Can Big Companies Innovate?

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 has time to interfere with the status quo. But conventional wisdom is rarely reliable, and certainly never 100 percent.

This was the topic of discussion on day two of the June 2008 Seattle Innovation Symposium (you can read about day one in my last post, “Digital Natives in Our Midst”). Participants quickly dispensed with the notion that big companies can’t innovate. It was hard not to, given the presence of Boeing in the room. They did, however, agree that more often than not, the institutional rigor often imposed on large, complex entities “leads to rigor mortis,” as one person quipped. Large organizations are by design built to avoid risk, and innovation requires risk taking.

Beyond that, there was little consensus (that wasn’t the goal), but there were plenty of interesting ideas. For example…

Those who lead innovation do three things: Create a sense of urgency, set a clear goal or vision of the future, and create a shared vocabulary around the new thing.

For groups to innovate, they must hold a common belief that all is not perfect in their world, as well as the idea that the problems putting them at risk are at least in part internal.

Innovation is usually N+50 — it’s not the initial idea that matters most but how you build on it.

In the inevitable face-off between Google and Microsoft (doesn’t every business discussion have to have one these days?), talk turned to simplicity. What users want is a product that gets the basics right. They’d rather have 10 options on their mobile phone than 100. Vista, said one participant, is innovation on top of innovation and shows a lack of leadership to make the hard calls and choose between options.

This led Rob Austin, co-leader of the Symposium, to theorize 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 why some incumbents survive radical technological change and others fail. New ideas in established companies are like a virus, he suggested; corporate anti-bodies will try to kill them.

Organizational barriers include structural and cultural inertia, complacency and a lack of incentives; internal politics and control issues (powerful groups want to maintain the status quo, or there is fear of cannibalizing existing products or destroying existing competencies); pay-off uncertainty, and a 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, from the Copenhagen Business School. Bruce Rogow suggested that big companies should take the most vocal, angry dissidents and spin them out to compete with the company.

So what is the upshot of all this? If your company is an industry incumbent – especially if it’s a large one – innovation isn’t likely to just happen. You need to find fault with your existing products or operations; acknowledge that, as Pogo once famously said, “we have met the enemy, and he is us”; and then encourage those who are most vocal about what’s wrong to create something new while keeping the corporate anti-bodies in check. For most organizations, this will be an unnatural act.