by Carl Bohlin, Sr. Member Sucess Manager
Council Members gathered in Amsterdam for 1.5 days to discuss innovation at our first European Summit of 2017. The group started the experience with excursions to ShareNL and Startupbootcamp prior to our Member Dinner.
Amsterdam is at the forefront of the sharing economy and environmentalism efforts. Our excursion started at ShareNL where they discussed assisting through education, and start-up guidance. Members also participated in an interactive discussion with start-ups to understand more the opportunities brands could have with them. Council members challenged startups to combine and collaborate across sharing platforms to enhance the user experience and value. We also discussed how consumer adoption of the sharing lifestyle and respective platforms was more of a priority to startups than regulations.
Startupbootcamp provides guidance, structure and a formalized process for innovation. Bootcamps are designed for start-up’s and corporate training programs. Start-ups engaged in the program provide equity to Startupbootcamp but they are also provided a stipend for living expenses for the three month program to ensure they can focus on completion. Survival rates are ~80% for the start-ups who have completed the program. Regardless of the attendee origin, Startupbootcamp strives to push attendees for the “why” and to maintain a customer centric view at all times. For the corporate program they include a mandatory 1 day session for C level executives to ensure greater success when employees finish the program and are integrated back into corporate.
Philips hosted Catalyst Companies members for the full day of interactive sessions. The sessions included two thought leaders, Rik Vera, CEO of Nexxworks and Patrick van der Pijl, CEO Business Models Inc. We also had deep dive presentations from fellow members at Philips, Achmea, Swisscom, and Leroy Merlin which showcased their Innovation efforts, and allowed discussions for best practice.
Through the day common elements or trends emerged from the leaders across all presentations/discussions including: Customer Centricity, Data, Strategy & Communication and Culture.
This may seem obvious but know who the actual customer is and the “why”. Get outside and observe, ask and learn – it’s really fun too! Ensure the product, innovation or corporate strategy aligns to the end customer. Gain insights by connecting the dots of your internal and external parties, possibly creating something new. One example of really knowing the end customer provided a potential 60M in savings. We also discussed the customer voice/actions being one of the best sales tools.
Data and management continues to be a significant trend. For monitoring, the right or agreed metrics being the critical component. One member shared their digital footprint for social monitoring and how they could communicate information back to product owners in near real time. Autonomous, Artificial Intelligence, Chatbots and other technologies will only increase data to be reviewed – choose metrics wisely and be sure agreement exists on measurements.
Strategy & Communication
Nimble strategy cannot be overlooked. Innovation leaders discussed how some are gaining traction within the board level to increase awareness and improve communication. Some have annual meetings to revive mission and vision to see where they are . With customer and technology advancements strategy has to be fluid and changing – one presenter shared time spent may be 70% today, 20% tomorrow and 10% longer term. Metrics also need to be highly communicated and agreed in advance so that Innovation is not bound to KPI’s meant for traditional business functions. Failure should also be open and okay to learn fast, adapt and change – doing something and learning is better than nothing.
We all know the important role culture plays within any organization. We have observed in our research the frozen middle layer and executive acceptance of Innovation. Members at this meeting shared insights to how they are dealing with change – forcing C level participation at bootcamps, open communication on metrics, involving HR through all levels of the organization to require change and unlearn old methods, pushing back on ROI or unknown goals during initiatives. Open the doors to outside your industry (Value of the Council). Trust – in the team innovating to do the right thing. One member shared 8B in new revenue was from products not in the market 8 yrs ago. Visual representation was also discussed as a tool to assist with a new project or initiative and gather support.
It’s great to see and hear the member challenges and opportunities. To me, it’s especially gratifying when I hear afterwards how members return to their organizations with concrete steps to improving innovation learned from our meetings. Such a fantastic group!
In our research on corporate innovation, we found the most advanced companies allow competitors to innovate in their own buildings.
Johnson & Johnson Innovation, JLABS enables outside innovation inside the company. As a result, they’re improving the entire industry, including efforts of competitors, in order to positively impact society as a whole.
At its nine sites within North America, JLABS gives startups the tools they need to level the playing field against large, corporate R&D teams. Half of each JLABS space is a common area with state-of-the-art equipment for use, while the other half is comprised of individual labs that help companies get started. JLABS is all new space, not old storage or “leftover” labs, and the facilities are separate and distinct from Johnson & Johnson corporate with no Janssen scientists working there.
The Catalyst Companies team was privileged to tour one of the JLABS sites earlier this year, bearing witness to how Johnson & Johnson Innovation is breaking the mold in a big way. During our tour, dinner, and discussion at JLABS in South San Francisco , we found that the culture as a whole is diametrically opposite normal business behavior by inviting anyone into their space in order to innovate and advance specific medicines, medical devices and consumer & digital health solutions.
