Big Companies Can Unleash Innovation, Rather than Shackle It

In today's world, start-ups aren't the only ones who can innovate. As I discussed in my post How Big Companies Can Save Innovation, large companies are now better positioned to innovate than ever before. Here's why: the innovation revolution spurred by venture capitalists decades ago has created the conditions in which scale allows big companies to shift from shackling innovation to unleashing it.

There are three trends are behind this shift:

  1. The ease of innovation and its decreasing cost mean that start-ups now face the same short-term pressures that have constrained innovation at large companies.
  2. Taking a page from start-up strategy, large companies are embracing open innovation and integrating entrepreneurial behaviors with their existing capabilities.
  3. Innovation increasingly involves creating business models that tap big companies' unique strengths.

In this context, "corporate catalysts" — entrepreneurially-minded people inside corporates — are working with corporations' resources, scale, and growing agility to develop innovative solutions to global challenges.

Consider Medtronic's innovative effort Healthy Heart for All. Medtronic is as far from a start-up as one can imagine: Founded in the late 1940s, it is today the world's largest stand-alone medical device manufacturer, with $16 billion in revenue, and is best known for its implantable pacemakers and defibrillators. The Healthy Heart program seeks to bring pacemaker technology to hundreds of thousands of Indians who desperately need it.

In late 2010 I visited The Mission Hospital (TMH) in Durgapur, a modest town by Indian standards (population about 1 million), nestled in India's northeast corner, near Bangladesh. During my visit I saw a pilot of Medtronic's innovative business model in action. The company had drawn on pioneering Indian health care models, such as Aravind Eye Care System's affordable cataract care, to help TMH design new ways to serve low-income patients.

Heart disease is prevalent in India but diagnosis is not, so Medtronic created diagnostic camps to identify potential patients. I saw one camp in a rural village where technicians used low-cost electrocardiogram machines to screen dozens of people in an afternoon and wirelessly send their ECGs to be read by doctors hundreds of miles away. Insurance is still rare in India, so Medtronic had to make its pacemaker more affordable. It worked with a local partner to create India's first financing plan for medical devices.

No new technology was involved here — and that's the point. Medtronic used business model innovation to enter markets formerly out of its reach. It follows in the footsteps of Vodafone (M-Pesa mobile payment service in Africa), Dow Corning (Xiameter online channel), and Hilti (tool fleet management services) as a market leader using a new model to power growth.

Healthy Heart's first implant occurred in September 2010. Over the subsequent 18 months, pilot programs in a handful of hospitals screened thousands of patients who previously would not have been diagnosed, let alone treated, and provided vital in-market learning. Though the total number of implants is still relatively small — approximately 50 to date — the pilots have demonstrated the model's promise. On the basis of this early success, the company plans to scale up the program across India and then in other emerging markets. The effort also positions Medtronic to dramatically expand in those markets as it develops new technologies that lower costs. (CEO Omar Ishrak has announced a goal of radically reducing the cost of a simple pacemaker.)

Think about the challenges that would face a start-up seeking to compete with Medtronic. It could mimic pieces of Medtronic's approach, such as the diagnostic camps and a financing plan. But it would have to either build a new pacemaker and seek regulatory approval (which would take years, if not decades) or partner with an established pacemaker manufacturer. It would struggle to get meetings with local doctors with whom Medtronic already has deep relationships. And, of course, it would have to learn how to operate in India, a notoriously complex market. Medtronic simply has capabilities, experience, relationships, expertise, and resources that entrepreneurs don't.

Instead, Medtronic had an internal "corporate catalyst" — someone who marshaled resources both inside and outside the company and built organizational support for the disruptive growth strategy. This was Keyne Monson.

In 2008 the head of the company's international arm asked Monson to devise a business model that would increase its presence in India. Monson launched the effort without a single direct report. He found advocates within Medtronic's Indian organization and worked with external enablers including David Green, of Ashoka, to develop a case for broader investment. He drew in outside partners early in the process, and he engaged leadership by highlighting stories about individual patients whom Medtronic could help. (Mission-driven by nature, Monson was inspired by his work in India to set up a separate nonprofit company called Elevita, through which developed-economy consumers can buy goods made by developing-country artisans.) Monson's early efforts earned him the support of regional leaders — notably Milind Shah, Medtronic's India country head, and Shamik Dasgupta, the regional head of Medtronic's pacemaker and defibrillator business, both of whom played critical roles in designing, staffing, and executing the pilot and expanding the program.

Medtronic mixed the entrepreneurial approach of a VC-backed start-up with the unique capabilities once housed in corporate labs. Its story illustrates how big companies are powerfully and uniquely suited to tackling large-scale social problems such as hunger, health care, sustainability, and education. These aren't stand-alone corporate social responsibility efforts — they are strategic initiatives to create profitable businesses that improve the world. It's easy to bemoan the stifling bureaucracies that characterize some large companies. But giants like Medtronic have hard-to-replicate advantages over start-ups.

This blog post was excerpted from the Scott Anthony's article "The New Corporate Garage" in the September issue of the magazine.

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