“Innovation theater is actually value-destructive, not neutral in its effect,” High Alpha Innovation CEO Elliott Parker wrote in “The Illusion of Innovation.” “Organizations would be better off doing nothing (or actively accepting and managing their decline) instead of pretending to innovate.”

Many corporations are moving beyond this theater and seeing tangible, transformative results from their innovation efforts. But many more continually engage in this illusion, leading to little (if any) desired ROI realized — and lots of wasted time, energy, resources, and money.

On this episode of Advantaged, host and High Alpha Innovation VP of Marketing Drew Beechler sits down with SVP of Partnerships Morgan Berman, Managing Director of Studios Ryan Larcom, and Business Development Manager Nick Wichert to discuss how scaled enterprises can move beyond innovation theater in 2025 and beyond to unlock growth and transformation.

Key Takeaways

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• Ryan shared how “a really great corporate innovation strategy cascades from really great corporate strategy.” If enterprises are able to clearly tie in their innovation programs to the primary business objectives for the next year, five years, 10 years, then their innovation teams have the necessary reference point to guide their work and, in turn, ensure they don’t end up working on initiatives that matter little to leadership.

• Morgan explained that many corporate innovation leaders spend too much time and energy to “justify their own business units rather than actually moving the business forward.” In other words, they don’t execute on transformative innovation opportunities, like exploring new markets and business models, and — more often than not — end up engaging in an illusion of innovation that only wastes their time.

• Nick noted how silos and a lack of support will doom any innovation project from the get-go. Asking what the company wants to get out of innovation initiatives, the specific resources innovation teams need to execute, and how the business can generate learnings and insights to bring back to the core are key questions corporate executives must ask before they give the green light for any innovation programs.

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Listen to the whole episode for more insights from our team on how corporations are starting to evolve from innovation theater and what changes they make internally to carry out effective innovation strategies in 2025.

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Sign up for our Wavelength newsletter to get new Advantaged episodes and other corporate innovation-centric content sent to your inbox, and subscribe to our podcast on Apple or Spotify.

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‍Transcript

Drew Beechler: Welcome everyone to Advantaged, a High Alpha Innovation podcast. I'm Drew Beechler, our VP of Marketing here at High Alpha Innovation and your host of Advantaged.

If you aren't familiar, High Alpha Innovation is a venture builder. We partner with leading organizations and entrepreneurs to co-create advantaged startups, hence the title of this podcast.

This episode, in particular, is part of our 2025 innovation trends mini series that we're doing as our first inaugural podcast. We recently published an article that dove into where we think the innovation landscape will be shaped as we come into 2025.

We decided as we were going through this that we wanted to turn this into more concrete discussions with a number of our team members, to go deeper on these trends and where things are heading in the new year.

So today, here with me, I'm super excited. We have Managing Director of Studios, Ryan Larcom, our SVP of partnerships, Morgan Berman, and Nick Wichert, our Business Development Manager. Morgan and myself actually started almost nearly on the same day. We were newer to High Alpha Innovation, while Ryan and Nick are OGs and have been here for quite some time.

We talk a lot about just the backgrounds within our team and the blend of people with former founders and investors and people with deep corporate innovation and corporate strategy experience. I think that we just live in this really, really unique space of this, blending of experiences. It's really, really unique.

What I really want to discuss today and what hopefully we will get into is just the evolution that we've seen in the last — what feels like a dramatic — two years, maybe even call it, around corporate innovation and, particularly, the lens of what I like to call startup engagement.

How are big companies engaging with startups? And how is that changing? How is it evolving?

I think we've seen a lot of models over the years and a lot of evolution around what this looks like in the corporate perspective. What's working? What's not working? How should you be shifting your focuses? That's really what we want to talk about here today.

Maybe just to kick it off with one phrase we use a lot internally: innovation theater. In particular, our CEO, Elliott Parker, wrote a book all around this called “The Illusion of Innovation.”

Last year, did we start to see corporations move more beyond this illusion of innovation and this innovation theater, as we define it? And do we think we'll move beyond that even more so here in 2025?

Ryan Larcom: Maybe it's worth just defining the term a little bit deeper, right?

Innovation theater is a result of corporations facing the pressure of constantly needing to innovate, but not actually doing the activities that are necessary to drive the growth and outcomes that they want. It's not their fault to some extent or another, right?