The concept of JLABS sprouted from a need when JLABS leader Melinda Richter suffered a near fatal medical emergency while traveling internationally, see her TED talk. She made a promise that, if she survived, she would do something to enhance medical efficiency and bring solutions to patients faster and better. From there, JLABS was born and sold to executives. It is now thriving under Richter’s leadership.
JLABS provides their space and tools onsite with no vested interest. Startups and innovators onsite have complete privacy to work without any sharing of IP. Security cameras are not even allowed to be directed where work is being conducted, and participants are encouraged to clean whiteboards after using. If it is presented with an idea of potential, Johnson & Johnson Innovation often pursues deeper partnerships that allow it to shape the ultimate innovation or product at a later date.
JLABS measures its success based on internal financial metrics, quality of innovators coming in, quality of science and technology being developed, development milestones reached, the number of people using its space, and education programs run.
Catalyst Companies identifies the JLABS approach to innovation as an advanced program, as it not only benefits the company but also the entire industry. “Common tides raise all boats” in innovation, and Johnson & Johnson Innovation understands that their scientists will only be pushed further toward greatness if up against the best minds, with adequate resources, in the industry.
Our recent research on Corporate Innovation Programs (download the high level version) found that companies are attempting to act more nimble and agile by deploying a combination of these innovation programs. Frequency varies, and budgets are skewed around Startup Acquisition, being the bulk of the investment. Corporations are taking pages from startups, to emulate the culture of a fast-moving smaller company.
This list is structured in a logical way: The items listed on the top are happening inside of the company, while the items towards the bottom happen outside of the company. This is not a list that you should automatically approach as a checklist as the order of deployment will vary. For example, some companies have corporate development teams only, that solely exist to acquire startups –rarely to derive innovation from internal teams.
- Dedicated Innovation Team
Corporations often start by staffing an innovation team within the company, which is comprised
￼of both full- and part-time employees dedicated to developing strategy, managing, and activating innovation programs. These leaders are experts at internal communications and are proven change agents. Centralized teams deploy on behalf of the business units, and often act as a governing body when deployed on a global/cross-functional scale to manage multiple innovation team strategies.
- Innovation Center of Excellence
Innovation Centers of Excellence (CoE) enable innovation across multiple departments within the
￼company, and members serving on the CoE are also responsible for senior leadership within various corporate groups. Common departments included in the CoE are marketing/digital, PR, legal, HR, IT, and product. The goal of the CoE is to standardize and scale innovation across the company, providing guidance to efforts that do not yet have dedicated teams or leadership.
- Intrapreneur Program
Rather than rely solely on external programs, internal employees — dubbed “intrapreneurs” — are
￼given a platform and resources to innovate. These programs invest in employees’ ideas and passions to unlock everything from customer experience improvements to product enhancements and full-blown internal startups that are then launched from within the company.
- Open Innovation (Hackathon or Internal Incubator)
Hosted inside a corporate office, large corporations invite startups to embed at their physical locations
￼and “incubate” them with funding, corporate support, and other perks. This can also take the form of overnight hackathons, demo days, and online open-innovation programs/contests that request — and often reward — ideas from the crowd.
- Innovation Excursions
Frequently, inspiration comes from outside, not within. Corporate leaders tour innovative
￼organizations, companies, and regions (in Silicon Valley and other relevant tech hubs) to discover trends in various industries, learn from speakers, meet partners, and be inspired as they immerse themselves in innovation culture.
- Innovation Outpost
An innovation outpost is a dedicated physical office, in Silicon Valley or wherever innovation
￼happens in a corporation’s key market(s), staffed with professionals whose job is to sense current trends and disruptive technologies, connect with local startups, and integrate programs back into corporate headquarters. Some innovation outposts are host to partners, events, and startups, thereby overlapping into internal accelerator territory. An innovation outpost is typically managed by employees, unlike an external accelerator, which is run by a third party.
- Technology Education / University Partnership
Through an educational partnership, corporations can tap into new university graduates, early-stage
￼projects and companies, and the network of an established educational institution. In addition to traditional universities, there are new private versions opening up that are dedicated solely to technology training, like Galvanize and General Assembly.
- Accelerator Partnership
Corporations partner with third-party accelerators to provide sponsorship and/or funding in
￼exchange for relationships with startups and integration opportunities. Corporate innovation professionals often embed themselves in accelerator offices, fostering relationships with local startups. These external accelerators are run entirely by vendors (investors, advisors, etc.), unlike innovation outposts, which are managed by employees.
- Startup Investment
Corporations place bets among the startup ecosystem, with both small investments for early-stage
￼startups and larger amounts of corporate funding that yield market data, create opportunities for follow-on investments, and block competitors. Intel Capital is a recognized leader in corporate investing, raising $1.28 billion in funds and making 1,094 investments in 769 tech companies to date.
