbents and reshape markets faster than
perhaps any force in history.“
„Whatever can be digitized is digitized.“
Wirtschaftshochschule International Institute of Management Development (IMD) in Lausanne
Quelle: Bradley et al, 2015
© Honeypump GmbH

Source: O’Connor 2006, Christensen / Raynor 2013
- Growth imperative
- Disruptive attackers
- Dependence on US technology platforms
- Customer centricity
- Acquiring qualified employees
- Missing interfaces for cooperations
- Exponential technological development
- Complexity and accelerated innovation cycles
Challenges for Established Companies
© Honeypump GmbH

© Honeypump GmbH
Exponential Technologies

System of Systems
Product System
Connected Product
Product
Quelle: Porter und Heppelmann 2014
Dissolving Industry Boundaries
© Honeypump GmbH

Thesis 2:
Corporate Response is often
inadequate and action-oriented

Wait & See
- Roughly 65% of german SMEs and 33% of international companies  
build on „wait & see“ strategy
- 62% of german companies have no comprehensive digital strategy
Pioneers
- Sofar only 15% of german companies are profiteers of digitalization
- Above-average growth thanks to a commitment to innovation
Source: TNS Infratest, 2015; Bradley et al, 2015; Deburba/Neurohr, 2015
Corporate Response to Digital Disruption
© Honeypump GmbH

Thesis 3:
Companies do not understand
or consider the mechanisms of  
The Innovator´s Dilemma

Successful, Established Companies
are Prisoners of their Success.
They can neither withdraw from their profitable core business
nor are they able to assert themselves in small, emerging
markets with uncertain prospects for success due to their
processes and structures.
The Innovator’s Dilemma
Source: Christensen, 1997
© 2016 - Honeypump GmbH

1. Companies Depend on Customers  
and Investors for Resources
The decisional routines of companies
systematically reject ideas that customers do not
want (yet). This results in a lack of resources or
the rejection of any disruptive technologies.
Clayton M. Christensen: 5 Principles of Disruptive Innovation

2. Growth Imperative
Small markets don´t solve the growth needs of
large companies. Strategy of waiting until the new
markets are „large enough to be interesting“
leaves these future markets to small
organizations.

3. Markets That Don’t Exist Can’t Be Analyzed
Established planning techniques fail when applied
to disruptive technologies and therefore have to
be replaced with explorative discovery-based
planning.

4. Values and Processes
An organization´s capabilities define its
disabilities. The very processes and values that
constitute an organization´s capabilities in one
context (sustainable technologies), define its
disabilities in another context (disruptive
technologies).  
 
Processes and values are not flexible and very
difficult to change.

5. Over-Engineering
In their efforts to stay ahead, many companies
don´t realize the speed at which they are moving
up-market, over satisfying the needs of their
customers and creating a vacuum for disruptive
technologies to enter the market.

Time
ProductPerformance
Progress due to sustaining
technologies
Disruptive
Innovation
Progress due to disruptive technologies
Performance
demanded at the
high end of the
market.
Performance
demanded at the
low end of the
market
Over-engineering
Vacuum
5. Over-Engineering Creates Room for Disruptors

Photo. Wikipedia
During their best times, successful organizations tend
to take steps that lay the foundation for their later
decline.
Clayton M. Christensen:

Insufficient Differentiation:
The Failure Framework: Why Good Management Can Lead to Failure
Radical
Innovation
Radical innovations
are significant
Improvements and affect
and/or change entire
companies.
A) New to the world
features
B) Significant (5-10x)
improvement in known
features
C) Significant (30-50%)
reduction in cost
Disruptive
Innovation
Disruptive innovation first
takes a foothold in new
markets and, at first,
often exhibits significant
disadvantages compared
to conventional products.
They satisfy other
customer needs and
have their advantages in
other, new criteria.
High risks, low sales  
and margins
Sustainable
Innovation
Sustainable (incremental)
innovations improve the
performance of  
of established products
or services along the
dimensions of
performance that
customers in major
markets have historically
valued.
Source: Christensen, 1997; O’Connor 2006

Many disruptive innovations are first discovered in established
companies and subsequently not utilized.
 
