Successful incumbent struggling to innovate? Here's a proposal for you to consider.

You know how... when you were 21, you were not afraid to pack a bag and move to another city to pursue an opportunity you were not quite sure of? But now that you are (maybe) older, you are very careful to jump into things. You don't want to rock the boat. People now depend on you.

Companies also go through that cycle. 

Once a business turns a profit, finds key repeat customers and is on a bonafide growth trajectory, a few things happen. Layers of organisation is added, the decision making wheels take longer to turn as there are now interests and points of view to balance, shareholders want to see the PBT figure go up year on year. The reckless abandon with which the company was able to try things can no longer be encouraged. For example, if you want to add a feature that breaks the product into a new segment of customers but which may harm a key existing client, you would either end up not adding that feature or not get round to convincing all stakeholders to take it on.

This is classic innovator's dilemma. Good book summary here. 

If your business is software-based, here's a proposal to consider:

Step 1: Create an API layer

Nothing special here. Everyone is doing it. Put an API layer on your service that lets other people have hooks into your features or customer base. This helps them provide value adds to your customers while getting themselves new customers for cheaper than it would have been if they go it alone. Whatever your primary strategic objectives are as a business, the APIs you expose should be such that nudge these 3rd party innovators in that direction. But still, have an open mind, good things could actually come from corners where you are not looking.

Step 2: Create an ecosystem of innovation around you

You are the big Don for a reason. Most likely, younger businesses are already knocking on your doors for various partnership proposals. Some ridiculous, some just a waste of your time (considering your size), but some really worth exploring. Rather than be afraid of them and push them off, keep an eye on those using your APIs and create an exclusive partnership program. An inner caucus of sorts. Built around your table. This gives you an inside look into what they are doing so you can selfishly nudge them around a direction that favours you or slow them down if they move too fast to scatter your market. *wink*. Provide extra resources to this inner caucus: like sales support, customized APIs, preferential pricing, co-branding, etc. Organise exclusive events that lets these chosen partners showcase what they do.

Step 3: Start a small investment fund

All that cash you are generating, watchu gonna do with it? Keep a small amount aside to invest in the businesses you see in step 2 above which seem to have a shot at either significantly growing your business or potentially upending it. Essentially, hedge your bets. Use the money you have to buy innovation. The businesses need it, and you need the innovation. If they become a real thing, then you are "inside". If after a few years it seems the business is no threat to you, or doesn't particularly fit your strategic agenda, you can divest. Hopefully.

Step 4: Do actual acquisitions

Not to be confused with step #3. In that one, you are basically experimenting. Playing "kalo-kalo". In this one, it's the real shizzle. You have found a company pursuing an opportunity you have already missed out on and they are kicking ass. Come on, everybody has a price. Before such a company gets completely out of hand and causes real damage, merge with them or buy them outright if still within your range. These days though, even if out of your range, there may be a financing option out there for you to explore.

Step 5: Have a skunkworks unit

You know, your own internal band of renegades. Those guys you allow to break rules and try stuff. A team that's not held down by those very things that make it difficult to experiment (organisational hierarchy leading to indecision, quarterly numbers that resist investment, etc.). Set a long term agenda for this team and step away. But hold them accountable. Make them come back to you with progress (or otherwise) regularly.

One may ask, "why is step 5 still necessary when you have done 1-4"? In my language there's a saying that 10 kids cannot play together for 10 years. You see all those companies that you are opening up to, it's guaranteed that at some point, the kids will leave the nest and you may not be able to hold the reins again. Your own internal black ops team is what you'd use to reassure yourself that you can still salvage something. It also serves a double purpose, it's very presence can help put these your partners in check not to overstep. It sends a signal that you are ready to move if they "do anyhow". Once in a while, call your partners in to have an inside look at the clones of their products you have built but chose not to launch because you respect their friendship. They'd get the message :)

So, there you have it. My proposal for staying protected as the innovation train seems to be choochoo-ing away from the station you control. One thing I don't really recommend, though some will disagree, is using your current production systems, people and processes to attempt to outrightly copy the young companies trying to.. err... err... "disrupt" you... Just Imagine a 56 year old man wearing bling and skinny jeans to feel among? Yeah... ridiculous.

Obligatory disclaimer: (You know I have to do that) Of course, I must say, there's probably nothing genius about this, most likely it's B-School 101 stuff, but please allow me... as per being a guy that went to night school, allow me some feel-good documentation of my weekend musings. Tenk you. 

Oh yeah... I know one or two people will be dying to say "but you work at...", :P to you. Das why I don't have a comments section.