- Startup Acquisition
Rather than build innovation from the inside, corporations acquire successful startups and integrate. While expensive, the startup is often already successful, and the acquisition can help the startup
scale further. According to recent studies cited by Global Corporate Venturing, only 5% of corporate venture capital (CVC)-financed startups are acquired by the backing parent corporations.3 A new study from MassChallenge also reveals that 23% of corporations see working with startups as “mission critical,” and 67% say they want to work with earlier-stage startups.
Which program is best for every company? We didn’t find a silver bullet for all, as it varies on the innovation goals and culture. For example, some cultures are open to employee feedback, and thus an intranpreneurship program makes more sense. However, in some cases, working with outside companies is easiest, so partnering through accelerators or investing in startups is more sensible. Want to know more? Download the report.
Though there are many ways to approach innovation, the majority of companies focus on building innovation teams or “Innovation centers of excellence,” as well as fostering internal education, before moving toward external deployments.
In Catalyst Companies’ recent report, The Corporate Innovation Imperative (download here), we identify 10 types of innovation programs corporations pursue when looking to evolve their business models, customer experiences, operations, or products and services. More on the 10 programs can be found here. We discovered that corporations often excel in one program initially, then add programs to their innovation portfolio as they mature and are able to justify related expenditures.
And, where do they begin? With their own teams. Through our survey, we found that dedicated innovation teams (79%), innovation “centers of excellence” (61%), and technology education / university partnerships (54%) are the most commonly deployed corporate innovation programs (see figure below). This shows that companies are first focusing internally on building the right teams, getting governance and processes in place, and educating current and new employees on emerging technologies before spending time and resources on rolling out external programs or investing in the startup scene.
Frequency of Corporate Innovation Programs
One way corporations are focusing on building strong teams is by involving cross-departmental constituents in their efforts. This smooths the path to internal acceptance and adoption as advocates are in every corner of the organization.
Much of the success of innovation teams depends on internal alignment among tangential departments, like legal and marketing, to move from ideation through implementation. Verizon recommends bringing new ideas and developments to lawyers early, who can help obtain and protect intellectual property rights in a fast-changing global legal landscape. Innovation teams should also have their own marketing and PR resources, as Mastercard Labs does, to socialize ideas internally and externally, when appropriate, pick up sponsorship, build momentum, and identify pilot customers. Mastercard Labs also produces its own 60-second “pitch” videos for each idea that makes it to prototype, as an easy way to promote viral sharing within the company.
How is your company approaching corporate innovation? Are you looking to build teams and foster education before looking outward to bolster innovation?
by Carl Bohlin, Member Success Manager
Quite often we hear of organizations looking to improve the industry in which they compete, or to benefit society, through innovation – a common buzzword at times. In actuality what we have found is that innovation can mean real change which is unrealistic to the existing culture due to quarterly earnings or the board seeking immediate or foreseeable returns. Further innovation leaders are also challenged with ROI for potentially disrupting the business (revenue) as it exists today.
Johnson & Johnson Innovation Labs (JLABS) is breaking the mold in a big way. Last month, we were lucky enough to have our Crowd Company Innovation leaders hosted for a tour, dinner and discussion at JLABS. What we found in the lab, and J&J as a whole, is a culture that is diametrically opposite normal business behavior, and benefiting as a result. How so? Invite anyone (possibly future competitors) into a J&J space and provide start-ups full access to advanced medical devices & tools, peers, workspace and structure to advance specific medicines. More importantly J&J is providing these tools with no vested interest.
How can this be? J&J doesn’t just have a mission statement, they live and breathe through their Credo which I encourage everyone to read. The Credo starts with responsibility to medical professionals, patients, families and communities. The final paragraph mentions stockholders and how they will benefit when all items described are handled properly.
JLABS – like any innovation – was created through a need. Melinda Richter suffered a near fatal medical emergency while traveling internationally. She made a promise that if she survived she would do something to enhance medical efficiency and bring solutions to patients faster and better than ever before. The JLABS concept was created and sold to executives. JLABS not only thrives but is part of the discussion of every company meeting.
- Start-ups access to working & lab space. New space that is designed to foster innovation, not old storage or leftover. The JLABS facility is separate and distinct with no J&J scientists working there.
- The most up to date technology and tools provided by partners. Tools J&J scientists may not have access to, and are often asking for.
- Complete privacy to work without any sharing of IP. Security cameras are not even allowed to be directed where work is being conducted and participants are encouraged to clean whiteboards after using
- J&J assistance with advice from funding, legal, production and more
In return, J&J has built lasting relationships and a fulfillment of the credo they live by. There are no strings attached for the researchers and the solutions they create. The end result could be partnerships, possible acquisition, private product launches, series funding or at the very least betterment of society and/or the people J&J serves. Living up to the credo!
