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Big companies cozy up to startups to drive innovation

How does a big company that is not exactly at a loss for new product ideas drive innovation?

When a PepsiCo division focused on “breakthrough innovations” was looking for a second opinion on a slew of new product ideas, it didn’t turn to consultants or muster up a traditional focus group.

“We brought in entrepreneurs from the MassChallenge team and basically [did] what I would call a Shark Tank on speed,” said Perry Witmer, senior manager, Innovation & Emerging Brands, at PepsiCo. MassChallenge, the world’s biggest startup accelerator, according to its website, helps promising early-stage entrepreneurs “launch and succeed immediately.”

With one day and “no budget pretty much,” Witmer showed the MassChallenge entrepreneurs her innovation team’s ideas, first getting their feedback as consumers and then asking them to exercise their business savvy.

“We then had them each pick their favorite idea and pitch it to a panel of consumers,” Witmer told the audience at the FutureM marketing technology conference, where she was a featured speaker. The consumers, in turn, were asked to invest in what they believed was the winning pitch.

“The upshot was that we were able to sit down with the consumers again and understand what drove their decision making,” she said. Her team got real-time insight into how entrepreneurs think about products — and how they pitch a product, she said. The PepsiCo innovation team also gleaned valuable information about what might drive and hold back their new products.

Constant Contact, an online marketing firm focused on helping small businesses, created its own accelerator program, said Andy Miller, chief innovation architect. The Waltham, Mass. firm brings in two classes of startups, two times a year to drive innovation.

“They stay for four to six months,” said Miller, who also spoke at FutureM.  The applicant class now numbers around 70 for the sessions, he said. The applications give Constant Contact tremendous exposure to “what’s happening in the small business space.” About 10% of the company’s employee base now works with startups during their allotted 10% “free time.”

Accenture: Large companies want to hook up with startups to drive innovation

PepsiCo and Constant Contact are hardly alone in their cultivation of startups to drive innovation — and identify potential threats to their core businesses.

A new report from Accenture, “Harnessing the Power of Entrepreneurs to Open Innovation,” found that most large companies feel they have a lot to learn from entrepreneurs. The study, based on interviews with more than 1000 entrepreneurs and 1000  large companies from the G20 countries, showed the following:

  • 82% of large companies say they can learn from startups/entrepreneurs about how to become a digital business.
  • 50% of large companies feel they need to work with entrepreneurs to be sufficiently innovative.
  • Large companies expect the proportion of their revenues generated by collaboration with entrepreneurs to more than double over the next five years, from an average of 9% today to 20%.
  • 78% of large companies say that working with entrepreneurs is important or critical to their own growth and to drive innovation.

The feeling is not mutual

Here’s what’s interesting: Entrepreneurs don’t feel the same about their bigger brethren. The report also found that:

  • Only 67% of entrepreneurs agree with the above sentiments.
  • Entrepreneurs are four times more likely than large companies to say their counterparts lack commitment to working together (29% versus 7%).
  • While 75% of large companies say they are entrepreneurial, 75% of entrepreneurs who previously worked at large companies left because they felt that was not the case

Accenture’s viewpoint is that the disconnect between the big guys and startups is puts about $1.5 trillion in global growth at risk ($433 billion in the United States).

We’re curious to know whether your company is working with startups to drive innovation and speed their routes to digital business.

Meantime, to learn more about the challenges facing innovation leaders in their quests to institutionalize and drive innovation, go to my SearchCIO report on the FutureM panel, “Enterprise innovation teams struggle to show what makes them special.”

Innovation panel at FutureM (from left to right): Adam Cutler, IBM; Andy Miller, Constant Contact; Richard Smyers, Fidelity Investments; Perry Witmer, PepsiCo.

Email Linda Tucci, executive editor, or find her on Twitter @ltucci.