—> Active management decisions against disruptive innovations
out of strategic considerations (risk, margins, cannibalization,
etc.). This favors advanced development of existing products in
existing markets and the associated high, predictable profit
expectations.
Disruptive Technologies Were First Developed
within Established Firms
The Failure Framework: Why Good Management Can Lead to Failure

Clayton M. Christensen
Overcoming the  
Innovator’s Dilemma

Source: O’Connor 2006, Christensen / Raynor 2013
- First-Mover advantages are essential
- Dealing with the unpredictable
- Separate consideration: resources, processes, values
- Dealing with performance oversupply
- Creating independent organizations
Overcoming the Innovator´s Dilemma

Creating Independent Organizations
A) Outsource (Service Provider / Agency)
B) Buy (Startup/Company)
C) Build (Lab/Accelerator)

Only independent organizational units can successfully
develop disruptive innovations.
Independent organizational units must be adapted to
the size of the target market in order to (still) be able
to quickly act in smaller markets, while the core
business continues to handle large markets and the
associated growth goals.

Levitz, 2013
Study:
Only 9% of the researched established firms recover  
from a disruptive attack.
Out of these successful companies, all of them  
have founded separate units to master disruptive
technologies.
No single company with an integrated approach was
able to successfully fend off the disruptive attack.

Gilbert, Eyring, Foster, 2012
Dual Transformation / Ambidextrous Organization
Transformation A: Strategically re-positioning and adapting the
core business to market requirements – what can we do better
than our attackers? What do we need to give up? Why do our
customers come to us? What is the true “need” associated
with the brand?
Transformation B: Building the future. Creating a separate
business area that deals with innovations. Working according
to startup methods, guidance on unexpected customer needs.

Innovation Labs
Corporate Accelerators

About ⅓ of german
corporations currently
run Innovation Labs or
Corporate Accelerator
Programs
Source: Hochschule für Technik und Wirtschaft, Berlin 2015

Source: Fieldstudy Summer 2015

Why Should Companies Launch Innovation Centers?
- Developing new products and services or proofs of concept
- Designing new business models
- Connecting with startups
- Identifying potential partners and forging strategic relationships
- Developing an innovation culture within the organization
- Incubate and invest in startups
- Understanding the digital customer
- Evaluating and testing new technologies
- Become a recognized part of innovation communities
Source: Solis et al. 2015

The declared purpose of nearly all
researched Labs and Accelerators is
(among other things) developing
disruptive innovations
Field Study and Expert Survey Results:

However: None of the researched Innovation
Labs and Accelerator programs met the
definition of an
independent organization
Field Study and Expert Survey Results:

Most Innovation Labs and Corporate
Accelerator Programs do not solve the
company’s Innovator’s Dilemma but
merely shift it.
Hypothesis

- The Book and the definition of the Innovator’s Dilemma are well known to managers
- They confirm the relevance of the Innovator’s Dilemma
- They confirm the Influence on decisions in innovation management
- Do not provide greater information on Christensen’s recommendations
Innovator’s Dilemma
Source: Primary data from expert interviews 2015
Research Findings

- Pressure for change is deemed very significant
- Self-critical assessment for preparing the company for changes
- Many companies do not have an established digitalization strategy.
Great Pressure to Change due to Digitalization
Research Findings

- Open Innovation processes and collaborations are established in all companies
- Insufficient differentiation of innovation types
- Innovation Labs and Accelerators have central roles in managing innovation
Innovation Management
Research Findings

Research Findings
Contradiction:
- “Cultural Change” can only be implemented in an affiliated organization.
- “Disruptive Innovation” can only be implemented in an independent organization.
Goals of Corporate Innovation Center
, Scale of 1 (not important) to 10 (very important)

Research Findings
Implementing the Innovation Center partly contradicts the stated goals: 
- No independent organizational units, mostly physical separation only
- Significant potential for improvement in the area of Error Culture
- Critical collaboration with existing customers
- C-level support available at all companies
Innovation Center Implementation

Research Findings
Innovation Center Typology
Source: Qwn research 2015
Based on the basic research, we defined 2 Innovation Center types.
Both types have their authorization and can significantly contribute to improved
innovative capability on the part of the companies.
Research and field study shows mostly associated (type 1) innovation 
center or a hybrids of both types.

Research Findings
Summary

Research Findings
Summary
This Research confirms many of the central findings from theory and field studies.
There are contradictions between theory and practice in the following aspects:
✘ The Innovation Centers’ operative Independence from the core companies is not
implemented in accordance with Christensen. None of the researched Innovation
Centers were an independent organization.  
✘ The definition of the established goals is not congruent in some areas with the
Innovation Center’s positioning and implementation methods.  

