One of the best ways to forecast the future is to look at the past.

That means CEOs, strategy leaders, and innovation directors involved in corporate innovation programs who want to understand the potential growth and transformation they could experience in 2025 need to examine what has and hasn’t worked for their own business and other large enterprises in 2024.

By doing so, corporations can more effectively plan (and know when to pivot) their business strategies and innovation priorities in the year ahead, enabling their organizations to grow and scale as desired.

In our very first episode of Advantaged, we kick off our “2025 Innovation Trends” miniseries with an in-depth conversation with our CEO, Elliott Parker, and General Manager of our Build team, Matt Brady.

Specifically, we discuss the state of the corporate innovation landscape entering 2025 and what types of initiatives will move the needle for scaled enterprises across industries in the months ahead.

Key Takeaways

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• Elliott explained how the future is “going to be much stranger and weirder than we can imagine, and it's coming at us really quickly.” That makes it essential for enterprise executives to look for innovation opportunities outside core operations — even if it is enticing to retrench to the core in times of uncertainty and disruption.

• Matt noted how corporations that pursue transformative innovation opportunities like venture building solely in-house often fail. More often than not, it’s because these companies lack the proper infrastructure, governance, and processes to execute on these initiatives. “Cynicism starts to grow around the innovation function and the promise of innovation itself,” he stated.

• Drew detailed how the rapid emergence of AI and creation of new, cutting-edge AI tools is “one of the biggest technology shifts and trends we've seen” in our lifetimes. He indicated the “adoption curve … just vastly accelerated, particularly within the larger enterprises.” This embrace of AI will enable corporations to grow and scale in ways they couldn’t prior to the arrival of AI.

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Listen to the 25-minute conversation below to learn more about the value of external venture building for corporations and discover insights that can help inform your own company’s innovation journey in 2025 and beyond.

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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 today of the Advantaged podcast.

If you're unfamiliar with High Alpha Innovation, we're a venture builder. We partner with leading organizations and entrepreneurs to co-create advantaged startups. That's the name of this podcast and the hint to our kind of mission.

This episode in particular, though, is part of a 2025 Innovation Trends mini series that we're doing. We recently published an article that dove into about 10 or so trends that we think will shape the innovation landscape in 2025.

So we decided, ‘Hey, let's turn this into more concrete discussions with a number of our team members, and we can go deeper on these trends and just hear their opinions on kind of where things are heading in the new year.’ And so this is episode one of this series.

Today, with me, we have our CEO, Elliott Parker, and our General Manager of our Build team, Matt Brady.

And I could not be more excited about this conversation and, particularly, we're going to talk a lot about the innovation work that we've seen from the public and private sector over this past year and what kind of programs and priorities we're likely to see from organizations next year and talk quite a bit around kind of trends last year and this year.

So, maybe before we even get into 2024 and look to 2025, I thought, especially in this episode, it'd be really great to just set the stage a little bit for listeners around. You know, who we are, what is venture building that we talk a lot about, and even what is our innovation perspective or, to be kind of crass, why should anyone care? Why are we even talking about this or why should they listen to us?

Elliott, if you want to give a little bit more background. How did you start to get into really thinking about corporate innovation and innovation strategy and this idea around venture building and startup engagement from a corporate side of things?

Elliott Parker: Yeah, so I began my career about 30 years ago in corporate innovation, in a way. I was working with large defense companies to try and take their inventions and find alternative commercial uses for them doing spin-outs, licenses, joint ventures, and things like this.

I learned in that process how hard it is for these big companies to take these things and do new types of things, new business models with these amazing inventions, but they had to go do it internally.

I didn't know why at the time, why it was so hard, but I saw the evidence of it. A few years later, I joined a corporate venture capital team for a large medical diagnostics business. Our job was to invest in startups that were relevant to our business. And if we couldn't find startups that fit our thesis, we could build those ventures internally.

We started off great like a lot of corporate innovation teams do. And over three years, we just got caught up in the corporate goo. The corporation ran into some, some regulatory challenges. And at that moment just became very risk-averse.

Everything that we wanted to do had to get approved by the CFO in Europe. If we wanted to make a new investment, we had to hop on a plane and go make the case. And, at a certain point, we couldn't get anything done and just saw it slowing down and realized that, in that business, this scaled enterprise was meant to do something very different than innovate.

