The basic premise of dual transformation for corporations is simple:

Balance near-term organizational needs to drive revenue growth with the exploration of new capabilities and/or business models to future-proof their organizations.

The framework's structured approach, when executed well by corporate leadership teams, allows large companies to tackle two initiatives (“Transformation A” and “Transformation B”) concurrently, both of which benefit from core-business capabilities ("Component C").

The team at Innosight behind this framework put it perfectly:

‍The goal of dual transformation is to "reposition today's business to maximize its resilience while at the same time creating tomorrow’s new growth engine."

As Colin MacDougall on our team said on an Innov8rs webcast, though, "Everyone who's worked on dual transformation efforts knows that there's so much work you have to do in A that B starts to feel abstract and like you might never get there."

(Watch the entire Innov8rs webinar here for more insights from Colin and Matt Brady.)

Common rationale in many corporate C-suites today is that ‘exploratory’ innovation should be a "lean effort, with minimum resources applied, which means low budgets and low performance expectations, until there is evidence of an investable idea," as Forbes contributor Andrew Binns recently wrote.

But this line of thinking fails to factor in Horizon-3 innovation opportunities that can be addressed while still improving existing business offerings. The good news? There's a way for corporations to tackle both initiatives at the same time while giving them the necessary attention and resources they need to work.

Tackling Near- and Long-Term Growth Initiatives Through Dual Transformation: A Strategic Imperative

Overhauling legacy technology stacks while onboarding new AI-powered tools to replace dated point solutions. Optimizing workflows by automating and digitizing processes (e.g., procurement, logistics). Shifting IT infrastructure from on-premise to the cloud for scalability and cost-effectiveness.

Business transformation initiatives can take many forms, but most of them have the same goals:

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• Enhance operational efficiency
• Improve the customer experience
• Reduce costs across the business
• Strengthen workforce agility
• Modernize data-governance practices
• Respond to market trends/insights

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These goals make complete sense. After all, a focus on capital efficiency, risk eradication, and maintenance of what already exists are the top priorities for corporate leaders today, thanks largely to boardroom pressures.

“Organizations produce the results they are designed for," Elliott Parker wrote in "The Illusion of Innovation." "Or, said differently, you can tell from the produced results what an organization is optimized to do."

The question corporate leaders must ask themselves, though, is if their companies are overly optimized for near-term safety, predictability, and efficiency and not enough for long-term business resilience and durability.

If the answer is "yes," a more forward-thinking approach to transformation is likely required.

Put another way:

‍Executives and boards must strike a balance between making 'foundational' improvements to existing products, services, and processes and fostering innovation away from the core.

Fail to do so, and corporations risk potentially letting insurgents (startups) with cutting-edge tech take market share away from their businesses. Consider upstarts with innovative AI capabilities that incumbents may lack.

“AI is constantly evolving, putting pressure on businesses to outpace the disruption as they scale their AI-driven transformations across their organization,” said KPMG U.S. Vice Chair of AI and Digital Innovation Steve Chase.

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Implementation of AI to streamline data analysis, speed up customer-support responses, generate personalized recommendations, and conduct quality control has a tangible, positive impact for today's corporate workforce.

The ripple effects from implementation are stronger customer acquisition, retention, and loyalty.

But as consulting experts recently wrote for Harvard Business Review, history tells us making mostly (or only) incremental upgrades, particularly in an era of rapid technological advancement like today, opens the door for emerging industry players to gain a foothold in their market.

"Thriving during disruption means reimagining your future, not simply improving your present," the consultants noted, adding that enterprises can "simultaneously take the judicious steps needed to strengthen their existing operations and the radical steps required to flourish in the new era."

Building and Engaging with Startups While Maintaining a Focus on Core Operations: A Balancing Act

The reality is it's not 'incumbents vs. insurgents,' when it comes to business success. (Or at least it shouldn't be.)

Rather, corporations that recognize business transformation isn't enough to withstand eventual market 'shake-ups' due to TBD external factors (not just new startups, but also black-swan events like COVID-19) must also recognize the power of corporate-startup engagements — the other side of the dual-transformation coin.

"For many corporations, deep and deliberate engagement with startups will be the only way to realize the transformation they seek and regain a competency for innovation that has been lost," Elliott said in his book.

Corporate venture capital firms and funds already build and manage portfolios through targeted investment in promising startups of strategic relevance and importance to their business. But successful startup engagement today goes beyond solely backing early-stage ventures with strong product-market fit and interesting AI.‍

A holistic venture strategy also entails startup creation.

Increasingly, large corporations understand how external venture building can help solve intractable problems facing their businesses that limit progress against their overarching corporate strategy.

Yet some of these scaled enterprises still undervalue its potential as a growth lever.

The real unlock of venture building, per Matt and Colin, is knowing how eventually launched startups can provide advantage to the core business and how the corporation can bring advantage to the startups:

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• Corporations have a wealth of resources and insights that, when shared with startups they build, can give them valuable intel to drive experimentation and inform product roadmap development.

• Corporations can also become first customers and investors of their startups, ensuring a strong financial start for the ventures and breathing room to explore other new business partnerships.

• Startups, meanwhile, operate with a level of speed and nimbleness corporations often can't, due to various internal innovation ‘antibodies,’ enabling them to act on ideas and innovate more quickly and, in turn, generate new insights to bring back to the corporation.

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This symbiotic relationship "creates something of a virtuous cycle between a corporation and a startup with deeply aligned incentives and deeply aligned insights between the corporations and startups," Matt said.

Before committing to venture building and engagement with startups, though, corporate leaders must ask:

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• What they want to get out of venture building (i.e., specific business, strategy, customer, and/or market problems they want to solve sooner than later)

• How they'd engage an outside partner to aid them with new startup development

• What structural changes must happen in-house to facilitate new venture creation

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"'Are we ready to take a step forward into venture building?,'" said Matt. "'If we were, where would we build? Where would we invest?' ... 'How would we do this in a programmatic way so that we are making multiple shots on goal and helping to solve as many problems within our business as possible?'"

Answers to these questions ultimately ladder back up to one’s corporate strategy.

In some instances, it may make sense to build new businesses internally.

Matt stated this avenue enables C-level decision-makers (and, in many cases, board members) to dictate the direction they take with ventures they could spin out from, acquire, or merge into the corporation in time.

But if a corporation's strategic ambitions involve wanting to better see around corners (i.e., forecasting the future in their space), gaining a share of adjacent markets, reshaping their company narrative publicly, and/or building a stronger business legacy, external venture building offers a wealth of advantages.