Driving Enterprise Value by Growth Centered Innovation℠
Enterprise value, from the perspective of investors or acquirers, is based largely on assessments of the potential for future growth. At the foundation of those evaluations are three questions:
1. What are the factors underlying recent growth and are the driving factors likely to persist?
2. Does the enterprise have the core strategy, resiliency and the structure in place to sustain growth in the face of changes of ownership and/or market conditions?
3. Can that growth potential be successfully acquired and integrated?
Because virtually every business confronts stagnating markets, these issues take on new forms and greater urgency.
With organic market growth disappearing, growth by individual businesses must increasingly be ‘engineered.’ Significant, even breakthrough innovation is clearly required to reignite sustainable, profitable growth. By all accounts, therefore, the ability of a company to identify, design, build and deliver innovation that is meaningful and valuable in the eyes of customers is key to determining the value of the enterprise.
Innovation Drives Growth
Innovation is the lifeblood of business sustainability and is essential to erecting barriers to market entry. Innovation is the pathway to new value creation, and as such is a primary component of determining and accelerating valuation for any company.
Most entities plan to grow, but few are structured to face current challenges. With most established markets either stagnating or shrinking, traditional market share tactics of profitably selling more current product or incrementally improved product to existing customers and markets are declining opportunities. Growth must now come from finding new customers (mostly located in new markets) or more likely, finding ways of delivering new value to all potential customers. In both cases innovation that creates new value is required if growth is to be profitable and sustainable.
Planning for Innovation
Business planning traditionally has focused on incremental improvement in product, delivery or process. However, the sources of inspiration and the practices of innovation can no longer be constrained by structured discovery and incrementalism. In fact, truly innovative ideas often come from the most unexpected sources within and from outside of a company. It is when ideas and invention outside of the normal functions, processes or channels are recognized and acted upon that real innovation happens. The real opportunities for growth take place ‘at the margins.’ It is at the edge of the current business where innovation can be found and accelerated value created.
The internal entrepreneur, the “intrapreneur,” is an important contributing resource that if cultivated and enabled can be a new source of innovation and the most significant single contributor to valuation of a company. Therefore, how well the enterprise is prepared to develop and support their intrapreneurs is a cogent indication of the potential for future growth.
The Intrapreneur – Tomorrow’s Innovation Champion
An “intrapreneur” is a corporate entrepreneur working to drive innovation within an existing business. The idea of intrapreneurship is not new, it has been around for decades. It was developed first by researchers who recognized that the skills, processes and cultures required to support innovation are different from conventional management techniques. They also recognized the need for a better path for innovation within the structural confines of an existing enterprise and the necessity of the entrepreneurial spirit. Research has surfaced the challenges faced by internal innovators and their enterprises. The topic has been written about, spoken on, and consulted within companies for years. The concept has been given different titles like “innovation management” or “building a culture of innovation” and has spawned new corporate positions such as Chief Innovation Officer. However, research continues to show that too much of the corporate world is not “getting it” and as a result innovation has fallen short of its potential to drive business growth.
Clayton Christensen, widely acknowledged thought leader about innovation, notes: “Historically, management is about “straight lines” and “right angles.” The tools of traditional business planning – “the software” – that managers use today have helped them perfect the art of analyzing, planning, and executing when the problem is standard and the interdependencies are known. But innovation is about uncertainty and nonstandard processes, curves and weird angles and the management literature and the tools we use have not yet caught up with the new kinds of problems that managers and innovators face. New software is needed, a new set of guidelines and rules that managers can use for facing high uncertainty problems.”
The Institute for Intrapreneurship
There is much work to be done. The need exists to move from theory to sustainable action that transforms how innovation is initiated, operationalized and monetized. The Institute for Intrapreneurship was formed to bring policy makers and government agencies, academia, and business (including the investment community) together, joined by experienced operators, to solve the challenges associated with the successful execution of growth centered innovation℠. Recognizing that the changing economic times require a different set of management skills and abilities, The Institute brings understanding of what is needed and how to prepare individuals and companies to more effectively discover ideas and bring them to invention, to innovation, to income, and resultant growth.
The case for innovation is compelling, but recognition alone is not enough. The challenge is to move from talk to effective action. The major responsibility of The Institute for Intrapreneurship is to use the research of thought leaders, the vision of innovators, and the experience of operators to impact the ability for companies to plan and execute innovation initiatives. The objective is to bring brand, intellectual property, research and resources to focus explicitly on one question: What must be true for existing businesses to develop and sustain profitable growth centered innovation and drive valuation in a changed economy?