What is the strength of innovation in your organization? In this week’s Killer Innovations, we explore avenues to building innovation strength. Innovation from Mergers and Acquisitions can be a fast track to innovation. What are the pros and cons to this innovation path? We also look at the five biggest risks to innovation. Your company’s innovation depends on avoiding the pitfalls. Is building innovation strength through acquiring innovation right for your company? Avoiding the risks to innovation stretches across a broader spectrum. Any company should be aware of the five biggest risks to innovation.
Mergers and Acquisitions: Acquiring Innovation
A growing means of building innovation strength is through acquiring innovation. Innovation from Mergers and Acquisitions has its benefits and its drawbacks.
To start, there are two types:
- Acquiring a company outright
- Purchasing the Intellectual Properties – This could be a product line, patents, a team, or a group of individuals with core expertise.
Let’s discuss the first type, acquiring the company. Innovation from Mergers and Acquisitions has its pros and its cons.
- You can get into a market fast – you don’t have to wait for R&D.
- There are reduced risks.
- Reduced risks = lower returns.
- This approach can make an organization lazy.
- This approach can be expensive.
The most common reason for Innovation from Mergers and Acquisitions are:
- Your company missed a trend and now you have to acquire company to get into the space.
- You saw the trend, but didn’t realize its impact.
- You saw the trend, but wanted to avoid the risk of investing in it.
Innovation from Mergers and Acquisitions can work if it is:
- Part of an innovation strategy
The second type of Innovation from Mergers and Acquisitions is purchasing Intellectual Properties (IP). Why has it become so important? In a word: litigation. Patent lawsuits offer lucrative opportunity. Exclusivity to a company’s investment can reap financial gain. This creates issues for those seeking to build innovation strength in this way. It can be especially difficult for the small business. To buy a patent can be expensive. Options are out there for acquiring innovation to build innovation strength. Companies can join a patent pool. Another option is for companies to join forces and make a group purchase of a patent.
Whether you are part of a large or small organization, think of this approach. If you are a seller of patents, write it in your agreement. Prevent the buyer from using your patents in proactive litigation. Allow the patents to only be used in defense. Why do people acquire patents?
- To exert a form of control.
- To create a defense.
Allowing your patents to be used only in defense, make them unattractive to patent trolls. Patent trolls’ sole purpose is to buy patents and sue. We need to come up with a radical approach to addressing the patent lawsuit challenges that are taking place in organization.
Another aspect of this are PCLs (Patent Cross Licenses). Most large companies pre-negotiate a patent cross license. This takes the whole risk of litigation off the table.
The Five Biggest Risks to Innovation
It does not matter what or who you are as an organization. It’s a common theme I have seen across organizations, irrespective of their size. I’ve compiled what I’ve observed into “The Five Biggest Risks to Innovation.” Those risks are as follows:
- Corporate antibodies and the tolerance of leadership for antibodies.
- Antibodies can prevent uncontrolled risks, but are mostly roadblocks to innovation.
- Leaders know who they are, but still tolerate them.
- True leaders should correct or remove antibodies from an organization.
- If leaders never correct antibodies, it counters being an innovative organization.
- Lack of patience
- Innovation is not the quick fix.
- Have robust innovation pipeline – keep it active and full.
- Companies realize they need ideas, but ignore it for so long that they want a quick fix.
- The Ambiguous Process
- If someone in the company has an idea, what is the process for submitting the idea
- Without a clear process, people get frustrated, then disengaged.
- Goal should be 100% of the ecosystem engaged in your innovation agenda.How do you do this?
- Be clear about what the process is.
- It should inform how employees can get engaged and track the process.
- Employees should feel their contributing to the process.
- Contributors should know how decisions are made and what projects get funded.
- Unprotected Resources
- Commit your resources.
- Protect your resources.
- Poorly defined “BHAG” (bold, hairy, audacious, goal)
- Setting the bar high for the team.
- Provide a clear goal.
Within your organization you could see anywhere from one to all five of these risks to innovation. As an innovation leader, you need to define the problem and find a solution. Don’t try to solve all five problems at once. I recommend defining the “BHAG” and the ambiguous process first because those you can directly control.
I hope today’s discussion gives you the insight on ways to build innovation strength. Through acquiring innovation, you can get an innovative edge over the competition. But be wary of this approach as a way to play catch up. Then, for any organization with a drive towards innovation, watch out for the Five Biggest Risks to Innovation. If you have questions or comments on this week’s show, I’d love to hear from you. Or carryon the conversation about these steps to building innovation strength at The Innovators Community.
To learn more about innovation strength, listen to this week's show: Innovation Strength: Acquiring Innovation/ Avoiding the Biggest Risks to Innovation.