It was meant to execute really carefully, with good predictability, with very little error in the system. And what we were doing as innovators was radically opposed to that. We were, on purpose, making mistakes, kind of messing around, seeing what worked and what didn't.

It was not capital-efficient in the near term, what we were doing.

And so it just didn't fit well inside the corporation. I saw firsthand how hard it is inside these corporations. And then, years later, I worked at a firm called Innosight, which was founded by Clayton Christensen, where Matt and I originally met and worked together.

We're coming up on 30 years since Clay wrote “The Innovator's Dilemma.”

Drew Beechler: Wow. 

Elliott Parker: His doctoral thesis at Harvard back in ‘97. In that, he explains that corporations can do everything right — everything they're taught to do by serving their customers, their best customers, trying to maximize profit and serve those customers better and better.

What happens is they leave themselves exposed at the low end for new disruptors to come in, and grab a foothold in the market, and then ultimately move upmarket themselves and displace those companies.

And what we did at Innosight is try to help these large organizations overcome that dilemma by setting up innovation teams, designing better strategies, and pursuing new opportunities inside these corporations.

The challenges, the incentives, the governance, the talent, and the processes they use are optimized for scaled execution of these global companies, not for doing new things. And what we learned was that, sometimes, for certain types of innovation, it makes more sense to pursue these things outside.

And you see what startups are doing out in the market there. They're learning, they're growing rapidly, they're upending markets. If we could somehow marry the best of the learning ability of startups with that execution ability and knowledge that the large corporations have, it seems like everybody would be better off: customers, large companies, and the startups themselves. 

Drew Beechler: Yeah. You talk a lot in “The Illusion of Innovation” about, if you have enough knowledge and money, every problem is solvable. And I think that's kind of a really interesting dichotomy where a big company, they have a lot of knowledge in a very specific way, a lot of money, but kind of the startup is action drives knowledge and learnings and failure drives a lot of that.

The corporation is not innately built to really be able to do that. 

Elliott Parker: Yeah, the corporation does certain things really, really well. I'm grateful for these global corporations. I think corporations are one of the greatest inventions that humans have come up with.

In fact, the idea that hundreds of thousands of people will get together and collaborate out of self-interest in a way that is sustainable to do amazing things like create the recording equipment that we are taking on. It's remarkable the types of problems corporations can solve.

We need those corporations to be successful.

As long as they are producing societal surplus, we need them to succeed, and it's getting harder for them to succeed. And that's something we care a lot about.

Matt Brady: I want to point out, I did not begin my career 30 years ago. I'm a lot younger and more vibrant than Elliott. But I did want to just piggyback on one thing that Elliot was talking about with regard to our work at Innosight, which is that we would help them plan for their response to disruption, help them build a strategy for innovation and creating new.

I think a lot of strategy or innovation folks, either within consulting or within the corporation themselves, fall short on the ‘how.’ And so it might be that we are aware of the phenomenon, we are preparing for something that is new. We might even be outlining specific opportunities that we could pursue, but I think that the actual execution is an area where historically we've fallen flat.

And what's really exciting about the work that we do is it offers a new kind of approach. It is not for every circumstance but in a lot of circumstances, where the core business is really good at operating and really should think about innovations within that core.

What do you do with adjacencies? What do you do with something that's truly transformative?

And that suite of options, I think, is still pretty unclear, and what we can offer is just some guidance on certain situations, those circumstances where building something that is really, really, truly new might be more appropriate as a startup outside of the business entirely. 

Drew Beechler: Yeah, maybe let's give an example or two. What do we mean by venture building or building a startup? You know, have we had success kind of doing this? What does that look like, in a realistic kind of perspective even? 

Elliott Parker: Yeah, I’ll give an example. You know, it's interesting to note just to begin that every large corporation began at one time as a startup, right? They discovered some type of secret the rest of the world didn't know.

They figured out a way to exploit that secret. But, as they grew and scaled, like we said, they wanted to become more careful, preserve what they had built and, in doing so, create all sorts of incentive systems and governance systems to perpetuate what they had.

And startups are intended to do something very different.

Startups are designed to learn. Startups are not capital-efficient. They make lots of mistakes. They don't execute very well, actually. But they're really, really good at learning because the incentive systems are so stark, binary, high degree of success or disastrous failure in front of you at all times, that it forces creative entrepreneurs to find a way.

