Corporate innovation has become a must-have for Indian businesses looking to rethink their growth strategies
According to the Union Budget Economic Survey 2021-22, India has the world's third-largest ecosystem for startups, with the number of such firms expected to grow 10% year on year
Corporate venture capital (CVC) funding participation in startups in India is increasing at a rate of 7% per year
Corporate innovation has become a must-have for Indian businesses looking to rethink their growth strategies. Collaboration and co-creation with startups should be more important than ever in their strategy.
The Indian innovation ecosystem, led by startups, has also expanded dramatically. According to the Union Budget Economic Survey 2021-22, the country now has the world’s third-largest ecosystem for startups, with the number of such firms expected to grow 10% year on year.
Corporations seek out new and innovative ways to expand their operations. A corporation seeks the best solutions to its problems. This is where innovation comes in. Corporations can invest in startups, innovation labs, accelerators, and other initiatives to discover new ways to do things.
Businesses have seen the value of investing in startups and innovation labs. It allows a company to stay ahead of its competitors by providing access to cutting-edge technologies that it would not have discovered otherwise.
Corporate venture capital (CVC) funding participation in startups in India is increasing at a rate of 7% per year. Between 2015 and 2019, CVCs funded approximately 31 startups per year in India.
Moving Away From A Traditional Mindset
However, corporate investments in the startup innovation space have traditionally been limited. Few have attempted to broaden corporate innovation portfolio investments and look beyond incremental growth.
The global investment in startups touched $621 Bn in 2021. According to CB Insights 2021 State of Venture Report, the United States topped the list that year, attracting corporate funds worth $311 Bn.
According to The Indian Tech Startup Funding Report 2021, Indian startups raised $42 Bn in 2021, up from $11.5 Bn in 2020. Indian startups have raised $19 Bn in funding so far in 2022.
Indian corporations’ investments in the innovation space must go beyond their familiar comfort zones. Current corporate investments in the innovation space are incremental, with limited growth.
Embracing An Opening Innovation Mindset
These are companies that are forward-thinking and innovative. Collaboration with innovation labs is frequently used to better understand the innovation journey. Such corporations have implemented a comprehensive open innovation strategy.
These companies invest in innovation both within the organisation and in the startup ecosystem. The strategy is to hit two mangoes with one stone, but it occasionally hits three.
In an open innovation ecosystem, innovation is about identifying talent outside of the organisation with whom to collaborate and co-create. By diversifying asset portfolios, this approach assists corporations in maintaining market relevance and growth.
Investing in a startup also assists a corporation in de-risking its organisational challenges by scaling new-age businesses created in the startup innovation ecosystem. Corporates must recognise that innovation is driven by both customers and employees. A company should strive to create an innovation-driven organisational culture and think long-term, viewing innovation as an investment that will grow in value over time.
Achieving Ecosystem Maturity
Efforts by corporations to innovate ultimately have a positive impact on the Indian startup ecosystem. Large corporations take a customer-centric approach, identifying priority areas that influence market trends. This helps startups in recognising that products must be customer-driven in order to meet corporate innovation needs. Startups must understand that corporates represent a valuable opportunity to gain access to a larger enterprise’s critical customer base.
Corporates are frequently sceptical of investing in startups. Such large corporations doubt a startup’s ability to deliver products consistently and with commitment over the long term. Large corporations have a lot riding on their startup innovation investments. The company’s brand value and profitability are at stake. Startup ecosystems in India will mature if entrepreneurs recognise this.
The Indian startup ecosystem has always enabled low-cost, tried-and-true technology solutions. These are qualities that corporations can use to gain a competitive advantage.
Ecosystem enablers aid in the development of strong awareness of the latest technological trends that corporations may be interested in better understanding. They can assist the Indian corporate sector in transitioning from a traditional mindset to an innovative mindset.
What Lies Ahead
In the coming decade, the Indian startup ecosystem serving the tech sector will appeal to corporates looking to diversify. Corporates should keep an eye out for innovation in areas such as defence and aerospace, fintech, health and med tech, enterprise tech, the AI/ML space, robotic automation, AR/VR, and blockchain.
Foreign investments will also help Indian companies grow faster than they would on their own, which is exactly what the startup ecosystem requires right now. Foreign investment has grown in scope over time, as more corporations look across borders for innovative solutions.
To drive growth, any corporation’s innovation agenda must be companywide. These organisations must cultivate an innovation culture in which employees are encouraged to experiment and fail quickly. Failure is not the end. It frequently aids those with an innovative mindset in creating something bigger and better.
