The Challenge of Corporate Innovation

Why doesn’t innovation thrive in older more mature organizations? Before I answer that question, I should first make sure to say that it can and does thrive in some older and more mature companies (e.g. Target, Ford, UnitedHealth Group) but all too often it’s the younger up-start companies making the lists of ‘most innovative companies.’ If you check out the list, you’ll quickly see that there is a strong showing from traditionally ‘tech’ companies. Of course, you can’t miss Nike at the #1 spot - who has gotten more involved in tech with it’s Nike Fuel Band.

It’s not as though bigger fortune 100 companies don’t have the reason to be innovative. To keep maintaining their growth rate (and keep investors happy) they need much more lucrative growth prospects than a smaller company who get much bigger growth percentages with each and every customer. Luckily for mega corporations, most of them also have fairly large coffers that allow them to invest in new and riskier ventures. They built up these financial reserves by finding a business model that works and tweaking/modifying it  -- eventually running in execution/operations mode once they found something that worked. 

Startups, on the other hand, are constantly searching for new business models. If you’re familiar with the Learn Startup movement, you know that Steve Blank and others focus on the experimental nature of a business model canvas (essentially a visual and simplified business plan) and tweak it until they find a customer segment that will pay for the solution that solves one of their problems/needs.

What we see all to often with large successful companies is that they eventually find the business model canvas that succeeds and then they sit on it. In the 1970s Wang Laboratories was the dominant leader in word processing. They had 80% market share and missed the fact that IBM, but more importantly consumers, had moved on to personal computers. Needless to say, they didn’t last long.

Wang Laboratories (the Blackberry of the 70s)

Wang Laboratories (the Blackberry of the 70s)

You may think the term ‘experiment’ connotes structured, careful, and slow moving work but that’s simply not the case for most startups. They are moving quickly, constantly learning and moving from one hypothesis test to the next. It’s an inherently risky process – if you knew the outcome of the experiment, it wouldn’t be much of an experiment now would it? So now that we know most experiments won’t be successful, the best way to manage our risk is to do lots of experiments with a portfolio approach. All your innovation eggs need to be spread out and protected from the hens (e.g. Corporate P&L Raiders) who either want to use the capital for incremental changes or simply lambaste the innovation groups who are taking risks.

The facts are that not everyone is cut out for innovation. It’s critical to find the folks in the company who interested in and have the personality to keep ideating and searching for new business models. If you’re trying to start up a intrapreneur program, keep your eye out for corporate rebels who love learning, are looking for challenges, accept a fair amount of failure, and are able to navigate the politics of the rest of the regime.