The myth of big orgs and innovation
April 11th, 2007
The myths of innovation book is coming - a mere 4 weeks away - and I’ll be writing appetizers like this one until it’s out to tease, titillate and tempt you.
One great misnomer about innovation is that big organizations can’t do it. It’s a shame really, as there are many stories of great innovations done by big companies. We love the start-up stories, but there are many great invention tales connected to big, old, organizations.
In fact many of the greatest technological innovations of all time, landing on the moon (NASA), the creation of the first PC (Xerox), and the development of the Internet (DARPA) all took place inside of large organizations. Then of course there is the ENIAC (first PC), the first jet engines (RLM), and countless other inventions created by various large organizations throughout history.
Now I’m not saying innovation is easier in large companies (although occasionally it is) - I am saying that the size of an organization is rarely a deciding factor: it’s the organization’s attitude towards change that matters.
Here’s an example: If the CEO of SuperBig Inc. decides to pay $1mil to any employee who prototypes new product ideas, guess what he’ll have? Lots of hard working people willing to take risks with new ideas.
And by the same token, if the CEO of UltraLeanStartupCo Inc. yells at people for taking chances, and pays bonuses exclusively for complacent status-quo behavior, he’ll never see innovation no matter who he hires, or what books he reads.
Certainly SuperBig’s stockholders might wonder about their CEO’s sanity, but we’re talking innovation, not mental health.
One hypothesis is that innovation hinges on two things:
- Willingness to take risks
- Commitment to hard work
And both are hard to achieve in any sized organization. Talent, resources, and luck are irrelevant if no one is taking chances (#1) and working hard to make them pay off (#2). I certainly like talent and luck, but innovation can happen without them.
Sure, there are a thousand caveats - I concede that risk aversion is rampant in many big organizations - but the point generally stands: size is not a primary factor in the ability to find/follow new ideas - it’s the strategy and behavior of the leaders that matters much more. There are enough examples of innovations by big organizations to render size a less important variable than is commonly believed.
So instead of lamenting “my company is so big it never innovates” - a more accurate complaint is “my boss’s strategy doesn’t reward people with new ideas”.
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Hi Scott,
Having the right incentive schemes are very important to generate wide spread innovative thinking in organizations. At the same time, having powerful teams also are important in major advances. The teams discussed in Warren Bennis’ “Organizing Genius” come into mind.
Looking forward to your book.
Kempton
[...] on amazon available now. More info and teasers to [...]
And just where do you think #1 and #2 are more common? Big companies or small?
No one claims big companies _never_ innovate, just that they do it so slowly it looks pathetic next to startups.
Good point. You may add the web to your list of examples. The web was invented at CERN, an international research organisation.
It is not even required to invest 1M$ to get inventors to work. Just giving them “free” time is enough, like at CERN. The 20% of google is one step in this direction. Big companies can afford to have people spending up to 100% of their time doing R&D, explore and test things.
Inventing is a matter of chance and letting people look around and explore things increase this chance. A company where all the employes have their nose stick in the handlebars, pedaling at full speed are very unlikely to make any innovative findings.
The other difference between companys is how employee inventions are dealth with. If the company has not a fair and attractive handling of these, the company takes the risk that the employee lives it silently and develop its invention in its own startup or selling it,etc.
John P:
On the surface it seems obvious that small companies would be bigger risk takers, but the more I’ve thought about it the more complicated it is.
A small business owner has everything at stake - if they fail, they go under.
We’re biased by high profile tech sector start-ups, which are in an extreme class of risk taking and opportunity. Many (possibly most) small companies don’t take on the same kinds of risks.
But a team manager at a big corporation has much less to lose. Even if s/he fails he’s unlikely to get fired and certainly won’t lose his house because the project took the biggest risk.
So again, I think the rough sketch of “small companies innovate more often than big” falls apart quickly . There are way too many counter examples in both directions.
[...] has a post up regarding large companies and innovation….most people like to bash the large companies like MS, IBM, etc and say they can’t [...]
I believe that both large and startup firms have the power to innovate.
If you take large firms like GE or 3M who are known for their strong efforts towards creating an innovative climate you are definitely right.
But other examples show that it is often the lack of resources of small firms that make them innovative.
Finding new ways for doing things seems to be more important to small companies.
Furthermore history tells us that many startups are the result of unsatisfied emplyees.
SAP R3 for example coud have been an IBM product, to name only one.
The boss`s strategy often doesn`t reward new ideas because he has to consider sunk costs resulting from former investments,
a problem seldom found in startup firms. Therefore large firms usually innovate in much smaller steps, following a less radical path.
From this point of view risk aversion is strongly related to size.
Another point is entrepreneurial behaviour which is seldom tollerated in lage firms but which is in my opinion
a very important lever in the innovation game. The concept of intrapreneuring which is supposed to overcome these boundaries shows
that they are quite aware of this.
At least some are! Companies like google may teach us that innovativeness is not a matter of size but a matter of generations in charge.
My best regards,
Michael