Bigness as an Obstacle to Entrepreneurship and Innovation: Big Corporations being… Nimble, Creative, Innovative… just like Small Companies

“Big companies don’t innovate” says the conventional wisdom…Not so fast, there are plenty of large companies that have done very well as entrepreneurs and innovators. Although there are quite a few big, older businesses that have succeeded as entrepreneurs and innovators in some fields, while others have failed dismally.

But the same can be said about about smaller companies. It is a matter of systematic organization, clear strategy, and hard work. The common pretext of waiting for the genius with the flash of inspiration will no longer wash. Any enterprise, no matter what its size, can organize itself to undertake continuous and purposeful innovation… ‘Bigness’ alone need not be an obstacle to entrepreneurship and innovation…

In the articleThe World’s Most Innovative Companies by Business Week writes: Innovation is about reinventing business processes and building entirely new markets that meet untapped customer needs. It’s about taking corporate organizations built for efficiency and rewiring them for creativity and growth. To discover which companies innovate best — and why – ‘BusinessWeek’ joined with ‘The Boston Consulting Group (BCG)’ to produce the annual ranking of the 25 most innovative companies.

The ‘BusinessWeek-BCG’ survey also focuses on major obstacles to innovation that executives face today. While 72% of the senior executives in the survey named innovation as one of their top three priorities, almost half said they were dissatisfied with the returns on their investments in that area. The No. 1 obstacle, according to the survey takers, is ‘slow development times’. Yet companies often can’t organize themselves to move faster, says George Stalk Jr. at BCG. “Some organizations are nearly immobilized by the notion that [they] can’t do anything unless it moves the needle (revenues),” says Stalk.

In addition, he says, speed requires coordination from the hub (CEO): “Fast innovators organize the corporate center to drive growth. They don’t wait for [it] to come up through the business units.” Indeed, a ‘lack of coordination’ is the second-biggest barrier to innovation, according to the survey’s findings. The best innovators reroute reporting lines and create physical spaces for collaboration. Innovative companies build innovation cultures. “You have to be willing to get down into the plumbing of the organization and align the nervous system of the company,” says James P. Andrew at BCG.

Procter & Gamble Co. has done just that in transforming its traditional in-house research and development process into an open-source innovation strategy it calls “connect and develop”. This embraces the collective brains of the world. Make it a goal that 50% of the company’s new products come from outside P&G’s labs. Tap networks of inventors, scientists, and suppliers for new products that can be developed in-house.

The radically different approach couldn’t be shoe-horned into managers’ existing responsibilities. Rather, P&G had to tear apart and re-stitch much of its research organization. It created new job classifications, such as 70 worldwide “technology entrepreneurs (TE)”. The TE act as scouts and look for the latest breakthroughs from places such as university labs.

They also develop “technology game boards” that map out where technology opportunities lie inside the minds of its competitors. “You want to have a coherent strategy across the organization,” says Larry Huston at P&G. “The ideas tend to be bigger when you have someone sitting at the center looking at the company’s growth goals”…

In the blog Evolution of Entrepreneurship in America? by Robert W Price writes: Entrepreneurship is not “natural”; it is not “creative”: It is work. The evidence shows that a substantial number of existing businesses, and among them a goodly number of fair-sized, big, and very big ones, succeed as entrepreneurs and innovators indicates that entrepreneurship and innovation can be achieved by any business. Entrepreneurial businesses treat entrepreneurship as a duty…they are disciplined about it … they work at it … they practice it.

A Latin poet called the human being “rerum novarum cupidus (greedy for new things)”. But, ‘How can we overcome resistance to innovation in the existing organization?’ is a common question asked by executives. Even if we knew the answer, it would still be the wrong question. The right one is: ‘How can we make the organization receptive to innovation, want innovation, reach for it, work for it?’ The answer: ‘Innovation must be part and parcel of the ordinary, the norm, if not routine…’

In the articleThink Disruptive by Andy Grove writes: The reward for businesss success is that they get big, and the punishment is that when they get big it gets harder and harder for them to grow. However, we found that under certain conditions a firm can create a new growth spurt for itself by entering an entirely different industry. The target industry must be stagnant and populated with companies that cling to doing business the way they always have. The corporation that enters this environment with an innovative product or service can shake up the status quo and reap big profits: Call this phenomenon ‘cross-boundary disruption’.