Do Innovation Labs and Accelerators Fail?
In spite of the contradictions, most Innovation Center currently fulfill an
important role in established firms’ innovation management, such as testing
new processes and establishing collaborations and partnerships  
(with startups, universities etc.).
However, the researched Labs are not an exit from the Innovator’s Dilemma
according to Christensen’s criteria. None of the researched companies have
currently been able to implement a convincing strategy for developing
disruptive innovations or produce specific results in the form of
groundbreaking products or services.
Research Findings

Interpreting the Results
Our research findings allow three different interpretations:
1. Currently associated Innovation Centers make up the foundation for additional,
more consistent forms of autonomous Innovation Centers in accordance with
Christensen. 
2. Established Firms with their associated Innovation Centers knowingly go against
Christensen’s advice and provide evidence that they are able to develop disruptive
innovations with their programs - despite the aforementioned operative
interdependence with the parent company. 
3. Established firms knowingly focus on developing sustainable innovations and
continue to leave development of disruptive approaches to startups and other
technology driven companies.
Research Findings

Strategic Framework for Established Firms to Overcome the Innovator’s Dilemma:
Triple Transformation

Triple Transformation
The following three-step solution approach that we have developed  
— inspired by the Dual Transformation Model – is based on the
following findings:
A. One-dimensional solution approaches are not able to satisfy
highly complex and dynamic requirements.
B. Creating an Innovation Ecosystem with clear roles and
boundaries is a significant factor for success.
C. The foundation for all activities is the definition of a radical
Innovation Strategy. There are still significant shortcomings in
most established firms with regard to this aspect.
Strategic Framework for Established Companies to Overcome the Innovator’s Dilemma

Established Firm / R&D
Sustainable
Innovation
1) Closed
1: Transformation of the Core Company
Intrapreneurship
- Strategic (re-)positioning
- Purpose-definition (customer needs)
- Cultural and organizational adjustment
- Performance oversupply strategy
- Adaptation and acceleration of existing
innovation processes
- Usage and promotion existing innovative
potential inside the corporation via individual
Intrapreneurship Programs  
(e.g. Adobe Kickbox)

Associated (Type 1)
Corporate
Accelerator
Partner
Sustainable / Radical
Innovation
Associated (Type 1)
Innovation
Lab
2) Open
2: Associated Labs & Accelerators
Intrapreneurship
- Radical Opening of the innovation process  
via Innovation Centers
- Co-Innovation with partners, universities,
competitors, startups, suppliers and customers
- Exchanging knowledge, employees and
resources with core companies
- Establishing open / lean processes  
and structures
- Cultural Change: Error culture, unpredictability,
exploration
- Focusing on sustainable/radical innovation
- Utilizing and marketing the results in the  
core company

Associated (Type 1)
Corporate
Accelerator
Autonomous (Type 2)
Innovation
Center
Startups
Partner Excubation
Sustainable
Innovation
Disruptive
Innovation
Innovation
Associated (Type 1)
Innovation
Lab
CEO
1) Closed 2) Open 3) Autonomous
3: Autonomous Innovation Center
Intrapreneurship

Autonomous (Type 2)
Innovation
Center
Startups
Excubation
Disruptive
Innovation
3) Autonomous
3: Autonomous Innovation Center
- Standalone organization without any links to
the core companies (except CEO)
- Mission: Disruption of existing business
model / Moonshot-Mission
- Clear proposition for the market (MTP)
- Defined long-term capitalization, no traditional
business planning / reporting
- No sharing of resources and employees, with
core company, no visits
- Individual values, processes, structures 
(e.g. ExO, Lean Startup, Holacracy, Reinventing
Organizations)
- Development and marketing under standalone
brands

Associated (Type 1)
Corporate
Accelerator
Autonomous (Type 2)
Innovation
Center
Startups
Partner Excubation
Sustainable
Innovation
Disruptive
Innovation
Innovation
Associated (Type 1)
Innovation
Lab
CEO
1) Closed 2) Open 3) Autonomous
Intrapreneurship
Triple Transformation Modell

Manuel Funk
Manuel Funk is Entrepreneur, Strategy Advisor and Futurist with over 20 years
experience. His work is focused on Digital Strategy, Business Transformation, Data,
Innovation & Future Management.
Founder and Managing Partner of HONEYPUMP, Future & Innovation Think Tank.
Founder of KNOWEAUX Applied Futures, adaptive Scenarios & Future Modelling Programs
Founding Partner of katapult:NOW, a Network of Tech & Innovation Entrepreneurs
About the Author
Complete study and detailed sources on request.
English Version: bit.ly/1oBpRhI
We offer Consulting and strategic Advisory on Innovation, Labs, Accelerators, Intrapreneurship

Non-Artificial Intelligence 
Digital Strategy
Future-Modelling
Innovation Management
Labs & Accelerators

FUTURE & INNOVATION
Honeypump GmbH
Straßburger Str. 55, 10405 Berlin
www.honeypump.de
Manuel Funk
manuel@honeypump.de
linkedin.com/in/manuelfunk
@manuelfunk
+49 172 4044495

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