Especially inside of publicly traded companies. They have this responsibility for short-term shareholder gains. So that means that there's a constant sucking sound of the core that's necessary for the investment of those dollars into near term activities that drive near-term gains.

However, they still need to be able to drive long term growth opportunities, which is challenging, as a whole. Structurally, it's already difficult.

Morgan Berman: Yeah, and just to piggyback a little bit on that, I think from the startup and corporates working together, there is a tremendous amount of innovation theater that quite frankly, wastes both the corporate innovation team's time and the startups time.

There's a lot of things that have been done just in the name of innovation that don't yield any results.

So when we're thinking about mentoring startups across the globe, giving them advice on how do you look for a corporation that has dollars set aside for pilots or proof of concepts and what sort of things you can hang your hat on that's real, that's tangible, to break through that illusion of innovation. 

Nick Wichert: But if you put it into perspective, the reality is that a lot of these corporations who have been around for a hundred years have only been at startup engagement for 10, 15 years. They're still learning. We're on maybe the second or third revolution of startups?

First, it was a lot of M&A and internal. Then, it was accelerators. And then, it was incubators. So they've gone through their own transformation of, ‘How do we do this.’ I think the interesting thing is that in their lifespan, they are in their infancy when it comes to innovation and working with startups.

I think a lot of us who have been there for the early days have seen what they've had to break through to even get the conversation going, let alone make substantial changes to their business, which requires a lot of change management.

And I think the evolution of this is going to persist, and it's going to be a matter of being able to keep up with how fast innovation needs to happen, and then how quickly you can work with startups, how quickly you can react to the market, and so they're learning just as much as a startup is learning in the market of how to engage.

Morgan Berman: So fascinating because I totally agree with everything he said. The term innovation is so broad, right? It can mean so many different things. If you're, if the corporation decides they need to innovate, and let's be honest, every corporation needs to innovate, right?

We can point to the graveyard of failed corporations over history that failed to innovate.

If they need to innovate, they have the whole stack of things they can do. They can do different things in the name of innovation. Working with startups is really important. A sliver of that. There's a lot of different flavors of how to do that.

I think sometimes the innovation or the illusion of that innovation is they want to just seem like they're doing a lot to justify their own business units rather than actually moving the business forward.

they need to think through, are they innovating at the core of their business? Are they innovating on the peripheral? Like what are they actually First, how are they defining innovation? Then what are they doing to push that? forward a little bit, 

Ryan Larcom: And then finally selecting the right tool, once you know what you're doing, right? Are we using the right tool, whether it's CVC or M&A or R&D to achieve the ends that they want? It's probably a mix.

Nick Wichert: Yeah. Innovation, as a general term and capability, has been a science fair project for a VP of a particular department, rather than a function and a capability that a company has not built out over the years.

Morgan Berman: Possibly. I mean, where I've seen it. Being successful is where it's actually ingrained in that innovation team or unit can see across. Different business units, so they buy in from different stakeholders across the enterprise, including the CVC team, the corporate venture capital team.

Where I've seen it not be successful is where that innovation team is siloed.

That sometimes leads to more of that like, ‘Okay, we're just doing something to look busy mentality, and can create that cycle of the illusion of innovation.’

Drew Beechler: Maybe you can even get into even like metrics for success, whether it's reporting structures or goals or metrics. Are there avenues that you think align the innovation team or that function more toward true innovation and out of this innovation theater perspective?

Are there structures or metrics or reporting that lends itself more to that or not? Or is there more nuance there? 

Nick Wichert: I think Morgan alluded to it. Teams who have defined what outcomes they need to achieve from innovation to come from a position of a strategic lens. Then, you can design your organization around that outcome.

It's when the tail's wagging the dog and you have a technology organization or a product organization that is innovating in a silo that is trying to look across the business, but doesn't have the support where they run into a very limited lifespan of what they're doing.

So I think the first most important thing that any company can do is say, why does innovation need to exist? What do we need to get out of it? That will drive the types of engagements you want to have with startups or internal innovation campaigns that you want to run.

To me, it tells me what you want to get out of innovation. What is its job to do for your corporation? Then that drives a lot of the initial discussions.

Morgan Berman: It’s so fascinating, because a corporation, as Ryan pointed out, is judged on a quarterly clip, right? Do they make the numbers? Does the stock price go up? What do they do that affects what happens on Wall Street? Which is so out of their control.

