Consultants and Contractors Don’t Work
It’s true that 80% of CIOs know they need to innovate with AI. The two most common tracks for doing so are to hire either strategic consultancy firms or contractors to execute internal initiatives (perhaps on the recommendation of the aforementioned consultants).
Neither of these paths solves the key problems in enterprise innovation that we have seen in our experience.
We believe that the startup studio model is best positioned to address the problems in enterprise innovation. We do this by bringing a group of experienced entrepreneurs and domain experts together to collaborate and get to solutions faster.
Challenges to Enterprise Innovation
Ideation
The internal team is likely to have great ideas for products, but little experience in developing businesses around these products. Will they be able to develop strategies and answer key questions such as: What are the threats and opportunities? Are there customers other than your employer? Is there a long term market for this product? How do you market it?
Budgeting
Let’s not confuse this with budget. The actual cost of the project is beside the point, the very act of estimating the cost causes delays, arguments, and fatigues the entire effort. Note that a dollar allocated here cannot be allocated there, and folks are anxious to keep their here from there.
Internal Buy-Off
This is the number one killer. A personal example goes like: Marketing’s hair is on fire but they need data to test an idea. The database manager is reluctant to allow access and has reasons that resonate with his manager. Despite pressure from the CIO, IT manages to bring in Finance and Legal who kill the whole endeavor.
Startup Studios Solve These Problems
Ideation
Genuine innovation comes from motivated individuals. A key benefit of working with studios is having access to active entrepreneurs. Entrepreneurs are a class of people used to thinking on their feet, accustomed to risk and uncertainty. They are motivated by BIG ideas.
Think of it: the major reason to take a job at a large corporation is the security of having the corporation surrounding you. Though this may take you to extraordinary heights, it does encourage you to think safety first. Entrepreneurs reject that notion and are willing to risk their careers in pursuit of a disruptive idea.
Budgeting
Most studios take a fee and equity for their innovation. This is simple and easy to negotiate. Their equity stake means they are cost-conscious and think revenue first. In fact, constraints like budget and time are known catalysts to invention — if you have the right talent as the medium.
Internal Buy-Off
To be frank, you will never get IT, Marketing, Finance, Product and Sales aligned entirely. Some mid-manager will throw a yellow flag and the whole thing will grind to a halt. This is neither a surprise nor an obstacle to studios. Helmed by executives and entrepreneurs, if they can’t build a bridge they take water from the river.
And They Solve More
Price
It’s amazing how much a start-up can get done with $500,000, which for most new ventures is considered a seed investment. With this funding an enterprise startup should be able to land its first major customer. The next step is Series A for a raise of $3-$5M. For many large corporations, figures like this are rounding errors. With an enterprise/studio partnership, we get to side-step the “first customer” hurdle, as the enterprise is building something they want to actively use.
Expertise
Studios build communities around them because it is crucial to their business model. At the drop of a hat, a studio might need an academic AI thought leader, a social media guru, or a CFO with the right network of investors. These characters are eager to participate in the creation of new ventures and can be leveraged for any number of challenges, yet their entrepreneurial and risk-taking nature means they are archetypes unlikely to be found in the enterprise.
Velocity
The very composition and infrastructure of the enterprise mean that new initiatives will take longer than a typical startup venture. This is one of those culture wars. It’s true, entrepreneurs move considerably faster than the mother ship. Many intrapreneurs find this slowness infuriating, but studios can act as a membrane between two fluids of differential velocity and manage it well.
Studios are the Best Vehicle for Innovation in Complicated Spaces
Faster, cheaper, more flexible yet still capable of operating with annual goals and quarterly budget meetings, studios bring efficiency that neither consultants nor internal innovation labs can ever hope to achieve, especially given the stage-gating most studios use to validate their ideas. There are a number of enterprise-focused startup studios listed on the Global Startup Studio Network including our own Verdant AI Startup Studio. If you are tasked with pursuing innovation at your enterprise, we encourage you to explore the studio partnership model as a way to create new products and keep your enterprise competitive in a rapidly changing world. Be sure to drop us a line!
