Why big businesses fail to innovate

Why do so many large, and particularly older organisations find it difficult to innovate? While most understand that creating new and different ways to serve their customers is a path to competitive advantage, few actually do it.

Why is it difficult for someone in a large organisation to do things differently, when in smaller companies, the same person may find no resistance?

Looking at the few large organisations that do innovate consistently, such as Apple, Procter & Gamble, Google and 3M, there are some fundamentally different approaches that can lead to innovation. However, there are also some tenets that govern the culture of innovative organisations that are absent in others. In this regard, it’s valuable to discuss what is absent in the everyday large organisation that impedes innovation.

Leaders don’t demand “cool”

The leaders of most organisations don’t clearly demand innovation from their employees. While many may talk of putting customers first, the structures for teaching employees how to do that are absent.

There’s also a persuasive argument that says being customer centric alone doesn’t guarantee an innovative product or service. So even with a process that ensures customers are properly considered, this doesn’t guarantee the “cool” factor.

“Cool” is a great word, because it’s what customers think when companies produce something innovative. As such, it can be used as a measure i.e. does this product or service make customers think “Wow, that’s cool”. If you’ve seen Steve Jobs present Apple products, it’s evident he drives for “cool”.

“Cool” takes many forms; innovation doesn’t have to be visible or sexy to be cool. Household goods, internal processes or partnerships with other organisations can be “cool” too when they radically improve things or address an unmet customer need. But, if there is no “cool” test applied to everything the company produces and does, then it won’t reliably inspire that reaction amongst customers.

Mediocrity is hidden in large organisations

When lots of people work inside a company, their individual contributions are harder to see. Conversely, in a small organisation, each person’s contribution matters a lot; there are less people to pick up the slack of underperformers. People who’ve tired of pushing themselves often gravitate to places where they can hide.

That’s why it’s even more important to celebrate the innovation effort of individuals in large organisations. By doing so, desirable behaviours are rewarded for all to see. But managers or “ideas people” shouldn’t be the only ones rewarded, for there are many roles that contribute to good innovation. Braden Kelley talks about nine roles: Revolutionary; Conscript; Connector; Artist; Customer Champion; Troubleshooter; Judge; Magic Maker and Evangelist. Each of these must be recognised and rewarded for trying to innovate if it is to become a cultural norm.

Outcomes are rewarded, effort is not

I’ve deliberately said “trying” in that last sentence, because innovating means failing more than half the time and unless people try and sometimes fail to innovate, they usually don’t. Companies like Google encourage their staff to try new ideas. 20% of their time is dedicated to building new things, of which only a proportion are actually released.

But the secret to failing cheaply is in failing early. There are no guarantees, only insurance policies that can be undertaken against failure, such as a rigorous customer centric design process that strives to do things differently and better than they have been done before. Procter & Gamble who have doubled their customer-base in the last ten years can attest to this.

Within this approach, experimentation is not seen as waste and inefficiency. Running a ‘six-sigma’ lens over it would guarantee you scupper creative outcomes through cutting out the very steps that explore variations and discard or refine ideas. Efficient would mean come up with one idea and execute it cleanly, not come up with lots of ideas, prototype and throw most of them away.

Middle-tier management are incented to restrain change

Implicit in the drive for efficiency is the need to cut away what is deemed to be waste. But those who chaperone processes toward the bare essentials are incented to spend less. They are not attuned to the cost of doing things better, which is typically more expensive than keeping things the same. This poses risk, which fans a fear of failure and change.

Typically the loser in cost-benefit analysis, the customer experience is the first thing to be eroded when trying to cut costs. This is because brand equity and reputation don’t show up in a spreadsheet but do increase sales. There is no getting around the fact that it can be expensive to make great things.

Criticism is badly done

Mediocrity is bred inside organisations with a culture of criticism, because it’s much easier to criticise than to create. People who can’t do the latter tend to indulge in the former.

This isn’t to say criticism is bad. On the contrary, critique is at the core of all good design processes. But there is a way to criticise constructively that involves making people feel that everyone is on the same team.

Equally, we need to recognise when our urge to criticise is levelled because a solution is unfamiliar versus poor. Unfamiliar is usually a good indicator that we may be looking at something innovative.

Success has bred complacency

When an organisation has known success due to scale, longevity or simply adequate product and services that meet basic needs in a sparsely populated market, complacency sets in. A certain strain of arrogance is spread through sharing a communal Kool Aid cup and it permits an organisation’s staff to be comfortable in their current state. This comfort atrophies the muscles that are used to innovate, so when competition demands it to survive, the organisation is unable.

Consultancies are then employed to drive the necessary change, but the arrogance, which has held the organisation back, also prevents it from accepting their leadership. A conundrum to be sure, but one that is solved through cultural change to embrace change itself. It is change, after all, which is at the heart of innovation.

Comments

[Susan P.]

Thank you for offering the opportunity to respond Anthony. This is a broad topic of course and you've raised many substantive issues that impact on both resistance to innovation and open opportunity that enables innovation.