And that's important. So we have one example that I like to tell people about is a company we launched called Athian, which is creating a carbon marketplace for dairy farmers. And what happened is, a large company called Elanco came to us. Amazing business. Elanco makes pharmaceuticals and feed supplements for commercial animals and companion animals.

And they came to us and said, ‘You know, can you look at our commercial animal side of our business and see if you can find opportunities for innovation?’ Our team went out and spoke to dairy farmers around the country and found that many of them had contracts on their desk from airlines and oil companies and all these other businesses that were wanting to buy credits from them.

And these dairy farmers said, ‘I don't know what to do with this. They're offering me money to do this thing. I don't quite understand it. In many cases, it doesn't make sense. Is this a good price? Should I do this?’

We thought, you know, there was at some point going to be regulation put in place, as we've seen in Europe, to kind of mandate changes in behavior to make dairy farming more environmentally friendly than it's perceived to be. We thought regulations would impose some type of credit trading system.

But here it was happening, already. It was here. And so we realized there was an opportunity when we went around and learned more about the market. We found there are large companies in the dairy value chain that have set aside massive budgets to invest in purchasing credits. And there just weren't credits available that were validated and high-quality in the market.

So, we launched Athian in partnership with Elanco, found a great team, a great CEO and other founders to launch that company and begin the process of validating farmer activities, turning those into credits, and then brokering the sale and purchase of those credits within the dairy value chain. Carbon insetting, not offsetting.

Along the way, a funny thing happened. A lot of other players in the industry said, ‘That's an intriguing idea.’ And credit to the CEO of Elanco who reached out to a lot of his peers and said, ‘You know, you ought to invest in this with us. This would be helpful to the industry if this existed.’

Within about six months of the launch of Athian, 85% of the U.S. dairy market had invested in the business. Just instantly, this company becomes advantaged because of its association with the big players in the market. They start working in the market, start issuing and validating activity and working to make sure that the validation is rigorous and scientifically proven, and begin issuing and selling credits.

For the agriculture industry, this has been a game-changer.

For Elanco, that creates feed supplements that reduce the carbon output of cows and opens up a whole new business model where now products that might have been too expensive to be sold without any other system with which to purchase them are now feasible, because farmers can, in theory, make money from using these feed supplements.

And it's opened up all kinds of new opportunities for Elanco. It changed the way they think about selling. It's changed the way they've structured their team. They've become incredibly smart about the space and leading, really. And it's changed the story that the investment community is telling about Elanco.

So, it's really amazing to see this transformation because of this little startup that we built that is now not becoming so little and growing quickly and doing a good job. 

Drew Beechler: Why do you think it wouldn't have worked inside Elanco as well? Why was there the need for it to be a standalone startup, back to kind of our original point of the things internally and how it needs to live outside of the core business even?

Elliott Parker: Yeah, in this particular case, Athian benefited from the fact that it needed to be arm's length for the industry to believe it to be credible. It couldn't be backed by any one player or linked too closely to any one industry player. Otherwise, other people, other companies would not have played along.

So, that certainly helped. But like all of these ventures that come out of the corporations that we build with, again, Elanco is designed to do the thing that it does really well, which is design, manufacture, and distribute pharmaceuticals and feed supplements with a high degree of quality, very few errors in the system, extremely capital-efficient.

And those things are just opposed to doing this other thing.

What Athian does is an entirely different business model. It is so hard to repurpose the existing machine that's been built to do something else. It's like taking some big machine you might have in a factory that's designed to stamp out metal parts and saying, ‘Okay, now you're going to do plastic extrusion.’

It's just a totally different activity. And it requires a new machine. Just to play with a counterfactual. 

Matt Brady: Let's just pretend that Elanco did pursue this internally. Let's say that the opportunity allowed for a corporation to pursue it on their own.

What you often see is, just to back up Elliot's point, that an innovation team might run with a concept. It might have lags. And so now you have to put more resources behind it. You're doubling your costs, tripling your costs.

Again, you might be making progress with that opportunity itself, but there's nowhere to hand it off within the business. And so you start to see these innovation teams balloon around something that might have promised, but maybe shouldn't be within that core itself.

What happens, unfortunately, is that cynicism starts to grow around the innovation function and the promise of innovation itself, because even though they might be making progress against something, the costs are going up, the business itself is not seeing the returns that it would have expected as if this were a little business unit within the, within the organization itself.

And cynicism grows, and grows, and grows. And it leads to some of the trends that we're seeing this year within innovation more broadly in the corporate sphere. 

