Regulated innovation - The digital strategy takeover

Big companies don't innovate. There, said it.

Big companies don't innovate because they practise the art of specialisation - the principles laid down by Adam Smith of segmenting labour into common chunks of activity. Groups of professionals who have a shared specialisation don't innovate because they are professionals who have a shared specialisation. They have common ways of working that makes them who they are. There is no room to innovate.

Big companies don't innovate because they believe in best practice and common process. If you spend all of your energy creating the best ways to do what it is your organisation does, there is no space to innovate because it breaks your model.

Big companies don't innovate because they are necessarily hierarchical. They have structures that enable them to manage risk and control themselves, and those structures mitigate against people doing things differently. That's the point of the structures.

Now I'm sure that there are exceptions that break these generalisations, but go with these assumptions for a while.

The world of technology understands that big companies don't innovate. Whilst the likes of Google and Microsoft and Apple might have R&D divisions, the new stuff is much more likely to come from acquisition than it is from the quasi-academic egg heads. R&D is something that a big tech company is expected to have along with, say, an HR department. Only this week I was reading an article about how if Google needs to cut its cost base in the next few years, those cuts will come in General Administration and R&D.

Tech companies outsource their innovation by acquiring products and talent from the world of start-ups, and the most credible exit plan for most start ups is to be acquired by a big tech company.

What's fascinating to me at the moment is that regulated industries, where alongside the three pillars of anti-innovation above the spectre of The Regulator rules supreme, innovation is happening on the outside but there doesn't appear to be much of a acquisition strategy by the big incumbents.

Take healthcare. An area which is being disrupted by the rise of the wearable. Where are pharma or traditional healthcare companies in this market? Well, they're not. Where are the rumours about GSK or Novartis acquiring Fitbit?

Or take financial services. Where are the rumours of big banks acquiring nimble consumer app developers?

Or utilities? Or telecoms? Or to an extent even media companies?

Now maybe in a world dominated by West Coast tech companies with enormous cash reserves it's simply that everyone else has been priced out of the market. But when big companies struggle by their nature to innovate, the acquisition path should be one more should be looking at to pursue a successful digital strategy.


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