Corporations have traditionally been built upon one immensely successful product, and subsequently expanding their enterprise on that existing business unit. R&D departments were solely focused on improving existing products by identifying supporting business models.
What’s inside?
As startups are increasingly outperforming their corporate counterparts, it is essential for established companies to embrace the corporate innovation model. A considerable amount of enterprises are proactively thinking about innovation through internal R&D, corporate innovation teams, in-house innovation labs, and external accelerator programs. So, what is corporate innovation?
Corporate innovation is not limited to the creation of new products. It also includes rethinking processes, operating models, partnerships, and customer experiences to ensure long-term relevance and growth.
Corporations have traditionally been built upon one immensely successful product, and subsequently expanding their enterprise on that existing business unit. R&D departments were solely focused on improving existing products by identifying supporting business models.
However, what was previously successful has now been upturned by an influx of disruptive startups. While corporations have shown to be weak at identifying disruptive opportunities, startups thrive in reimagining the outdated. In the current environment, corporations must rethink and reinvent their business models, incorporating internally generated success with externally generated innovation.
Today, corporate innovation extends beyond improving existing offerings. Market volatility, accelerated technological change, sustainability pressures, and shifting customer expectations now require companies to continuously adapt how they operate, deliver value, and compete. Innovation is no longer confined to R&D departments, but embedded across strategy, culture, and execution.
Historically, scale and efficiency protected market leaders. Today, speed, adaptability, and access to emerging technology are equally critical to maintaining competitiveness.
How does corporate innovation work?
Corporate innovation can be defined as the process of enterprises implementing new innovation opportunities into existing business models. Established companies who engage in corporate innovation typically have a dedicated team towards innovation efforts.
Recent research shows that innovation inside large enterprises is now primarily being led by technology leaders. Around 80% of CIOs and senior technology executives report that they are personally responsible for driving innovation across their organizations. Strategic planning and operations leaders are also increasingly involved, but at significantly lower levels, with fewer than half of organizations citing these functions as central innovation drivers.
However, leadership alone is not enough. Additional findings reveal that only a small portion of companies apply structured governance to their innovation efforts, yet these organizations consistently outperform their peers. Roughly one in eight enterprises manage innovation through formal governance frameworks, and those that do generate nearly double the average revenue growth of companies that approach innovation in a more fragmented way. Firms with disciplined innovation governance achieve close to 6% annual growth on average, compared to under 3% for organizations without clear structures in place.
In a study of 26 corporate partners conducted by Plug and Play Tech Center, a majority have an innovation team of over 20 people. Their main objective is to implement proof of concepts (POCs) and pilots across the company. This can be done in multiple ways, primarily through R&D within the company and by working with corporate accelerators to leverage their startup network.
In practice, corporate innovation often follows a structured journey from exploration to experimentation and execution. Organizations identify priority areas, test solutions through pilots, and scale what works across the business. This approach allows companies to move faster while minimizing risk.
During the exploration phase, organizations focus on identifying where innovation is most needed. This includes assessing strategic priorities, market trends, customer pain points, and internal challenges. The goal of exploration is to build alignment around why innovation matters and where it should be applied.
This phase also helps create urgency. By understanding competitive threats and emerging technologies early, organizations can define clear innovation focus areas rather than pursuing disconnected or reactive initiatives.
Experimentation is where ideas are tested in practice. During this phase, organizations engage internal teams and external ecosystems to validate potential solutions. Proofs of concept, pilots, and prototypes are commonly used to test assumptions in low-risk environments.
Rather than aiming for immediate scale, experimentation prioritizes learning. Organizations use this phase to understand what works, what does not, and how solutions may need to be refined before broader deployment.
Execution is often the most critical and challenging phase of corporate innovation. It focuses on scaling successful initiatives and integrating them into core business operations. Without strong execution, innovation efforts risk stalling at the pilot stage and failing to deliver measurable impact.
Effective execution requires close collaboration between innovation teams and business units. Clear ownership, defined success metrics, and operational readiness are essential to move from experimentation into production. Organizations that excel at execution prioritize standardizing processes, educating stakeholders, and aligning innovation outcomes with broader business objectives.
Considering one of the main intents of corporate innovation is to strategically implement a new technology, one clear process is sourcing for startups. Common ways to source for startups include external accelerators, internal corporate innovation programs, and corporate venture arms (CVCs).
The innovation team must closely evaluate a startup by analyzing a concise set of criteria. Two major questions to consider include:
Who are their main competitors?
Which business units do they want to work with?
Beyond these questions, corporations often assess a startup’s scalability, team maturity, and ability to integrate with existing systems. Alignment between innovation teams and internal business units is critical to moving pilots into production. If the startup proves to be a good fit, the innovation team will run a POC or pilot. This allows startups to test their product in a safe environment before fully integrating with the corporation’s business model. The innovation team is responsible for evaluating the startups during this testing period and determining if they are equipped to move forward.
While innovation is often associated with major breakthroughs, most corporate innovation occurs through incremental improvements. These include process optimizations, technology enhancements, and refinements to existing products or services.
Incremental innovation allows organizations to generate faster returns, manage risk more effectively, and build internal capabilities over time. These continuous improvements often form the foundation for larger transformations.