Are you ready to open doors and assist disruption of your industry?
By Jeremiah Owyang, with co-contributor Ryan Brinks
Corporations are approaching innovation processes and methods in different manners. Here’s a sample of common methods that we’ve commonly heard in our interviews from our recent report on the Corporate Innovation Imperative (download). Feel free to leave comments below with a design process or method that you feel if valuable, and explain why.
In summary, here’s the most commonly discussed and adopted versions, both in a high-level table below, then summaries below with a diagram
|Waterfall||1956 by Herbert D. Benington||Linear||Well-Defined projects||Teams work independently on each stage|
|Lean Startup||2008 by Eric Ries||Circular||Unproven Markets||Low investment to test the market|
|Design Thinking||1969 by Herbert Simon||Circular||Creative, unconventional solutions||Forces exploration of ideas beyond the familiar|
|Agile||2001 by the writers of the Agile Manifesto||Circular||Volatile projects||Can quickly and easily adapt to project changes|
|Design Sprints||2010 by Jake Knapp||Conceptual||Problem-solving||Produces a tested prototype in just one week|
|Rapid Prototyping||1981 by Hideo Kodama||Back-and-forth||Manufactured products||Direct digital-design-to-prototype approach|
Known for a traditional method, it’s best suited to products for which the customer’s needs and expectations are well defined, the waterfall design methodology flows sequentially through six stages of development, completing one milestone before reaching the next. Waterfall design begins by understanding the context surrounding the problem to be solved and forming boundaries within which the solution must exist. Next comes the theoretical design of the product itself, followed by prototyping and testing. The fifth stage is packaging and delivery, and the final consideration is ongoing maintenance and customer service. “Even though there are newer and sexier development processes available, most projects are still probably using some version of this approach to deliver their projects,” TechRepublic stated.
Example: Acme project leaders sit down to interview a corporate client and agree on requirements for the project. They then instruct the design team to produce plans, which are prototyped and tested. From there, designs are tweaked, the prototype refined, and more testing conducted until the product is launched. Post-deployment, customer service keeps tabs on issues and ongoing maintenance.
Rather than presume to know what customers need and want, the lean startup design methodology helps innovators focus on a disciplined management process that transforms an idea into a product by circling around and around three core principles: build, measure, and learn. This process begins by solving the problem with a basic, unrefined minimum viable product (MVP). The development team can then test the MVP internally and externally with a focused group of target customers. The feedback and learning then feed back into a new round of refinements, tests, and feedback. Soon the product is spiraling along an ever-rising and broadening helix that exposes it to better technology and more customers. “By the time that product is ready to be distributed widely, it will already have established customers,” TheLeanStartup.com states. “It will have solved real problems and offer detailed specifications for what needs to be built.”
Example: As soon as a product idea is formulated, Acme’s build team puts together a rough working MVP and passes it along for testing and exposure to a focus group of customers. Based on tests and feedback about the potential for the MVP, the build team reworks or refines the MVP and presents it for another round of testing and customer feedback. Eventually, early versions of the product gain momentum with beta testers, and their feedback defines the direction of future enhancements.
The design thinking methodology encourages exploration of unconventional solutions by forcing innovators to go beyond their instincts and experience. Design thinking starts with the challenge of defining not just any problem but the right problem, and that requires developers to leave the comfort of stereotypes and theories to confront the realities of their customers’ situations and habits. It also involves intense questioning of every perspective. To then solve the right problem, a diverse team must be disciplined enough to push past the solutions that come easily and propose many other, often more creative, possibilities. From there, the team experiments freely with the most promising ideas until a winner emerges that can ultimately be prototyped and tested. “Design thinking,” according to Fast Company, “describes a repeatable process employing unique and creative techniques which yield guaranteed results — usually results that exceed initial expectations. Extraordinary results that leapfrog the expected.”
Though more ambiguous than other methodologies, Agile represents any methodology that’s focused on creating products in a way that quickly adapts to ever-changing needs, demands, ideas, and technologies. At the core of Agile is a set of four guiding values and 12 principles. Being Agile means prioritizing individuals and interactions over processes and tools, working software over comprehensive documentation, customer collaboration over contract negotiation, and responding to change over following a plan. This is typically accomplished by breaking projects into small pieces and conducting short-term iterations that move products along one goal at a time. Between iterations, teams have the opportunity to act on feedback, re-prioritize goals, etc.
