Friday, September 13, 2013

Large corporations and the desire to innovate

About a year ago, I read a three part blog series on large corporation's inability to innovate, particularly the breakthroughs that produce growth versus value results, at the Harvard Business Review website.  There are a few bits of information in the blogs that are valuable to be reminded of:

From the first blog here:

"Big companies are really bad at innovation because they're designed to be bad at innovation."

This is a generalization and perhaps shows a lack of experience on the author's part.  There are large companies like Procter & Gamble who have turned the model of innovation on its head.  While I was at P&G with its $84B in revenue, the company was spending over 5% on R&D, though interestingly over half of the funding was capturing innovation from the outside and being applied into its products.

In the second blog here:

"Mature corporations are designed to execute on the science of delivery — not engage in the art of discovery. They're bad at innovation by design: All the pressures and processes that drive them toward a profitable, efficient operation tend to get in the way of developing the innovations that can actually transform the business."

I cannot disagree with the above statement.  An ideal example of incrementalism driving efficiency is the much touted Six Sigma methodology.  It superbly squeezes out the last ounce of productivity from the humans and machines in the process, but it does not deliver any transformative breakthroughs.

From the third blog in the series here:

"No company ever dazzled the world by lackadaisically going after a market. Executives never reach the pinnacle of their industry by consistently taking timid action. So why, despite all the evidence to the contrary, do we see so many corporations dip their toes into the pool of innovation instead of diving in? Corporate innovation is already a difficult proposition; why doom it to failure by pursuing it half-heartedly?"

In this blog the author discusses Xerox PARC and how it has been the precursor to significant number of todays breakthroughs; while Xerox itself today is a poor reflection of what it could have been.  Another example of course is Kodak.

I believe that most large corporations live a self fulfilling prophecy of inevitably trapping themselves into linear cycle of starting with a breakthrough idea to accelerated growth to growth to value to sustain to divest (or bankruptcy) and ending in ceasing to be what they were or could have been. Yet, rare it is, exceptions do exist to prove the rule!  Perhaps perpetual growth is simply not possible.  Can Apple continue to wow the consumer forever?

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