Why Big Companie Can't Innovate

The assigned article( http://blogs.hbr.org/cs/2012/09/why_big_companies_cant_innovate.html) sums up the reason for this trend  in a nutshell….once corporations reach maturity…the measure of success is different…it changes to profit, as opposed to the infancy stage in which success is measured by how well a problem is identified, and then a solution is discovered.  Corporations exist to make money. Issues arise when corporate leaders fail to acknowledge the limits of organization that they’ve put in place.  When limits are recognized, and an organization gives power to internal groups to function with different goals and operational metrics, only then can growth be secured through innovation.

When doing a little research about this topic, there was a recurring theme within the different articles and blogs I came across. Innovation requires risk. The bigger the organization, the bigger the stakes.  Big companies would rather make small improvements to an old process then get rid of the process all together and start from scratch. Most employees in these organizations tend to avoid risk as well and stay for a long time. While high retention rates can be a good thing, there are no new fresh ideas coming through, rather old ideas are reinforced over and over again.

http://emba.mit.edu/the-experience/executive-insights-blog/6-lessons-for-encouraging-innovation-in-large-corporations/

This above article also goes on to discuss how one model for decentralized innovation can have great implications on how large organizations innovate. Some lessons for adapting this model include the following:

1)     Innovation should start at the business unit (BU) level including having its own budget and managers. The central team members should be encouraged to seek out new thinking externally.

2)     Central team should function more like researchers as opposed to research managers.

3)     Develop a trust in the BU’s research; focus on what they see as promising.  Doing such will help to prioritize a close connection with the customer by the BU.

4)     Higher –ups need to develop physical relationship with the BUs. Attend meetings, get to know them and understand their strategies on a more personal basis.

5)     Giving BUs larger discretionary budgets allows the entrepeneneur type group the ability to take the lead. Expert help from central teams as well as time will help to increase the probability of better innovation across the company

6)     Leadership support is essential. By starting with BUs ideas, gain the immediate support of the BUs Senior management. In a centralized organization, and idea has to be shopped around until someone wants to embrace it.  Managers frequently seek to minimize risk because their reputation depends on the outcome of their projects. By shifting innovation from a central function to a decentralized model, managers reduce risk by empowering the employees closest to the customer to lead innovation.

I also came across this older article;

http://www.forbes.com/sites/osmancanozcanli/2011/01/08/innovation-in-large-companies/

It states many of the same ideas as far as risk-taking and how difficult it is to be an innovator within a large corporation because no one wants to be attached to a failing product; there are easier ways to be promoted. The risks are just too high not only for the employee, but also the organization as a whole. Shareholders would rather have a predictable return on the money they have invested as opposed to a high-risk move. The article does go on to say that although this is the norm, and the nature of the business…there is a possible way to achieve innovation in a large organization, and goes on to share his ideas on how.

To start, it must be understood that innovation is the task of creative and risk taking individuals and small teams…these people exist…don’t hire them, understand they cannot function in the environment of a large corporation. Tell them you want to innovate and do the following:

1)      Give them a budget and direction, but let them experiment

2)      Help in the selection of product concept that is in line with organization

3)      Leave them alone, just provide financing

4)      Let them own the vision with deadlines…very little hand-holding

5)      Allow them to start selling product when time is right

6)      Possibly draft an agreement allowing you as the organization to purchase the company if it becomes successful in the future.

7)      This small company may create a brand with true passion behind its product (s). Poducts that never would have survived in a large organization.

8)      Watch them closely, let the company grow, if it fails, only money was lost, if it succeeds, buy it!

In this scenario, employees were not a risk and neither was the reputation of the organization. A product and possible brand was developed that would have most likely never stood a chance within the current organization at a much cheaper price for development!

The title for this model really hit home for me as a Research Scientist-
The In Vitro Method for Innovation

As demonstrated by all of these articles, to innovate in an established, large organization great risk is involved, the right culture and the appropriate support is also necessary. Although innovation may not be impossible to do within these environments, it is difficult to achieve based on the aformentioned reasons. A thorough assement of the risks versus benefit should be done before trying to implement either of the models discussed here to ensure the most success.