Design sprints are five-day shortcuts to solving big problems or tapping new markets through high-level idea prototyping. Developed by the minds behind Google Ventures, “the sprint gives you a superpower: You can fast-forward into the future to see your finished product and customer reactions before making any expensive commitments.” Google Ventures outlines the design sprint process by day: “On Monday, you’ll map out the problem and pick an important place to focus. On Tuesday, you’ll sketch competing solutions on paper. On Wednesday, you’ll make difficult decisions and turn your ideas into a testable hypothesis. On Thursday, you’ll hammer out a high-fidelity prototype. And on Friday, you’ll test it with real live humans.”
With the rise of 3D printing has come the emergence of rapid prototyping, which transforms digital CAD designs directly into functional prototypes or concept models. The rapid prototyping process accelerates testing, cuts out wasted time and resources, and leads to earlier detection of important product flaws or issues. It can also allow for wider experimentation of different manufacturing materials, including photopolymers, thermoplastics, metals and composites. Rapid prototyping can even engineer the tooling or molds needed for large-scale production.
Summary: Choose a Design Method that suits your Need.
What’s most interesting is that very advanced companies like WL Gore train and educate all their employees on a common innovation framework (in this case, Lean Startup method) and encourage all teams to approach, measure, and even report up on this method. I personally care less about which method you choose, as long as it’s the right one for the business and encourages a culture of innovation beyond just pockets of labs. Lastly, we found that many agencies, consulting firms and innovation boutique companies have their own permutations of the following methods, which they rebrand and package up for their clients. Here’s a sample of a few processes that we’ve observed, feel free to leave a comment with additional versions, below.
Photo credit: pexels
Welcome, this industry newsletter shares key market changes, in a twice-monthly publication, curated by Jeremiah Owyang, Founder of Catalyst Companies™, you can subscribe to the email newsletter on the footer of the homepage.
The Secrets to Defending Against Disruption
What is it about established businesses that fosters continuous innovation and helps them defend against the constant barrage of technological disruption? That’s what Catalyst Companies Founder Jeremiah Owyang investigated, and what he found to be the biggest obstacles to innovation, the best ways to restructure for innovation, and the key metrics with which to measure success are all laid out in his newest report, “The Corporate Innovation Imperative: How Large Corporations Avoid Disruption by Strengthening Their Ecosystem.” Read more in the FIR Podcast Network interview here.
Adobe Redesigns Creativity for the Cloud
From revolutionary font technology to visionary photo software, innovative document formats and much more, Adobe has redesigned the future of creativity and productivity over the decades. And fresh off its “tech-industry-first” software-as-a-service innovations, the multinational firm that Fast Company ranked No. 35 among the World’s Most Innovative Companies this year is aiming to further redesign cloud-based intelligence with new innovations in AI and virtual reality. Read more about Adobe’s Fast Company accolade here.
Drones Are Taking Over the Tech Conversation
The technological development of drones is taking off even as rules and regulations scramble to catch up, and regardless of what shape and size they come in, these drones are headed straight for the retail and logistics industry. When drones show up at your door with food, gadgets, or goods, they’ll change the face of delivery forever. Check out Catalyst Companies’ compilation of 10 delivery drones and bots currently leading the way toward the Autonomous World of the future. It’s on the Catalyst Companies blog here.
We want to hear from you! What are the market impacts of this week’s news stories? Email Catalyst Companies™ Founder Jeremiah Owyang directly to share your thoughts.
Corporate innovation programs are primarily measuring revenue to show success –but that’s a risk, it a small incubated program is being compared to the primary billion dollar business lines. ROI is a fallacy metric of corporate innovation. Basing program success on ROI too early, rather than dedicated innovation KPIs, will not yield an accurate representation of progress.
In our recent Catalyst Companies research, “The Corporate Innovation Imperative” (available for download here), we found there is a startling chasm between what organizations are measuring around innovation and which KPIs truly indicate program success from infancy through maturity. Corporate innovators who implement realistic measurement plans that focus on innovation KPIs, not immediate ROI, find greater executive support and are given adequate time to deliver results.
Our survey data of corporate innovation leaders reveals that the most common metric attached to innovation program success is increased revenue (66%), Other top measures of success include greater customer satisfaction (54.5%) and faster time to market for new products or improvements (45.1%) (see figure below for full list of innovation metrics).
Top Innovation Success Measures
Companies should focus on measurment depending on which phase of their innovation cycle they’re at. Lookoing at the classic Agile Startup methodology put forth by Eric Reis, companies (large and small) can focus on innovation metrics (usage, renewal, referral) in addtion to raw revenues.
Though innovators report increased revenue as an indicator of success, mature corporations reveal that focusing on ROI over other growth KPIs is actually harmful to innovation, and that programs should first encourage speed to market and increased ideas cycling through the pipeline. Migros, one of our interviewees, monitors KPIs of possible yield models instead of revenue for its innovation programs, with agreed-upon guardrails like maximum accepted expenditure per year and total investment volume over a period of time. It also plans out expectations for when innovations will break even in order to set realistic measurement goals and act accordingly if and when they are or aren’t achieved.
