As a consultancy, we work with a diverse clientele — from smaller companies with big visions to large corporate organizations with decades of experience.
One thing that still strikes us the most is the unwillingness or inability of some teams to share ideas. While this is not always the case, it is unfortunately quite common.
Our assumption is that these companies hire consulting firms such as ours and become entirely dependent on them to be the “ideas people.” However, it is imperative for the success of our work to gain significant input from the client. After all, they know their company's strategic goals and the ins and outs far better than we do.
So, why do larger companies struggle to develop innovative ideas and bring them to life?
“Big companies are really bad at innovation because they’re designed to be bad at innovation,”
writes Maxwell Wessell on why big companies can’t innovate.
Whether this is true or not, there is more than one perspective on innovation.
On the one hand, some organizations must pursue innovation in order to drive progress — securing their growth by constantly evolving.
But no company is the same, and some businesses need to recognize their limits when it comes to introducing new ideas and changes. Large, well-established organizations have more to lose; the stakes are higher, and so are the risks and threats that could make or break their future.
At some point, when a company reaches a certain size, it becomes more risk-averse — and rightly so. As an organization grows more established, its measures of success change: they start focusing on maintaining efficient operations and increasing profit where possible. This is not the same for startups and smaller, more agile businesses, which need to constantly strive for innovation and growth.
We once worked with a client with over 20 successful years of operating the way they always have. Everything was run in a smooth, structured manner, clients were always satisfied with their services, and employees were comfortable and had excellent job security — with some people even spending up to a decade in the company! For companies like this, highly innovative change is often seen as disruptive rather than positive due to deep-seated beliefs and organizational culture.
Some companies have the notion that they are simply not cut out — or have no need to — innovate. Instead, efforts are centered around executing the same strategy and approach that has always worked, severely limiting a firm's ability or willingness to innovate.
On the one hand, it could be argued that large companies are, in fact, large because they have, at some stage, been successful innovators. They have identified a problem, built a product or service around this, and then successfully grown and guided the business to deliver this exclusively. However, as a company grows, new developments often dwindle as operations, processes, and strategies get built around executing the initial innovation as effectively as possible.
This is not wrong.
Indeed, it’s critical to the growth and success of a business — but only up to a point. Think about Nokia vs. Apple.
Nokia was fixated on delivering the feature phones they always delivered — the very product that allowed them to scale to the levels they did. Refusing to move away from tradition, Nokia continued to forego innovation at the expense of following its old ways. This worked up to a point: until the birth of smartphones, and the continued unwillingness to innovate led to Nokia rapidly losing market share to more inventive firms like Apple, which were first-movers in smartphone delivery.
Arguably, this is not exclusively a “large company” issue and more of a strategic one. But the idea that a company is “too big to fail” is unsurprisingly more prominent in large organizations, where innovation often comes second in the pursuit of maintaining what has always worked.
It’s important not to neglect some truth in this reasoning. Large corporations cannot behave like startups, and sometimes it may be the right strategic call to continue developing and improving what already works.
With this in mind, it's our belief that such companies should still strive to innovate — even if they're not "built" for it. Markets in all business areas are constantly evolving to adapt to changing customer needs and trends. Regardless of its size and line of work, each and every organization must pursue progress and development if it wants to remain relevant. Otherwise, they risk simply plateauing over time or worse — reaching a point of no return, as in our previous example with Nokia.
Avoiding an active pursuit of innovation may work temporarily if the company needs to continue doing the same thing — selling the same product or providing an unchanging service — as it enables them to maintain efficient operations, see consistent revenue growth, and satisfy customers. But this is hardly sustainable in the long term.
After all, corporations exist to deliver value to both customers and shareholders. They’re obliged to recognize their limits and roadblocks that can hinder this goal — and often, innovation is crucial in discovering what is valuable to an ever-changing customer.
While some organizations may be averse to innovation, there are several factors we’ve identified that can also prevent companies from unlocking it. While more typical in large businesses, these factors are not exclusive to larger, established companies only.
In our experience, bigger companies’ hierarchical corporate structures make for a significant degree of bureaucracy and difficulty in integrating effective means of innovation.
While maintaining stability is good, having a hierarchical, rigid structure, more often than not, filters down the company culture and causes employees to feel unmotivated and lacking in the creativity needed to take risks — a core aspect of innovation.
Leadership truly matters when it comes to innovation — after all, someone has to be at the helm and lead the company toward transformation.
Unfortunately, many leaders are managers rather than innovators. They tend to tightly control their team and follow proven ways of doing things, focusing on running day-to-day operations for short-term success. This often means losing sight of longer-term opportunities and goals.
Conversely, innovative leaders are more future-driven — they value creativity and a progressive vision. Managers need to be able to encourage this way of thinking in their teams and then turn great innovative ideas into actionable strategies.
Innovation can be difficult to scale, whether you’re a startup or a corporation.
It’s not only about implementing changes across your business but also working out how to deliver and promote new ideas to large numbers of people. And this is particularly challenging for larger organizations with many departments (that may not even regularly work together) and a broader and more diverse customer base. This means more threats when it comes to whether consumers will embrace their new product or service.
This is why we often recommend companies establish a separate team dedicated to innovation scaling and management.
A challenge that comes with any type of transformation or change in an organization is alignment.
Most companies, especially larger ones, tend to have multiple departments and many teams. So when embracing company-wide innovation, it can be complicated and time-consuming to impose the necessary shifts onto all parts of the business (and manage that change). There may also be a lack of alignment and communication caused by the distance between management teams, the C-suite, and people doing day-to-day work.
Another issue is aligning existing strategic goals with innovation goals. Often, there is a discrepancy between these objectives because innovation and business strategy require different things. Companies may struggle to tackle both types of goals at the same time, as innovation tends to be unpredictable and involves improvisation, experimentation, and constant revision.
Many organizations, particularly older ones, are increasingly risk-averse and hesitant to embrace anything new.
When dealing with problems, most companies resort to existing models of thinking and tried-and-tested solutions. After all, it can be hard to break out of a habit built on doing things the same way for a long time. And combined with other factors — like unmotivated employees and inflexible managers — it’s no surprise that change is synonymous with uncertainty and risk rather than growth and innovation.
But the fast-paced evolution that comes with digitization and other developments in the global business landscape means that change is inevitable. So, more often than not, organizations must simply brace themselves and prepare for their pursuit of innovation.
Innovation isn’t just for startups, even though they’re often better designed for it.
For larger businesses, the case for forgoing innovation is rarely a permanent solution. Ultimately, all sorts of organizations need to capture, expand, and implement new ideas if they want to experience consistent growth and remain competitive. Change is an added advantage to the existing profits of a business — it’s essential to use all available resources and tools to make the most out of it.
This again brings us back to digital transformation, which is inseparable from an innovation strategy in contemporary businesses. There cannot be innovation without change, and embracing digital is currently one of the most vital shifts. While it can feel daunting and challenging, it is also necessary!
Building a culture of innovation with the right leadership can help steer the company forward. For organizations that struggle to embrace change, another option is to “contract” it out to other firms. For instance, at Mäd, we work with companies to help them strategize and implement digital transformation, and we may also do a chunk of the work internally, such as developing their online platforms.
Alternatively, organizations can recreate a startup structure within their larger corporate framework by implementing innovation within separate departments. It can be more productive for a bigger business to succeed if certain parts of it stay small enough to innovate. With regards to defining small teams, we like to lean on Jeff Bezos’ Two Pizza Rule: if you cannot feed the entire team with two pizzas, it is too big.
If you’re interested in pursuing innovation or transformation for your company, don’t hesitate to reach out to us at hi@mad.co.