When you think about innovation, especially working with startups, you can define it and have it structured, but to measure it, you're talking 7-10 years from now, right?

What I've seen to be successful is how do you bring that future forward where you're saying, ‘Okay, we understand working with, investing in startups is going to help us down the road. Yes, it might help us avoid becoming a blockbuster. But at the same time, what can we learn? How can we get that, quote unquote, startup juice? How can we have cultural transformation? How can we think differently? How can we move faster?’

So, to me, the companies that really internalize that and set up KPIs that are based on those sorts of learnings in addition to all the benefits and, yeah, if you invest in the next, Airbnb, then that's great and everybody's happy.

But that is a unicorn by definition, right? And so I think bringing that future forward and a way to think about how to measure that has been something I've seen that's been successful. 

Ryan Larcom: Yeah, I think that's great. I mean, tying those two pieces together, like a really great corporate innovation strategy cascades from really great corporate strategy.

First, you’ve got to know where your company's going and what you're great at — what's your right to win. Then you usually define a growth gap. In order to get from here to there, we need a certain amount of revenue. Some of that is attributable, as you said, you triage it: R&D, M&A, CVC, startups are a piece of that.

Like you said, while you're casting the long-term vision for it, you're also trying to figure out what are the near-term benefits. I would add to that list of near-term benefits, perhaps near-term revenue accretion. That's a really high bar for very young startups often. But if it exposes you to new customers, if it gives you opportunities to try new transformative business models that you wouldn't want to do in the core because they would be cannibalizing your business.

There are ways that you can learn and still make money or achieve some of those growth objectives without yet entering that market. 

Morgan Berman: Totally agree. One thing just to add to that, when a startup comes to work with a corporation: It's really hard and it's really daunting. They don't know where to plug into that organization. They don't know how to find the right buyer or to find the pockets of money for pilots or proof of concept.

The organizations that have that defined and have the metrics and be able to help plug those startups in is very critical. 

Ryan Larcom: Funny, I think with all the corporate innovation desire, it's so easy to want to build a team that does the fun and sexy stuff. ‘Let's design startups. Let's invest in startups.’

The thing that I would say to corporate innovation teams actually is they need to do the least-sexy stuff, which is, ‘How do we integrate startups into the day to day of the organization? What would it take for me to identify needs from a business unit leader, help create ties back and forth between that business unit leader and startup, distract the legal and procurement teams so that we can get fast NDAs, right, and rapid procurement?’

Those are hard things and super unsexy. Yet, I think are probably the most critical things that corporations can do to drive innovation inside from startups. 

Drew Beechler: Yeah, I think it makes some of the biggest differences. I like Ryan, as well, around you can define growth or revenue in a handful of different ways too.

Yes, you shouldn't think this startup we invested in is going to exit next year. Like we need to have long term time horizons and  an enduring capability. But think about it more holistically, is this solving a pain point for us, for our customer, within our supply chain?

You know, this is a multi-million-dollar problem and that's going to be far more valuable to the corporation than the return on invested capital might be within a particular startup. I even think  having some of that lens can bring some of that near term vision, but also have the long term upside and  true transformative innovation potential.

Ryan Larcom: Can I just tell a story real quick on that note? We had a corporation come to us who had a $20-million IT problem. They couldn't figure out how to identify which of the parts were going to show up late to the factory. That would also shut down the factory line.

And, they had analysts, of course, right? Procurement analysts whose job it was to triage their portfolio of products, 200, 300 at a time, deep in inboxes trying to solve this problem. And, they were a very, very large supply-chain organization.

We figured if they had this problem, everybody else would have this problem too. Wouldn't it be neat if there was a startup that could solve this problem? And, they looked. There wasn't an available one on the market that could do this well.

They were thinking about solving it themselves with a $ 20 million investment. But we all know one-time IT projects don't solve problems. Startups, enduring businesses solve problems.

So, we launched a business with them. They became beta customer, first customer. We designed it for their first team. And, inside three months, ahead of data from a really successful, startup org in the supply chain space and a really successful person actually from inside of their team who had had previous startup experience, addressed the need for a single portfolio manager and saved millions of dollars essentially in flying parts on 747s back and forth inside of their one team.