As companies climb the ladder of maturity, they also begin to clarify which of the four innovation goals (product innovation; operations; CX; or business model) they’re setting out to achieve (see figure below) — both within each program individually and in their innovation charter for the company overall. This impacts the metrics they attach to signal progress. When pursuing a new corporate innovation program, setting clear goals that answer “why this program?” is paramount to choosing the right initiative.
Advanced companies build their capacity for innovation by approaching innovation goals separately at first (avoiding the trap of too-early ROI expectations), each with its individual programs and support mechanisms. Then, as the corporation matures in its efforts, its programs will strategically progress to fulfill all four innovation goals within a culture of innovation that serves as the lifeblood of the organization.
For example, each of the above innovation goals have different associated KPIs for each, for example Product Innovation will be focused on usage, revenue, and referral, Operational Innovation may focus on reduced costs, higher quality, or faster time to market, Customer Experience innovation may focus on customer satisfaction, engagement, and reduced contact center costs, and Business Model Innovation will focus on newly generated ideas, avoiding disruption or partnerships with young startups.
By Jeremiah Owyang, with co-contributor Ryan Brinks
Drones come in many shapes and sizes, and are coming to a front door near you. Retail, logistics, and the way we shop and consume will never be the same.
We call this trend the “Autonomous World” when robots are able to augment, supplant and replace human workers at greater efficiency. It’s happening in all walks of life, industries and sectors, but the one area that will be most impacted will be the retail and logistics space. Earlier this month, I was a keynote at Etail, where over a thousand retailers were present to learn about how on-demand workers and autonomous drones will impact their business models.
Just three years ago, the thought of delivering packages by drone was a fantastical idea. Today, it is one of the leading obsessions of the tech world, and a future where drones fill the streets and skies now seems inevitable. When that day eventually arrives, it will no doubt change the retail business forever. An estimate from the former White House administration forecast the potential for an $82 billion American commercial drone industry with as many as 100,000 new jobs by the year 2025.
Here are 10 delivery drones that are likely candidates to help companies get there:
- Domino’s Robotics Unit
- Domino’s is not betting exclusively on either air or ground; if its flying drone venture with Flirtey doesn’t take off (below), it still has its wheeled DRU, the Domino’s Robotics Unit, in tests on the streets of Queensland, Australia. The 3-foot-tall carrier for up to 10 pizzas keeps them hot — and a few beverages cool too — while speeding along at nearly 12.5 mph. DRU is built by Marathon Robotics, better known for its robotic military targets. Domino’s as a whole produced $2.2 billion in revenue throughout 2016.
- Amazon’s Drone
Much closer to reality is Amazon’s delivery drone itself, which successfully delivered its first order of popcorn and a Fire TV stick to a rural customer near Cambridge, England, in December. The drone is designed to fly under 400 feet with packages that weigh 5 pounds or less within a 10-mile radius of a fulfillment center, enabling deliveries to be made in less than 30 minutes.
Amazon first announced its pursuit of drone technology in December 2013, and with 341,400 employees and $136 billion in 2016 revenue, it is an undisputed leader in the race to deploy retail delivery drones.
While lesser known than the eCommerce giant it’s competing against, Nevada startup Flirtey beat Amazon to the record books by completing the first government-approved test delivery in March 2016, and the drone that can carry up to 5.5 pounds for a 10-mile round trip further tested 77 deliveries from a 7-Eleven in Reno before the year was out. Unlike Amazon’s drone, Flirtey designed its deliveries to be dropped from a cable while hovering 40 to 50 feet above the ground. The startup has raised $15.8 million and, in addition to 7-Eleven, has also partnered with pizza delivery giant Domino’s for development.
- UPS and the Workhorse Group
No stranger to the intricacies of delivering packages, UPS has driven to the forefront of the drone scene with its deployment of an electric delivery truck equipped with a drone dock on its roof. Its ubiquitous brown trucks have made news in September 2016, when it teamed up with a CyPhy Works drone to make a package delivery to an island near Boston, and again in February when a partner HorseFly UAV lifted off and delivered a package in Florida.
A lot is at stake for UPS; in addition to its standard-setting role in the delivery industry, the company projects that it could save as much as $50 million a year by shaving just one mile off each of its drivers’ routes every day. UPS employs more than 434,000 people and generated $61 billion in 2016.
The HorseFly is an eight-rotor drone developed by the Workhorse Group of Ohio last year, and it can carry up to 10 pounds for a 30-minute flight. As soon as it returns to its truck-top dock, its battery automatically recharges.
