The Decline of Corporate Innovation Arms: Why It Makes Sense and How to Reconnect Innovation with Strategy

The Decline of Corporate Innovation Arms: Why It Makes Sense and How to Reconnect Innovation with Strategy

The Decline of Corporate Innovation Arms: Why It Makes Sense and How to Reconnect Innovation with Strategy

  • Posted by Dan Toma
  • On 20/06/2024

In recent years, numerous companies have made the decision to close their innovation arms. Notable examples from this year alone include MigrosZF, SAP, FWD, and Walmart. At first glance, this trend might seem counterintuitive. After all, innovation is often touted as a crucial driver of growth and competitive advantage. 

However, a new study by Boston Consulting Group (BCG) sheds light on why these closures might actually be a strategic move. According to BCG’s research, only 12% of companies have successfully established a strong link between innovation and their overall corporate strategy or strategic intent. This means that for 88% of companies, innovation is perceived as an expensive, non-essential activity that yields minimal impact on the company’s core objectives.

The Disconnect Between Innovation and Strategy

The disconnect between innovation efforts and corporate strategy often results in wasted resources and missed opportunities. When innovation operates in isolation from the company’s main goals and objectives, it becomes a siloed activity. 

This misalignment can result in innovation projects being rejected by business units once they need to step in and scale them, increased innovation costs, and above all a persisting perception within the company that innovation can’t be taken seriously as its only theatrics.

Breaking the Cycle: Reconnecting Innovation with Strategy

To break this cycle and effectively link innovation with corporate strategy, leaders responsible for innovation must increase their pragmatism and start taking clear actions. Specifically, they need to consider implementing the following five critical steps if they want innovation to be viewed as a business imperative that can withstand economic downturns and cost-cutting measures, rather than a dispensable luxury:

1. Develop a Clear Innovation Thesis

An innovation thesis is a strategic document that outlines the company’s innovation goals and the means to achieve them. This thesis should be directly connected to the overall strategic intent of the company. It provides a framework for making decisions about which innovation projects to pursue and ensures that these projects are aligned with the company’s long-term goals.

2. Develop Clear Goals for the Innovation Investment

Innovation leaders need to collaborate closely with the company’s board to set clear, measurable goals for innovation investments. These goals should be defined across a series of time horizons, such as short-term, medium-term, and long-term. This alignment ensures that everyone in the company understands the purpose of innovation efforts and how they contribute to the company’s strategic objectives.

3. Establish a Clear Budget for Innovation

Once the goals are set, it is crucial to agree on a clear budget for innovation, divided across different time horizons and strategic topics. This budget should reflect the company’s commitment to innovation and provide the necessary resources to pursue meaningful projects. Allocating the budget in this way ensures that innovation efforts are adequately funded and that resources are used efficiently.

4. Create a Mix of Innovation Vehicles

A successful innovation strategy often involves a mix of different innovation vehicles, each with specific objectives and goals. These vehicles could include internal R&D, partnerships with startups, corporate venture capital, innovation labs or startup acceleration programs. Each vehicle should be tied to the overall innovation investment goals and have clear metrics for success.

5. Establish a Clear Line of Authority and Communication

Effective innovation requires strong leadership and clear lines of authority. Innovation leaders should have good access to the board and be able to communicate the progress and impact of innovation projects regularly. This communication ensures that the board remains informed and supportive of innovation efforts, and it allows for quick adjustments if projects are not meeting their goals.


The closures of innovation arms in companies highlight the urgent need for a stronger connection between innovation and overall corporate strategic intent. If you want to avoid following in the footsteps of companies like Migros, ZF, SAP, FWD, and Walmart, and ensure the longevity of your innovation function, it’s crucial to become pragmatic about innovation now. 

By developing a clear innovation thesis, aligning with the board on goals and budgets, creating a mix of innovation vehicles, and establishing clear lines of authority and communication, companies can ensure that their innovation efforts are not merely “nice to have,” but integral to their strategic success.

Taking these steps allows innovation leaders to transform innovation from a costly overhead into a strategic imperative that drives significant value for the company.

This article was originally posted on The Corporate Startup.