In Asia, corporations have a strong control of the market across many industries. One example is of the banking industry. Financial services are heavily regulated and any systematic change will inevitably involve major banks. Start- ups that aim to introduce a new technology and change how financial services are done will eventually run into the major banks. It is in every party’s interests to have major banks collaborate with startups. Similar stories can be found in various other industries. Corporations have the ability to enable certain systematic changes that facilitate the adoption of new technological solutions.
“It is good to have the big boys on your side” - a fintech startup founder
A lot of people expect the government to create policies and programs to support innovation in their country. Pushing selected industries with state endorsed programs has been a significant driver of economic growth in many Asian countries for decades, thus the government should play a big role in supporting innovation as well. China has done this with a great deal of success, turning them into a global leader in innovation. Other Asian countries are trying to emulate this, but the progress and results are mixed.
In countries where the government is not effectively fostering innovation at the rate needed for the market, there is a case for corporations to lead the way in driving the innovation ecosystem. A mature innovation ecosystem consists of
Corporations are in a unique position to lead the way in improving the ecosystem because they have the resources necessary to provide similar support in each part of the innovation ecosystem as well as the business rationale to do so. On the other hand, in countries where the government does play a dominant role in driving innovation, corporations can also align themselves with the policies to systematically accelerate innovation. The government relies on the private sector and state-owned enterprises to execute systematic changes. In both cases, corporations play a vital role in shaping the innovation ecosystem.
Something to be wary of about corporate innovation in Asia stems from a cultural element. In general, corporations are known to be slow and encounter a lot of decision paralysis. In dealing with innovation, where success is far from guaranteed and the early indicators for success are barely existent, there must be more of an appetite for calculated risks. Conservative culture hampers risk-taking and prolongs decision paralysis.
Corporations should not wait to see success formulas before acting because there are none. There is no guarantee for success, but the guarantee for failure is not making changes. Corporations are encouraged to form a bias for getting experiments to happen, fail fast, and accept self-disruption.
In traditional decision-making processes, expected results are at the core. In innovation, expected results are often wildly inaccurate. Instead, it is more practical to measure the ability to take actions and the market potential to evaluate opportunities and make calculated decisions.
Corporate Innovation Is Already Integral to the Innovation Ecosystem
This new wave of corporate innovation is only in its early stages and has not substantially yielded concrete results like revenue growth yet. However, there is plenty of measurable signals we discovered that strongly suggests the surge in corporate innovation.
A clear and ubiquitous metric in business and economics is the amount of investment. In the corporate innovation context, we can observe the quantity of investment from Corporate Venture Capital (CVC) funds. There is a strong growth trend in global CVC activity and that growth is also continuously shifting to Asia. According to CBInsights, CVC funding increased by 47% and the number of deals increased by 32% in 2018 compared to 2017. For context, Pitchbook reported that 23.1% of all venture deals in the world in 2018 were led or completely backed by CVC’s.