Clayton Christensen describes the process in his book ‘The Innovator’s Dilemma’. In Christensen’s scenario, a small company penetrates an industry by first establishing a position in the least demanding portion of it and then progressing into more-demanding segments. ‘Cross-boundary disruption’ is different. I’m talking about established giants (big companies) seeking to transform markets other than their own (e.g.,  Apple, Wal-Mart). These are companies, big and powerful enough to solve intractable, industry-wide problems and produce lasting change...

In the articleLack of Breakthrough Innovation by Big Companies” by Sharad Sharma writes: You want to be the innovation company, the ideas company, the good customer service company and not necessarily be tied down to a particular product or manner of delivery, then think “small teams”. Only small teams with a passionate few people can come up with new and disruptive products and services.

As a rule of thumb, any team that cannot fit in your corner office is too big. Adopt one of many solutions to this well studied problem, e.g., – new DNA, acquisitions, intrapreneurship, spin-in structures – to foster innovation.…Can big companies really innovate?  I believe that a big company can foster innovation one of two ways. It can either emulate an entrepreneurial company much like what Apple has done in recent years. Or it can leverage its size to follow the Toyota and Honda’s Kaizen method of breakthrough innovation.

In the article Popular Myth of Big Companies and Innovation by John W. Ryan writes: There are a number of people who characterize big companies as the following: Bureaucratic, corrupt, slow, boring, vast wastelands of soul-crushing activity, focused on status-quo. All of this leads to the inability to innovate. I have seen innovation and speed come out of large companies just like small companies… Smart risk-taking people work in big companies too.

Likewise, I have seen small companies paralyzed by a flat-footed CEO who couldn’t make up his mind or was in over his head.  I have also seen entrepreneurs spin out of large companies go on to create successful companies of innovation based on something they learned at the large company.  Large companies can commit to innovation and agility in a dynamic world.  It comes down to leadership and culture, not size.

In the articleWho Says Innovation Belongs to the Small? by New York Times writes:  For more than a decade, the prevailing view of innovation has been that little guys had the edge. Innovation bubbled up from the bottom, from upstarts and insurgents. Big companies didn’t innovate, and government got in the way. In the dominant innovation narrative, venture-backed start-up companies were cast as the nimble winners and large corporations as the sluggish losers.

That was the headline point that a generation of business people, venture investors and policy makers took away from Clayton M. Christensen’s 1997 classic book ‘The Innovator’s Dilemma’, which examined the process of disruptive change… But a shift in thinking is under way, driven by altered circumstances. The biggest economic and social challenges — and potential business opportunities — are problems in multifaceted fields like the environment, energy and health care which rely on complex systems.

Solutions won’t come from the next new gadget or clever software, though such innovations will help. Instead, they must plug into a larger network of change shaped by economics, regulation and policy. “These days, more than ever, size matters in the innovation game,” said John Kao. The innovation tilt toward big companies, to be sure, is a rebalancing. There is still plenty of bottom-up innovation, including promising start-ups in the environmental, health care, and energy businesses. Still, the pendulum of thinking on innovation does seem to be swinging toward the big guys…

In the article Think Tank: Size Does Matter When it Comes to Innovation by Richard Tyler writes: At a London Business School (LBS) meeting of largely international company executives the question was asked: “Can big companies innovate or is such noble activity the preserve of the new and nimble?” After much soul searching and self doubt, as well as a hearty lunch, the answer was a resounding: “Yes, we can.”

George Buckley, 3M Corporation, explained in his world innovation is everything. After all, 3M boasts 55,000 different product lines, from the ubiquitous ‘Post-it note’ to complex mobile phone screen components. Buckley’s teams routinely “cannibalize” about 30% of the sales of 3M’s existing products in existing markets every year with new versions that will attract the same customers. They also throw “pebbles” into adjacent markets to see what effect the ideas have.

This combination of “incremental innovation” with “leapfrog technologies” puts 3M in the right competitive position, Buckley argued. “If you don’t work on the leapfrog, whatever that might be, someone else is going to work on it for you,” he said.  It is all about small units of expertise, incentivised in different ways and “cherry picking” the most promising ideas appearing across a range of sectors…

In the blog The Myth of Big Organizations and Innovation” by Scott Berkun writes: One great myth 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, older organizations… 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.

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. 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”.

Silicon Valley’s Secret for Entrepreneurship and Innovation Success: Tolerance of Failure; Tolerance of Treachery; Pursuit of Risk; Willingness to Reivest; Enthusiasm for Change; Promotion on Merit; Obsession with Product; Openness to Collaboration; Anyone can Play…” ~ Tom Peters