Recently, I’ve read several articles about how bigger companies tend to get less innovative as they grow – smaller startups with fewer people tend to be more innovative. Why is this? In my opinion, it has nothing to do with the size of the company – we all know that innovation doesn’t come from the corporation. It comes from the people within that company.
And the people within the large enterprise are as innovative as ever. No, the real reason why larger and also more well-established companies seem to be less innovative is that their output of innovative products either declines or the innovation is restricted to incremental innovation on the company’s existing products—the reason for this: they tend to focus on shorter-term, revenue-generating opportunities only.
Even companies like Apple, typically considered innovative, fall into this trap. I’ve reported that something that many feel is innovative, like the Apple Watch, is all that innovative. The Apple Watch is not innovative in design (it simply looks like a smaller, square iPhone) or in functionality (it needs a connection to a phone to operate, the battery life is not particularly good, and it has no more features than a Pebble watch or a Fitbit can provide). The only thing that is innovative about it is that it is the first wearable from Apple – not sure that’s something that we can consider innovation.
So, let’s say that the large enterprise appears less innovative because its output of innovative products decreases – it has a steady income flow from its current operations. Senior management and shareholders are pleased with those results. So why innovate? Even if your employees can envision great new products and services which may (or may not) bring in new customers and revenues, why take the chance? Why dedicate resources to projects which may or may not be successful – focus on what works – or in this case – what drives revenue?
So you have a company full of very innovative people who are maybe allowed to provide some incremental product innovation to the current product line. Still, when it comes to breakthrough new products, management either ignores them (by not providing employees with an outlet for those ideas) or, even worse, gives them an outlet for those ideas (by, say, running a nominal innovation program or even something as simple as a suggestion box) but then proceeds to do nothing with the ideas.
Eventually, these innovators within the large enterprise, when they are not nurtured and listened to, leave to head to either your competitors or find your competition. But you say – we have to protect the bottom line – we can’t go off and develop every possible idea that our employees come up with. We aren’t Google.
We can safely say that Google is so profitable that it can spend money on more innovative projects that may or may not provide a near-term return. But like you say – you aren’t Google – but your people are just as, if not more, innovative. How can you balance your people’s ideas because you need those resources to run the company and keep your senior management and shareholders happy? Even though you may have more revenues than the startup – you don’t want to risk those revenues for unproven new products.
Luckily, the days when it cost a lot to develop new product ideas into real products are behind us. With the advent of modern software development tools and frameworks in the software space and 3D printing in the hardware space, the ability to prototype new products takes a lot less time and money.
So how do you stay creative as you get bigger and bigger? Ensure that you have a healthy innovation pipeline that gathers and rates ideas from your employees and provides a facility to take that idea to prototype and eventually product. Whether you do it yourself or hire an innovation consulting firm, you can compete with Google on innovation, with a much lower impact on your operating resources.
