Innovation Inc.

It’s conventional wisdom that big organizations aren’t as innovative as smaller ones. At best, innovation is harder for them. At worst, big companies crush innovation before it interferes with the status quo. But conventional wisdom is rarely reliable.

This was the discussion topic on day two of the June 2008 Seattle Innovation Symposium (read about day one in my blog “Digital Natives in Our Midst”). Participants quickly dispensed with the idea that big companies can’t innovate. It was hard not to, given the presence of Boeing in the room. But they also agreed that the institutional rigor often imposed on large, complex entities “leads to rigor mortis,” as one person quipped. Large organizations are built to avoid risk, and innovation requires risk taking.

Rob Austin, coleader of the symposium, theorized that one real difference when it comes to innovation may be the notion that large organizations more easily fall into compromise among multiple stakeholders, while at small firms, there’s usually a single figure—the founder—who forces a decision.

Suresh Kotha, professor at the University of Washington’s Foster School of Business, raised the question of why some incumbents survive radical technological change and others fail. New ideas in established companies are like a virus, he suggested; corporate antibodies will try to kill them. Organizational barriers include structural and cultural inertia; complacency; a lack of incentives; internal politics; control issues; payoff uncertainty; and lack of knowledge in the new realm.

One conclusion: Large organizations need the ability to handle not just diversified technologies but diversified modes of organization as well. Skunkworks are a sign that the official structure can’t really handle innovation, said Daniel Hjorth, professor of entrepreneurship and innovation management from the Copenhagen Business School.

So what is the upshot? If your company is a large industry incumbent, innovation isn’t likely to just happen. You need to find fault with your existing products or operations and then encourage your internal critics to create something new while keeping the corporate antibodies in check. For most organizations, this will be an unnatural act.