They rolled it out across their entire supply chain inside, and they became the biggest customer of the startup out of the gate. Now, this was right in the middle of the pandemic. There was a lot of opportunity for pain. We were able to raise a huge seed round on that and their investment of 5x on that seed round.

Instead of paying $20 million to solve a problem, they made money-solving a problem that the market experienced and they did as well. 

Nick Wichert: That story and others is the recognition of the innovation team to do more than just look internally though, right? They looked at what they knew and how they weren't going to be able to solve that.

They pointed to all the expertise that they had, the advantages they could bring, and said, ‘If we deployed that elsewhere in a startup, we could endow that thing with capabilities that a startup normally would not have.’

It was the foresight of that company to say, ‘Let's reconfigure how we're thinking about solving this issue and taking what we do know, which is supply chain. We know who all these folks are that are impacted and point that strategically at a startup that said if we give this to you, you can go and execute faster than we can.’

So they did exactly what the innovation team was supposed to do. They identified the problem. They provided a ton of insight that would take months for a startup to even wrap their head around, assuming they could get access to it.

Then, they were able to build it. So that the innovation team did exactly what they were tasked to do. It didn't require them to think horribly differently. It was just a reframing of how do I point out what I'm already good at? At a different vehicle. 

Morgan Berman: Yeah, I like that a lot. I think sometimes when a company goes from an outside in approach to innovation, sometimes it can lead to more illusion of innovation because they look at the ecosystem through their own lenses.

So what they need to do is work with some, not to have a plug, but work with some sort of partner who understands the venture ecosystem, who understands the startup ecosystem, how to create companies, and has a different perspective, if only to help them remove those glasses.

Because what they are looking for, if they go out with their preconceived biases, they're looking for a hammer for their nails. Where the real innovation happens is the things they're not thinking about, right? What's three, five, seven years from mainstream that's around the corner that they can get ahead of? ‘Man, we never thought of that.’

Start innovating alongside those companies, or build those companies that then can be ingrained in their business. 

Ryan Larcom: Yeah, that's a great point. Like a different version of that story could have ended with this company going out to the market and found a startup and forcing them to solve just their problem and that startup died.

This company decided to start a company that solved only their problem and they were stuck funding it for the rest of their life. Instead they found something that was market appropriate and gave them the speed and flexibility to go and it turns out this company ended up pivoting. I think that the secret to this whole thing was the parts that they needed.

Weren't even in their supply chain's inventory, but in another neighboring supply chain across Guadalajara, Mexico. So the answer wasn't like better supply chain analytics. It was a marketplace for trading electronic components.

No one would have been able to find that if they tried to try it on their own. A startup was able to find that because they were incentivized to go do it. 

Drew Beechler: Just back to who you're optimizing for. We talk about this a lot, learning, optimizing for failure, and the faster you can fail, the faster you can learn, and that corporations are just not optimized to fail.

But, startups are inherently designed to fail quickly and learn from those failures very, very fast.

The innate business of the corporation is to squash those failures and grind them out of the system, essentially where startups bring this beauty I think can solve this in a very unique way. When grinding out the failures, they're also grinding out the learnings.

Ryan Larcom: Yes, exactly. They are there to keep things safe and, unfortunately, safe doesn't mean learning fast.

Nick Wichert: But there's been a lot of innovation teams who have hung their hat on we exist to learn, right? And it goes back to measuring the success of your innovation team, and the problem with learning inside of a corporation is you get one spin of the wheel, and if what you learned doesn't help advance the ball, the instinct is to say, ‘All right, it's not going to work.’

You've got a set of incentives that don't align to maximizing learning, whereas the startup in this case learned, and instead of saying, ‘Well, this isn't exactly how we envisioned it, so let's shut it down,’ they iterated and went to where the market was going and unlocked even greater insights.

So companies will try to learn. It's just the infrastructure, the antibodies aren't set up to have a series of feedback loops that can sustain learning until you do find that nugget that helps you scale. It's too quick to fail. 

Drew Beechler: Yeah. the startup, the incentive there is, ‘If we don't learn, we die.’ The corporation is like, ‘If we don't learn from this, we still ship parts tomorrow.’

You know, I got to email a bunch of investors and say, ‘Hey, the money's gone. We failed.’

Nick Wichert: Yeah. They're not going to do that. They're going to work as hard as they can to figure out, ‘Well, where is the market for this thing?’

