By: Brian Solis
Companies once deemed “too big to fail” are increasingly exposed to failure. The threat of disruption is everywhere. Startups are taking on the Goliaths in every market. Scores of malls across the United States are in collapse. Many household brand names are losing ground or even shutting completely. Regardless of industry, businesses face digital Darwinism, the evolution of technology and markets. Disruption is just a matter of when, where and why. To compete, executives must make tough decisions but more so, they must look to new horizons for new insight and direction. Whether companies thrive or cower in the face of digital Darwinism is a choice.
The reality is that innovation is now a constant, and the net result sets the stage for disruption. Every day, startups continue to push industries and technologies forward. As they do, new trends shape and reshape markets. Companies of all sizes increasingly face a new reality where doing nothing about it or operating as usual is a surefire way to get disrupted and eventually become either irrelevant or obsolete. The answer isn’t to continue with business as usual nor is evolution achieved by simply improving business as usual through iteration. To compete for the future, businesses must now think and act like startups. Some are doing just that by opening innovation centers in tech hot spots around the world.
To compete in an era of digital Darwinism requires companies to shift perspective and broaden or even reset mindsets. More so, executives and the workforces and partner ecosystems they manage must also modernize to evolved market conditions, expectations and behaviors. One of the most promising trends in the modernization in or even reinvention of business is the rise of corporate innovation centers around the world.
In 2015, CapGemini’s Jerome Buvat and I (through my work at Altimeter, a Prophet company) set out to explore the shift from R&D centers to innovation hubs. We published our findings in one of the first detailed reports on the subject, “The Innovation Game: Why & How Businesses are Investing in Innovation Centers.” In 2017, we released the third installment of our research, “The Spread of Innovation Around the World,” and in just two short years, we are already witnessing the rapid expansion of innovation centers, the ever-shifting focus on emerging technologies, upgraded business goals and priorities and the archetypes for innovation approaches.
Defining innovation centers
Innovation centers represent enterprise investments in understanding new market dynamics, acquiring new expertise and resources, and also aligning with entrepreneurs, startups, investors, academic institutions, and related ecosystems driving new trends. Innovation centers assume many shapes, but at their core, they are comprised of special teams of intrapreneurs inhouse or moved into dedicated sites within relevant global tech hubs. They function outside of the traditional operational landscape with the goal of accelerating digital innovation, rethinking customer experience, improving operational efficiency and testing new business models.
Innovation centers are on the rise and notably so. In our first report, we documented a total of 301 bona fide corporate innovation centers around the world in July 2015. By February 2016, that number grew to 368. As of October 2016, the number of innovation centers swelled to 456.
Silicon Valley has been synonymous with innovation for over 30 years. And, it’s reign as the epicenter of innovation continues to this. Today it hosts 65 innovation centers, up from 53 in July 2015 – a 23% increase in little over a year. Despite its continued growth, Silicon Valley no longer claims sole ownership of innovation. In each report, we witness the inevitable erosion of its dominance. Between July 2015 and October 2016, its share in the world’s total innovation centers has fallen from 18% to 14%. This is a result of increasing competition from a diverse set of hubs across the world. In particular, the top three cities in Asia – Singapore, Bangalore and Tokyo – together added more innovation centers (9) between March and October 2016 than the Silicon Valley (7).
Additionally, Asia has, for the first time, overtaken Europe in its number of innovation centers built and operated, with the region now host to nearly a third (29%) of all such centers globally. So strong is Asia’s growth that it could soon overtake the US as the biggest hub of innovation centers, if it continues to grow at the same rate.
Why so much movement?
In Asia artificial intelligence (AI) is planting roots.
The availability of talent is a key driver for growth. For example, of the 14 new Fintech innovation centers established globally between March and October 2016, 5 of these were in Asia as organizations look to tap into the region’s talent pool to meet changing customer needs.
We learned over the years in our research, that each location tends to cultivate specialized expertise and technology development. In Asia, artificial intelligence (AI) is planting roots. Since our last study, four out of the nine AI focused innovation centers in the March-October 2016 period were opened in Asia. In the region, universities, such as Nanyang Technological University in Singapore, and Singapore’s Agency for Science, Technology and Research (A*STAR) are promoting AI-focused programs to develop innovative products and build AI talent pool.
Earlier this year, China also announced its plans to boost the growth of AI innovation in a bid to be “in line with the global AI technology and industry by 2018”. According to a recent report released by the US government, China appears to be overtaking the US in terms of publishing research in a fast-growing subfield of artificial intelligence known as “deep learning”
Asian companies are not the only companies investing in Asian innovation centers. In our previous update, 41% of innovation centers opened or announced in Asia were founded by Asian companies. In the current research, this drops to 29%. We also see a significant increase in the number of American companies investing in Asian innovation centers, from 32% previously to 53% now.
Innovation shifts with technology tides
Over time, the focus of innovation centers shifts to align with technology trends. Keeping a keen eye on these dynamics helps companies identify potential locations for their innovation centers and better leverage innovation ecosystems. Different hubs around the world tend to unify specific expertise and technology trends, which align uniquely with outside industries. This analysis serves as a barometer to firms that want to identify new growth opportunities, extend existing brands and leverage digital technologies to transform customer experiences, operations and business models.
From fintech to big data to IoT to AI to AR/VR and everything in between, companies are leaning on innovation centers to stay plugged in to the technologies that will help keep relevant. In our latest report, we found that big data and analytics topped the list at 28% with IoT and Cloud following at 26% and 23% respectively. In order of priority, other technologies were also among the top areas of investment including robotics, fintech, biotech/digital healthcare, AI and cybersecurity.
With Asia’s dominance in this edition of our research, it’s clear that innovation is becoming globally democratized. Furthermore, by tracking associated technology trends, the focus on AI suggests that the future of corporate innovation will realize new business models, products and processes emanating out of Asia with global effects.
Innovation centers must be a part of, not ‘the’ innovation strategy
In the hurry to launch innovation centers, many treat the innovation job as ‘done’ once they’ve launched an innovation center. However, the reality is more complex. In particular, while innovation centers are an influential node in an organization’s innovation strategy, they cannot be the sum of the innovation strategy. They are just a part of it.
Part of the challenge companies face in doing so is that it’s very easy, almost natural, to apply legacy thinking, processes, and models toward innovation. This anchors new possibilities to yesterday’s standards, which then limits or inhibits the return on innovation. But that isn’t stopping corporate innovation centers from rising in technology epicenters all around the world.
We see time and time again that innovation centers are corporate attempts at thwarting digital disruption. And companies seeking to out- maneuver disruption usually become the disruptors in their space.
Please read the report below or download at Slideshare: The Spread of Innovation around the World: How Asia Now Rivals Silicon Valley as New Home to Global Innovation Centers from Capgemini.
Please also download our previous research on innovation centers from Slideshare.
Part 1: The Innovation Game: Why and How Businesses are Investing in Innovation Centers
Part 2: Digital Dynasties: The Rise of Innovation Empires Worldwide
About the author
Brian Solis is a one of the world’s leading digital analysts and futurists. He’s the author of seven best-selling books including X: The Experience When Business Meets Design, What’s the Future of Business and The End of Business as Usual. As a digital analyst, Solis studies the impact of disruptive technologies on business. As a digital anthropologist, he studies its impact on society and culture. Among the many topics he tracks, Solis actively publishes research on digital transformation, experience design, connected consumerism, enterprise and startup innovation, the evolution of brand, and the future of work. With an audience of over 500,000 people online, his work makes him a sought-after advisor to leading brands, celebrities and startups.