Big is no longer beautiful. World-changing business innovation increasingly comes from nimble, highly focused start-ups, unencumbered by scale. Many large corporations, particularly in tech, use acquisition to stay ahead, while others adopt a partnership approach, drawing on the ideas of an ecosystem of smaller firms.
Octopus Group CEO Simon Rogerson has taken a different approach: the corporate venture. Originally an investment firm, 18-year-old Octopus has now branched out into healthcare, energy, fintech and property, employing over 800 people. Here’s what Rogerson learned along the way.
"Big companies struggle because they spend all their time thinking about protecting the existing business. They see the world changing so quickly and they hire a head of innovation. That 100% will not work, because innovation is a mindset.
Acquisitions rarely succeed, in my experience, unless you buy an innovative start-up and then leave it alone. Pepsi bought PJ Smoothies in 2005 and just ran it into the ground, because it put in all its culture and governance and processes. Coca-Cola has wisely left Innocent alone. Partnerships are difficult too, because they won’t wake up in the morning and think about you when they’re in the shower – they’ll think about themselves. In fact, one of the two things I regret the most over the last 18 years is partnering, when Octopus was a small company.
My advice is to set up a company a few miles down the road, and tell them it’s their job to put you out of business as soon as possible. You need to give them the flexibility and freedom that a start-up would have.
We set up Octopus Energy with a different HQ, a different P&L, different benefits, different remuneration structures, different governance, different everything – the only things that have to be the same are the core values and employer brand – customers of our energy and investment businesses must feel like they’re dealing with the same company.
Its CEO reports directly to me but has a lot of autonomy, and I don’t spend much time in his office. In fact, I spend as much of my time as possible protecting them from the rest of the business, from people who think they can help."
For more information
Read this for information on how Tata, Microsoft and PA Consulting stay innovative at scale. Or for research debunking the myth of the Eureka moment (and offering some smart alternative goals), see this article by academic Feng Li.
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