Drew Beechler: Yeah. It's that incentive alignment that is impossible within the confines of the corporation.

One other trend and just topic maybe we could discuss is two very specific arrows within this innovation quiver, historically, have been CVC and corporate venture capital arms and accelerator groups.

We have a lot of experience here on the table around the table and actually both of these arenas. How do we think these will both evolve over the coming year?

We just got to have a conversation around fundraising. Last year, broadly, the startup world was up from 2023 still — nowhere near what we saw in 2021 and back to pre-COVID levels.

We're thinking that potentially this could be another year where we get back into the trend line  pre-COVID, but are we seeing the same thing in CVC?

What is the impact both economy-wise or just broadly within the innovation landscape that we're thinking we're going to see around accelerators and CVCs as it relates to startup engagement levers that have been very, very popular over the last decade?

Ryan Larcom: I think you characterized it right, There was a massive downturn that occurred, which always causes corporations to pull back and direct capital from the core. I think rather than just rushing back toward previous levers they've used for innovation, I think it's causing folks just to pause and think and say, like, what have we learned through this process?

I think those in CVC have learned that you need to pair long-term financial outcomes with near-term strategic benefits. It needs to be more than learning, like Nick said. It needs to be more than long-term finance, like Morgan said.

‘What can we do that's in between that helps us to see some growth in between?’

I think the CVCs that are making it through this turn are the ones that are figuring out how to, broker deals, with these startups, invest at a time when those startups actually can help them to grow and vice versa: drive business efficiency improvements, solve problems for their customers.

I think it's just a different set of use cases, perhaps for what we'll see, as well as perhaps a different, slightly different stage to where they're investing. 

Morgan Berman: Yeah. On the accelerator point, I think an accelerator means a lot of things to a lot of people, right? How you define an accelerator is very different.

I do think, from what I've seen, a lot of corporations have tried something in the world of accelerators and they've used it in connection to their CVC. They've used it for learning. They've worked with partners like Techstars or 500 Global or others. And they've tried it. An innovation team is usually where that accelerator plugs into the organization.

An innovation team, by definition, needs to innovate, right? They've already tried it. They've tried that cycle. Now, they're thinking, ‘Okay, what is next?’ Neither have they internalized that accelerator. Like take Disney, for example. They ran a program with Techstars for a couple years and then designed a later stage accelerator program that they're running in house.

That's great, right? They learn, they take the learning, they learn how to do that.

Others look around and they say, okay, we need to do something else other than. quote unquote, just the accelerator because we need to keep innovating. So innovation teams are constantly looking for that next thing that helps move the needle forward a little bit.

Nick Wichert: I think on the accelerator route, over the last 10 years, the barrier to entry to be a startup is so low. So what a lot of startups have figured out are the table stakes. So a lot of these corporations are looking at going, ‘Well, great. We've seen 50 startups in this space.’

But they've got a handful of issues that are unbeknownst to startups.

They're things that they don't want the market to know because it'll hurt their competitive angle in the market, their products. So, it's harder to solve corporations' needs because startups have been so efficient over the last 10 years at looking at the surface and saying, ‘How do we solve this?’

A lot of successful startup folks who were previously in those corporations who spun out and said, ‘I can solve this differently and I can do it through a startup.’ But, for the most part, what I'm seeing now is that a lot of CVCs and corporations are going, ‘We've seen startups in this space for the last five years. What's different?’

It can't just be a technology play. And so figuring out a way to get a better view of what those corporations' issues are and solving more root and growth opportunities is going to be critical. But it's harder to do because you have to be embedded. You have to have insights. You have to have data.

You get to know things that people don't know and that's really hard to scale.

The long and short of this is that corporations are going to work with fewer startups, but the startups they work with are going to be high quality and they're going to have founders who've been in the space and they're going to work with partners who understand how to navigate internally.

Otherwise, they're going to see the same 50 startups come through that they've seen for the last few years. 

Drew Beechler: Well, thank you all for joining me. This is an incredible conversation and one that I hope we will continue for, for quite some time. both here and in other scenarios, but thank you so much for joining me.

This is an incredible podcast. If you're listening, be sure to subscribe and follow along for the rest of this series and future conversations we have all around the illusion of innovation and what do we mean around building advantaged startups with.