In other forums, I've raised the issue of creatives resisting innovation via both hiring processes and chosen views of talent and skills held by individuals outside of a traditional 'normative' field. So, for example, if we view an array of employment positions in the creative field, more often than not the role requires 'x years in a similar environment'. Whilst I am not dismissing the potential importance of insider understanding and experience, taking the position that 'we can only hire *one of us*' immediately offers statements about the belief that talent, creativity, and innovation, are the purview of selected people. I categorically reject that perspective [even while accepting that not 'everyone' is necessarily going to hold innovative genius or potential].

Perhaps I've been lucky working at times with groups of blue collar workers such as council staff but I have regularly been impressed at insights they offer - and solutions - to a number of problematic issues their employers deal with, even where those matters fall outside their own core work experience.

Similarly, when we read through say Lovemarks, we can locate all manner of fresh takes and perspectives on well known brands and/or service experiences.

The voice 'of the people' is, in my terms, 'cool'. :) But, as equally, I also advocate for those who access the luxury market and who really know their brand loves and are strong fans of gadgets and 'toys' et al. Wow, the innovative user interface and other ideas brand fans can pitch are wonderful. And, yes, even when some of those ideas aren't workable for some reason, they can often be amended and shaped. This is perhaps where we have that lovely synergy of user voice and expert attendance, observation and guidance.

But one resistance to innovation perhaps comes with concerns about both disruption and suddenly feeling without strong foundation. After all, usual or normal practice becomes, like a habit, also part of the sense of permanency and fabric/brand/identity. Are there times an organisation should say "no" to innovation - or, rather 'no for the moment'? Perhaps, pragmatically, the answer is "yes". If you are in the middle of a project, and are well directed, a sudden call to change could potentially cause harm to the process. Yet, at the same time, can we entirely afford to ignore a potential betterment?

I'll end my post on that open question.

[Anthony Colfelt]

Hi Susan, thanks for the thought-provoking comment.

Implicit in your question is an assumption that innovation means change. Indeed, it is also explicit in the original post.

But, to what degree is it disruptive to an otganisation's normal state, depends somewhat on how used it is to change of this kind. One would hope that an organisation used to trying to innovate, is used to a degree of change. 

But, inversely an organisation unused to innovating may not be as practiced at managing change. Like any new philosophy or way, these organsations must adopt an innovation culture deliberately. To do that, systems must be in place to teach the organisation how to work in the 'new' way. Leaders must also actively engage in, champion and lead the change by example.

So is there a wrong time to innovate? I'm not sure that it would be sound advice to say 'no' even though in periods of uncertainty, e.g. management restructuring, it would be tempting to reduce the number of moving parts. To do so also delays winning more business through innovative products and services. Most businesses take for granted how close they really are to losing market share to an innovator in their space and can't afford to wait.

Perhaps there is only a wrong WAY to introduce an innovation culture?

[Susan P.]

Hmmmm...thinking, thinking. :) To re-trace back, yes, there was an implication that innovation = change. In fact, I can't think of any example of innovation where change of some sort wouldn't naturally arise. However, isn't it easy to talk about change as if the action or process naturally builds in "difficulty and disruption'. I can think of examples of disruption that have been an extremely positive process and certainly given so many rewards (both minor and major), that any 'nuisance value' has been negated by the users. This said, I can think of similar examples where the opposite has happened and principally because the benefits weren't tagged to all (or most) employees and only served a small or selective group.

Now, that of itself is an interesting topic because if one person in a workplace has a major benefit that increases their well being, then the flow on effect should occur for others. If you (as Creative Director) suddenly have a car space that means your ease in and out of the workplace is facilitated and prevents you needing to park a mile away, then, that 'change' should benefit others around you. Of course, it may be that the new, improved process leads you to increasing your energy and expectations of your staff (who are still trudging in to work). And everyone wishes you never had a car to begin with! :)

I guess I'm reminded of the value of analysis and openness to assessment. I think that applies to all of us, what we 'do' and have become used to. I was saying to someone last week that as a consultant working independently that working solo can become insular in terms of critique and one has to work especially hard to be reflexive. An autoethnographic style of reflection upon reflection has a lot of merit to it and the majority of businesses can benefit from that I believe.

From my experience, yes, there are 'wrong ways' to introduce an innovation culture and one of those is actually announcing to staff: "this is what we are doing - you can like it or lump it". There is an inherent contradiction in doing that, but, amazing how many businesses still use that approach.

I was reading a luxury hotelier discussion group the other day and someone posted survey data on use of all those guest feedback sheets guests regularly complete. I can't recall the figures off-hand but I was amazed how many hotels reported throwing all the sheets out unread or gave them the most superficial look over.

When I hear that I know said organisation is overdue for user-centred focus and design, however, they need to be guided away from doing as I said above, simply telling staff "this is who we are now'.

I'm often interested in what cleaners have to say because cleaners are a wonderful group of forensic people. They can tell you if staff think well of their own workplace or disrespect it, for example. So, maybe I'm advocating innovation from the cleaner up...? :)

[Alexander Muir]

Kinnect, baby. Wooho!