Drew Beechler: Yeah, that's a great segue. Maybe let's talk about what we’ve been seeing over the last year within corporate innovation teams? And how do we see some of that maybe changing or continuing even into the next year? 

Elliott Parker: Yeah, it's interesting. Right now, a lot of corporate innovation teams are retrenching to the core. Corporations are scaling back on their innovation investment at the same time explaining that innovation is more important than ever. And they're feeling the need to adapt more acutely than ever.

There's certainly tension in that. I think it's a recognition that the standard approaches just aren't working as well as they would like.

Number two, there's just a tremendous amount of change going on right now as corporations look to the future. Dramatic increases in information technology capacities, specifically around artificial intelligence, right?

So, many of the corporations we talk to and work with right now are looking at AI and just thinking, ‘We don't know what to do. We're finding uses for AI for improving efficiency within our business or maybe enhancing the customer experience slightly, but we know there are whole new business models out there that AI enables, and we just aren't sure what they are yet or how to go pursue them.’

And that's almost paralyzing to a lot of corporations. It’s a real challenge. I think it's a more difficult environment than we've ever seen. There's simultaneously more opportunity and less certainty about what to do. 

Matt Brady: I'm actually pretty optimistic. First of all, it's probably important to recognize that this function within corporations is relatively new.

There have been innovation teams for 25 years. Let's say we work with some really big companies where the innovation function is brand new. So, there's still big companies that are actually just getting started and there's cyclicality to any industry. There's cyclicality to any business and I think that there's cyclicality to functions and teams themselves within an organization.

So all the rage, maybe 15 years ago, was design thinking. And so what is that going to mean for our innovation team or our strategy team? We have to incorporate design thinking into everything that we do.

Then, there's open innovation. How are we going to respond to open innovation? How are we going to harness the power of our organization and channel that through the innovation and strategy teams?

And now there's a fundamental question of how AI, for example, is going to impact our business. Are startups a vehicle that we should be pursuing?

Really big questions, but I think with every one of these new kinds of waves, it probably underscores the underlying importance of the function itself and going through the exercise thinking about how the organization can grow and innovate and create the new.

So, we've seen a lot of retrenching this year, but I think it's that natural retrenching that you do when there is a new wave coming. How do you brace for it? How do you prepare for it? But then ultimately, how do you embrace it?

And so I think we will start to see a lot of corporations saying we now have a plan. We're going to take measured responses to this new opportunity and not just think about it as a threat. 

Drew Beechler: Let's double-click into AI, in particular. I'd be really interested in both of your opinions on what we are hearing from partners, from people in the market around the other concerns with AI and how well-prepared they are.

What are they asking us? And what are we telling them when, when they come to us and ask, ‘How should we think about how AI is going to disrupt our business?’ What would you tell these teams?

They're being asked the same thing probably by their C-suite saying, ‘You are the innovation team, you know — tell me what, what we should do with AI.’

Elliott Parker: Yeah, I think, generally, it’s a mix of both fear and optimism, which is appropriate. There are certainly threats, but there's massive opportunity too, and corporations are really well-poised to take advantage.

Look at Meta. The company invested $40 billion this year in R&D around artificial intelligence. No startup can raise that much money. They've got a cash-generation machine that they can use to redeploy into these experiments around AI.

And, as a result, they've got a good chance of winning for what they're trying to do. Now, most corporations aren't spinning off enough capital that they can invest $40 billion a year in R&D. 

Drew Beechler: They did help invent one of the best business models probably of all time in digital ads.

Elliott Parker: Exactly, exactly. But I think there's plenty that corporations can and should do.

Here's the reason why I am so bullish on artificial intelligence. It goes back to something you mentioned a bit ago, Drew. There's a philosopher in the UK named David Deutsch who explains that problems are inevitable. All problems are solvable within the laws of physics, as long as you've just got enough knowledge and wisdom.

If you've got enough knowledge and wealth, you're going to be ready for those problems that we can't yet predict that might come. If you're running a corporation and you want that corporation to be resilient, you need to be prepared to solve problems that you can't yet predict.

And you do that by gathering knowledge and gathering wealth and preparing.

Well, what artificial intelligence has the promise of doing is rapidly increasing our ability and capacity for gathering knowledge and gathering wealth. And that's why it's so exciting for large corporations. You can think about AI as a tool for improving efficiency, enhancing customer experiences, and building new business models.

