Established Companies and Generative AI

Markets are buzzing with GenAI and greentech startups. But what about established companies? Should they be disrupting themselves? The answer isn't straightforward. 🤔

Many large firms lean towards incremental innovation. They avoid risk to protect their existing successes. But this increases the chances of getting upended by newcomers. Incumbents don't have to be trapped in this cycle. They can leverage their vast resources and capabilities to stay ahead.

From a recent HBR article, here’s how:

💡 Set up multiple partnerships - Large firms should prepare for various future scenarios by conducting numerous experiments with startups.

Example: Enel's Innovation Hub connects with over 200 startups annually. One success story is Aerones, a startup using automated tech for windturbine maintenance. Enel's proof-of-concept tests led to Aerones securing $30 million in growth capital.

🚀 Sometimes the entrepreneurial partner comes from within

Post-it Notes, PlayStation, and Gmail all started as internal projects. AWS began with Andy Jassy in 2003. By 2006, AWS became central to Amazon's success.

Commitment: Leverage Your Advantages

🔗 Shift from loose to collaborative relationships

Incumbents should help startups clear roadblocks. For example, W.L. Gore & Associates worked with Bionic Yarn to create textiles from recycled plastics. They ensured quality and developed a market strategy to support higher costs.

🌉 Build a supporting ecosystem

Atlas Copco collaborated with startups to develop remote-monitoring services. This prepared them for large-scale deployment in 2013.

🛒 Identify ready customers

Epiroc partnered with Northvolt to develop batteries for mining equipment. They identified early adopters to electrify their fleets.

🥩 Win stakeholder support

Abbott Laboratories worked with patient advocacy groups to promote Humira. This helped position Humira as the go-to treatment for rheumatoid arthritis.

Getting to Scale: Move Fast

💼 Make the CFO a direct stakeholder

Early involvement of the CFO helps balance risks and opportunities. Atlas Copco's CFO spearheaded the acquisition of the Edwards Group, ensuring a well-informed decision.

📊Pitch a conservative case to the board

Craft a moderate growth scenario to gain board approval. Atlas Copco's acquisition of the Edwards Group was based on a reliable growth outlook, satisfying the board's concerns.

Innovation isn't just about taking risks. It's about managing them wisely. To stay ahead, large firms must embrace exploration, commitment, and rapid scaling. How can established companies better manage innovation? Leave your thoughts down below or on LinkedIn.

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