| | May 20168CIOReviewIN MYOPINIONBy its nature, innovation is unpredictable, spontaneous, and risky. These characteristics have historically made innovation more common in small, agile startups than large, well-established corporations. After all, the former have far less to lose and fewer internal hoops through which to jump, while the latter have years and years of established processes and procedures, along with shareholder expectations, to fulfill.For a long time, this informal arrangement worked fairly well. Corporations remained profitable by building in-house expertise, solidifying and expanding their supply chains, and making adjacent products and incremental improvements driven by customer requests. Meanwhile, most startups went out of business. However, some of the startups that did survive released world-changing products and made unbelievable profits.Times have changed. As the recent Ericsson report, "Organizing for Change," discussed, technological change has lowered the barriers to entry for almost every industry. Incumbents no longer have the advantages they once enjoyed--and as we have seen with Uber, Airbnb, Netflix, and more, it is very possible for a newcomer to gain market dominance in just a few short years.To stay competitive, larger companies need to make innovation a core tenet of their business. In this paper, we will discuss some of the strategies they can use to become just as disruptive as their startup counterparts.The Right EnvironmentDisruptive thinking does not happen on demand. Rather than planning for innovation or telling your employees to "be innovative," you must create the right conditions for innovation, while the ability and means to be experimental will catalyze it organically.Location, Location, LocationWe tend to focus on what we can change within the company to stimulate innovation--but focusing on what is taking place externally has just an equal, if not greater, impact. According to Michael E. Porter and Scott Stern, researchers from Harvard Business School and the MIT Sloan, innovative output takes place disproportionately in clusters: regions with high concentrations of businesses and organizations in a specific domain.One of the biggest clusters for technology is located in Silicon Valley. For that reason, any company that is seeking to forge or maintain an innovative edge should have a strong presence there.Let us examine Silicon Valley's benefits through Porter and Stern's innovative capacity framework, which has three central factors.The first factor is the availability of high-quality inputs. First, Silicon Valley has a huge amount of human capital. In addition, the Valley benefits from a strong relationship with several top universities, including Stanford and University of California, Berkeley. Lastly, this region has ample risk capital: In 2014, combined venture capital investments in the bay area reached $14.5 billion, or 43 percent of U.S. total investments. The second attribute is context for firm strategy and rivalry. Porter and Stern explain working near one's competitors encourages progress and the commercialization of new technologies. There are between 14,000 and 19,000 startups in the Valley, which is at least 3.5 times higher than the U.S. metro average. This leads to impressive innovation: more than 46 percent of California's patents (and 12.7 percent of America's) are granted in Silicon Valley.The third element of the framework is demand conditions, or local customers who consistently push organizations to release new and updated products. Because technology is widely available to many people, "local" has taken on a new context. Nonetheless, pressure from sophisticated consumers drives Silicon Valley companies to continually innovate.For all of the above reasons, Ericsson invested in a new Santa Clara campus with aim to lead the software innovation. Innovation: The Most Important Word for OrganizationsBy Diomedes Kastanis, VP, Head of Innovation and Technology BUSS, EricssonDiomedes Kastanis
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