Rather than waiting for a single disruptive moment, leading enterprises focus on continuous progress that compounds over time.
Corporate innovation generally follows open, closed, or hybrid models.
Most enterprises today adopt a hybrid approach, combining internal expertise with external ecosystems to accelerate innovation while maintaining strategic alignment.
A powerful example of open innovation in practice is the partnership between Mercedes-Benz and Plug and Play through STARTUP AUTOBAHN powered by Plug and Play. Launched in 2016 in Stuttgart, the program was created to blend Silicon Valley’s startup culture with German engineering excellence and accelerate the adoption of mobility technologies.
Since its launch, the platform has screened over 6,800 startups, executed more than 197 pilot projects, and brought 20+ innovations into series production. With approximately 500 startup-corporate projects across Europe and eight global mobility platforms, STARTUP AUTOBAHN demonstrates how structured collaboration with startups can move innovations from pilot to real-world deployment at scale.
Recent projects include lightweight noise-reduction metamaterials that cut component weight by up to 30%, AI-driven wind-forecasting systems that improve EV range predictions by 50%, and edge-computing sensor platforms that significantly reduce vibration testing time — showing how open innovation translates into measurable operational impact.
Leaders featured in Plug and Play’s Inside the Corporate Mind video series emphasize that innovation culture cannot be mandated top-down. Instead, they recommend starting with the small group of employees who are already motivated to drive change, demonstrating early results with them, and then scaling those successes across the organization. Once roughly ten percent of the company adopts an innovation mindset, that behavior can cascade organically throughout the rest of the business.
Executives also highlight the importance of blending internal and external innovation. While internal forums, incentives, and challenge programs help teams develop new ideas, engaging with startups, research institutions, and academic partners ensures companies stay exposed to thinking beyond their own walls. Several leaders note that rigid hierarchies and siloed decision-making often limit innovation, which is why many organizations are shifting toward cross-functional teams, flatter structures, and more agile ways of working to collaborate effectively with startup partners.
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The role of innovation teams
Dedicated innovation teams play a central role in turning ideas into impact. These teams are typically cross-functional, bringing together expertise from product, technology, marketing, finance, and operations.
When empowered with clear goals, leadership support, and the freedom to experiment, innovation teams help bridge the gap between strategy and execution.
To ensure innovation efforts deliver meaningful value, organizations track a combination of financial and non-financial metrics. Common indicators include return on investment, time to market, number of pilots launched, customer adoption, and employee engagement.
Organizations with strong innovation cultures consistently generate more value from their technology investments than their peers. In a global executive survey of over 1,000 leaders, cultural misalignment and outdated ways of working ranked among the top reasons digital transformations fail. Companies that identify innovation as a core part of their culture are twice as likely to successfully scale their digital initiatives and nearly twice as likely to increase spending on innovation and R&D.
These organizations also outperform in execution. Innovation-driven companies are far more likely to embed AI into core processes, capture real-time data to guide decisions, and apply agile practices across the business. As a result, they develop new products significantly faster, scale new ventures more effectively, and are substantially more likely to rank among the top performers in both revenue growth and profitability.
Leading organizations increasingly prioritize impact-based metrics over activity alone, ensuring innovation contributes to long-term growth rather than short-term outputs.
Corporations have historically proven to be immensely successful at advancing existing business models. However, they often fail to identify new disruptive opportunities for growth and expansion. On the other hand, startups are great at re-envisioning how an industry can operate and grow. Innovation is crucial to a corporation’s success by giving it a competitive edge in penetrating markets faster, a reality explored in Plug and Play’s Inside the Corporate Mind video series featuring leaders from Jaguar Land Rover, Ernst & Young, and American National Insurance. By creating a mutually beneficial relationship with startups and entrepreneurs, corporations can ensure a long-standing successful business for generations to come.
Corporate innovation enables organizations to adapt to change, remain competitive, and build resilience in increasingly dynamic markets. Companies that invest in innovation consistently are better positioned to attract talent, respond to disruption, and sustain long-term growth.
More importantly, corporate innovation helps companies turn change into something actionable. Rather than reacting to disruption after it happens, organizations with strong innovation capabilities are able to test new ideas early, learn quickly, and adjust before market shifts become existential threats. This proactive approach reduces risk and makes change more manageable.
Innovation also plays a major role in how well a company executes. Many organizations have no shortage of ideas, but struggle to move beyond pilots or experiments. When innovation is embedded into how teams operate, how success is measured, and how decisions are made, good ideas are far more likely to turn into real business outcomes. Execution is what separates innovation that looks good on paper from innovation that actually drives impact.
From a people standpoint, innovation matters because it shapes culture and engagement. Teams that are encouraged to experiment, collaborate across functions, and learn from failure tend to be more motivated and more invested in the company’s future. In an increasingly competitive talent market, organizations that create space for innovation are often better at attracting and retaining high-performing employees.
Companies that continuously test, refine, and evolve are better equipped to navigate uncertainty, whether that comes from new technologies, shifting customer expectations, or broader economic change. Over time, this ability to adapt becomes a competitive advantage in itself. Ultimately, organizations that treat innovation as an ongoing discipline rather than a one-off initiative are better positioned to grow, adapt, and lead in the long run.
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