But, fundamentally, if I were running a large corporation, I'd be thinking about the promise of AI for knowledge accumulation and for wealth generation. For the purpose of preparing for a future that is really hard to predict and that is coming our way very quickly, they absolutely need to be embracing it.

Matt Brady: It's going to be a major accelerant in terms of efficiency. I still come back to what it can't do, which is actually around some of the original problems for innovation within corporations, which is the how, right?

So, AI can absolutely help with the what and probably with some of the why itself, what it can't do is help navigate the organization, it can't help align leaders, it cannot help pursue the opportunity itself.

And so I think that there's tremendous potential for AI to be used to help with the day-to-day itself. But what it can't do is, again, back to some of the main failure modes of innovation and strategy within corporations, which is getting the work done.

And, again, aligning leadership around a pretty uncertain future. 

Drew Beechler: I'm pretty optimistic and just really excited. I think this is one of the biggest technology shifts and trends we've seen. It's been adopted the quickest by the enterprise too, I feel like.

And that's been really, really interesting to me, even into the amount of time between ChatGPT coming out and Salesforce rolling out an equivalent kind of into their enterprise-grade product. It’s the quickest I have ever seen that at that scale, going back even to mobile and social and cloud, all of those technology-adoption curves.

It feels like the AI technology adoption curve is just vastly accelerated, particularly within the larger enterprises, which I think is really fascinating. And I think it sets us up for a really interesting couple of years here. 

Elliott Parker: Yeah, I think one thing to note in the examples you gave is that the companies that are adopting it most quickly and putting it kind of centrally in their operations are these large corporations where the founder is still in place.

That's an important thing to note for those who might be working on the innovation side of large corporations.

Often, those companies that are still led by the original founder are willing to take more chances because the founder's got the credibility, the ability to kind of take on the risk and has the appetite to do it.

Most corporations aren't in that condition. And when we see innovation really succeeding, really, we see companies transforming. One of two things is generally true. Number one, the founder is still in place running the business. Or number two, the company is facing an absolute existential threat, and, if they don't transform, we'll go out of business.

You've seen IBM, as an example, transform five or six times over its history because it faced existential threats.

So, for most corporations that aren't in either of those two positions, it's particularly hard to innovate and put AI at the center right now in this current moment where that's the thing. And so you've got to find unique ways to do it.

We think venture building is a really good tool for certain types of opportunities for that reason. 

Drew Beechler: As we close out here, as teams are thinking about this new year and goals and where do they want to be at the end of 2025, what's maybe one piece of advice for innovation and strategy leaders that you all would give just around how should they be thinking about this year ahead and how to get ahead of what's coming down the road.

Matt Brady: I would say to focus on first principles, which are, ‘What are the problems that we want to solve?’ There's so much noise. There are so many, to Elliott's point, even just within AI, so many risks, so many opportunities. It can be overwhelming. And I think that that leads to some of that retrenchment to the core itself.

But by thinking about what kinds of problems could we solve for our customers or for the business itself or creating new opportunities for a new business, how do we want to solve those problems? What would really move the needle most for us?

I think that getting back to the first principles of the plan itself and where we want to have an impact I think helps clarify the machine a little bit and gets people back on track.

Elliott Parker: Yeah, I'd say, you know, in this moment of turbulence and uncertainty, the future is impossible to predict. All we know is it's going to be much stranger and weirder than we can imagine, and it's coming at us really quickly. And, in large corporations, we make decisions based on data and knowledge with a high degree of certainty.

In that environment, the data doesn't exist. There is no data about the future. The only way you get data about the future is by taking action and creating the data. Action creates data. And so the way that you take action and create data about the future is by running experiments.

Corporations need to make room for some deliberate inefficiency in the form of experimentation, as long as those experiments are fast, inexpensive, or cheap, and weird, meaning they're designed to challenge the status quo and what we already think about how the world works, what we know to be true as an organization.

If you can run more fast, cheap, and weird experiments, you're more likely to uncover anomalies, insights, and data that you need to make decisions about the future. We think startups and ventures are a great form of experimentation and a great way to uncover those anomalies quickly. 

Drew Beechler: Well, thank you both. I love both of those points. And I'm excited for these conversations to continue happening in a public setting like this. I really appreciate both of you spending some time with me here this morning. 

Elliott Parker: Yeah. Thanks, Drew. 

‍Matt Brady: Thanks, Drew.