- Mercedes-Benz and Matternet
As would be expected, luxury car manufacturer Mercedes-Benz is upgrading the UPS vision with a drone delivery van concept of its own. This one features a stylish self-driving electric van with a fully automated cargo space and rooftop drone hatch, making the entire process fully autonomous. Mercedes-Benz has designed the van with a 168-mile range and backed drone startup Matternet with a five-year, $562 million investment back in September. Matternet had reported $13 million in funding at the time of the Mercedes partnership. Its drone can carry up to 4.4 pounds and fly 12 miles per charge. The automaker anticipates testing throughout 2017. Mercedes-Benz employs 140,000 and generated revenues of $94 billion last year.
- Ford’s Autolivery
Legacy automaker Ford isn’t about to pass on the delivery drone opportunity, either. Though lagging behind UPS and Mercedes-Benz in development, Ford recently unveiled its Autolivery service concept with virtual reality headsets at the Mobile World Congress. Married to Ford’s push for fully autonomous vehicles by 2021, Autolivery envisions self-driving electric vans equipped with flying drones for curb-to-door navigation and even skyscraper window delivery. Ford generated $152 billion in revenue last year.
- Self-Driving Delivery Trucks
Mercedes-Benz and Ford aren’t the only companies in hot pursuit of a self-driving retail disruption. Overseas, Charge has designed a self-driving electric delivery van that it says could be ready for use yet this year — and priced competitively with conventional vans. The Oxfordshire, England, startup has been backed by $500 million venture capital firm Kinetik since late 2015. Charge’s lightweight frame can be built by a single person in just four hours, giving the company an initial production capacity of 10,000 trucks per year with just 10 workers on two daily shifts. The electric vehicles are autonomous-ready and emit no emissions over their first 100 miles. A dual mode can extend that range to 500 miles.
In the United States, the retail industry’s interest in self-driving vehicles has focused on larger distribution trucks, and while leading names like Otto and Embark have made headlines with self-driving technology for highway driving, Starsky Robotics has put together a self-driving truck that also boasts of having remote-controlled last mile navigation. Its aftermarket retrofit kit can turn any big rig into an autonomous vehicle remotely monitored by a driver who can instruct the onboard robotics to physically push the pedals, turn the steering wheel and change gears. These remote drivers can keep an eye on and intervene for 10 to 30 trucks at a time. The San Francisco startup with $3.75 million in funding debuted a successful test in February that featured autonomous driving for 120 miles and remote guidance for 20 miles.
- Starship Technologies
Moving even closer to home is Starship Technologies, which has created a wheeled sidewalk drone for small deliveries across town, I visited them at their Redwood City location and test drove their unit. Spawned from a 2014 NASA robot contest by a pair of Skype innovators, the delivery bot can send up to 40 pounds of goods out into the neighborhood and reach its destination within a 3-mile radius in 5 to 30 minutes by traveling at pedestrian speed.
Headquartered in London and engineered in Estonia, Starship just garnered $17.2 million in funding this January and has already inked partnerships in the United States with DoorDash and Postmates, as well as deals in the United Kingdom, Germany, Switzerland and Estonia with Just Eat, Hermes Parcel Delivery, Media Markt, Swiss Post and Wolt.
- Carry by Dispatch
Another leading contender in the neighborhood delivery race is Carry, a 3-cubic-foot delivery bot that stands 3 feet tall and sports four storage compartments that can hold a total of 100 pounds. While it travels at the same pedestrian speed of 2 to 4.5 mph, Carry is only limited in range by its 12-hour lithium-ion battery. Its compartments are unlocked by an app.
Carry’s $2 million South San Francisco startup, called Dispatch, is testing the bot out on the campuses of Menlo College and CSU Monterey Bay. Dispatch, backed in April 2016 by Andreessen Horowitz and Precursor Ventures, plans to sell access to Carry, not the drones themselves.
10) Amazon’s Flying Warehouse
- One of the most widely anticipated concepts for the future of retail delivery is Amazon’s vision of drones literally raining down to Earth from a massive blimp-style flying warehouse. Patented in April 2016, this airborne fulfillment center would house a vast store of popular Amazon products some 45,000 feet in the air and release small drones to glide nearly energy-free to their destination. Upon delivery, the drones would then fly to a nearby collection site to await a return trip to the flying warehouse.Amazon also attained a February patent for an alternate delivery method from its flying warehouse: parachutes instead of drones. And another patent theorizes a system of light poles capable of recharging or docking drones.While the challenges that stand in the way of such visions are daunting, they have nonetheless inspired many to dream outside the box.
