Large corporations often struggle with innovation due to their focus on optimising existing business models rather than exploring new ones. This is due to the risk-averse nature of large firms, which prioritises predictable, short-term profits over uncertain, long-term gains. This mindset can result in a lack of radical innovation, leading to stagnation and decline.

One solution is to divide the company into two parts: one focused on optimising the existing business model, and the other on exploring new ones. This ‘exploration’ unit should be separate from the main business, with its own resources and processes, to avoid being constrained by the risk-averse culture of the parent company.

To succeed, the exploration unit needs to adopt a methodical approach to innovation, using tools like the Business Model Canvas and Value Proposition Canvas. These tools can help the unit generate new business models, test them rapidly, and pivot if necessary.

Finally, senior management must be committed to this dual structure and willing to tolerate failure in the exploration unit. Without this commitment, the exploration unit will likely revert to the risk-averse culture of the parent company, and the opportunity for radical innovation will be lost.

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