Challenges Facing Delivery Drones
Despite the prevalence of successful drone tests across the country and world, the real roadblock to a drone-filled future for the retail industry is government regulation. Regulatory frameworks are lacking and commercial drone rules are stifling. The Federal Aviation Administration prohibits drones from flying higher than 400 feet, at night, over human heads and outside their pilots’ line of sight.
Better rules have been proposed, but that process is moving slowly. A government committee recommended standards for drone flights to the FAA in April 2016, and Congress ordered the FAA to create new regulations that would allow for commercial drone delivery by 2018. The new Trump administration, however, has thrown a curveball into that progress via an executive order requiring two federal regulations to be rescinded for every new one passed.
Meanwhile, other workarounds are also being proposed. A D.C. bill to allow personal delivery devices has been introduced, and Virginia was the first state to pass legislation allowing delivery robots to operate on sidewalks and crosswalks across the state. That law, drafted with the help of Starship Technologies, goes into effect on July 1. Similar legislation has been proposed in Idaho and Florida.
Besides airspace concerns, costs and energy usage constraints — particularly in the collection of deployed drones — have hampered drone development.
But with so many players now in the game, viable solutions are bound to find their way to customers’ doors in the near future.
Corporate innovation leaders face many challenges when attempting to get innovation programs off the ground. Peter Schwarzenbauer, chairman of BMW (a Catalyst Companies member), is quoted saying, “Innovation is a willingness not to be understood for a long period of time.”
Change agents are those whose radical, innovative ideas are not internally understood –and the culture of the company resists change that could conflict with existing business models. In our research, we tested to see if technology adoption, relationship with startups, or if understanding new trends would have been a primary cause of challenges –yet over and over, we heard that internal culture was the primary issue.
[Ironically, most Corporate Innovation leaders had more challenges with internal culture –rather than combating disruptive startups from the outside]
As part of Catalyst Companies’ research for “The Corporate Innovation Imperative” (available for you to download here), we surveyed individuals responsible for innovation within their organizations. Survey results (below) show that the top innovation challenges include: fostering an internal culture of experimentation and innovation (57%); juggling competing internal agendas and goals (56%); overcoming the middle management “permafrost” layer (45%); and moving forward despite deferred commitment and delayed action (33%).
(Above graphic is from report: Corporate Innovation Imperative, download on slideshare)
Top Innovation Challenges:
Our research also included interviews with innovation leaders and strategists from large corporations. During our interviews, we uncovered two additional challenges: keeping up with startup innovations and a steering progress with a lack of clear business goals.
- Foundational culture change is required to make significant progress.
Innovators first focus on internal education as a catalyst for cultural change, from external speakers to internal workshops, first at the executive level and then targeted toward other senior leadership. Innovation excursions are also helpful in the initial stages of program development to align executives and teams around what’s possible.
- Middle management “permafrost” doesn’t support innovation.
A symptom of a culture resistant to innovation is a middle management layer that can only see short-term goals, not long-term change. As a result, they encourage employees to operate efficiently within their current roles and responsibilities by meeting consistent benchmark metrics. This doesn’t leave room for the innovators to explore new ideas. We heard this middle management layer called everything from the “frozen tundra” to the “permafrost” to the “antibodies.” It’s critical for senior leadership to embrace innovation from the top down, so middle management is empowered to support innovative employees without fear of retribution.
- Startups innovate quickly, leaving corporations playing catch-up.
Many companies are burdened with complicated processes, long production cycles, and bureaucratic red tape for moving forward with new ideas. These hindrances stand in direct contrast to the countless nimble startups swiftly prototyping and executing ideas that directly compete with slower-moving enterprises. Innovators commonly turn to educational workshops (in-house or at vendor locations) and university partnerships to speed internal innovation, as well as innovation outposts.
- Companies lack clear business goals for innovation programs.
Corporate innovation leaders, who we’ve published more data about their role here, are tasked with tying programs to business metrics and proving ROI to executives, yet they often lack the budget needed to adequately resource said programs to an extent that generates results. There is hope for innovation, though. Our survey revealed four innovation programs with more clearly defined business goals: dedicated innovation teams, innovation outposts, innovation “centers of excellence,” and startup investment programs. Mature companies are even defining innovation goals by individual program, while simultaneously laddering metrics up to overarching departmental and company KPIs.
Companies need to clear the obstacles for Corporate Innovation leaders.
The Corporate Innovation teams are often struggling with internal conflicts –more than combating external startups. When I’ve spoke to these leaders, they are willing to risk their jobs to make a change to help innovate their employer, some said “I’m banking on my employability, not my employment” as they knew they could get jobs elsewhere if it didn’t pan out. It’s key that management help offer them a road towards innovation success. Also, read Steve Blank’s list of the 13 things companies are doing to hamper innovation, or Stefan Petzov of Swisscom’s post on corporate challenges.