Why Big Companies Can’t Innovate: Insight from a Former Fortune 200 Innovation Director

By Anthony Vengrove

I’ve noticed a lot of conversation lately centered on why big companies struggle to innovate.  Scott Anthony, Beth Comstock, Ron Ashkenas and others have written on the topic each with different takes.  I must confess, I don’t completely agree with all the diagnoses nor do I think they’ve addressed all of the critical reasons.

My diverse career experiences have afforded me a general management perspective of innovation.  I’ve worked on new products in ad agencies, corporate brand marketing, business development, and R&D.  Having served as a Director of Innovation at a Fortune 200 company for nearly ten years before moving on to consulting, I can say that I’ve experienced many challenges first hand.

First of all, let’s acknowledge that there’s a flaw in the premise of this argument.  Big companies CAN innovate.  They innovate all the time.  They are very good at driving incremental innovation that builds their brands.  They regularly create process and product innovations that generate cost savings which contribute increased profit for shareholders.

What big companies are not so good at is radical or disruptive innovation.  Here’s my take on what they are doing wrong.

They Lack a Vision or the One They Have is Uninspiring. A key responsibility of the transformational leader or any leader embarking on a major change initiative is to create and champion a vision.  A compelling vision statement describes what the company wants to become in the future.  It not only needs to inspire but ideally it should inform the innovation agenda.  When it operates on this level, employees charged with innovation will have a better sense of what they need to deliver.  Without vision, innovation becomes highly subjective; leading to ideas that do not align with corporate objectives or brand strategies.

They Smother Innovation with too much Infrastructure and Process.   Big companies love to create processes and business systems that promote predictability and mitigate risk.  Unfortunately, following a process perpetuates sameness — and sameness is the enemy of original thought.  Remember, creativity is the fuel for innovation.  Make it easy for your employees to share and build ideas.  Use process as a tool to make business decisions and shepard initiatives toward commercialization.  Process doesn’t create ideas — only curiously engaged human brains can do that.

They Staff Innovation Teams with Managers Instead of Leaders.  Academic writers such as John Kotter suggest a difference between managers and leaders.  Briefly summarized, managers cope with complexity and rationality while leaders plan for change and direct others toward a common goal.  As companies chase the holy grail of innovation there is much perceived uncertainty, risk, and complexity.  It’s no wonder they staff up with competent managers who can ‘control’ it all.  Unfortunately, the manager mindset is wrong for innovation as it favors order over challenging the status quo.

Instead, companies need to put their best leaders in charge of innovation.   Each project should have a transformational-like leader who can rally the team with effective visioning and championing of goals.  Just like a traditional change management effort, these project leaders are trying to move teammates toward a new future.  They will be faced with roadblocks, rejection, changing objectives and the like.  A strong leader can motivate his or her team to maintain belief and create solutions to the toughest challenges they face.

The C-Suite is only Moderately Engaged.   All innovation involves change of some degree.  Usually any change management initiative has the C-Suite all over it.   But with innovation, the same level of engagement isn’t always apparent.  Quite often, CEOs communicate innovation as a key strategy then sit back and wait for the ideas to come — only to quickly judge and challenge them.  For all the reasons noted in the previous section, the CEO must lead innovation in a transformational and authentic way.  Executive management needs to demonstrate their commitment to fresh thinking and creativity — including constant communication of the vision and strategies for the innovation agenda.  If employees don’t hear the management team talk about innovation they’ll assume there’s a lack of commitment at the top.

Management Lacks Experience Building & Fostering Creative Cultures.  Most senior leaders lack direct experience building and fostering idea-friendly cultures — or managing creative employees, for that matter.  Most executives say they want innovation, but behave in ways that diminish employee inventiveness.  Developing creative leadership abilities should be a priority of all leaders.  Managing creative employees and fostering an idea-friendly climate requires different skills and approaches.  For example, consider how you might respond (both verbally and nonverbally) to someone pitching an absurd idea.  A simple roll-of-the-eyes can send the wrong signal and prevent someone from feeling comfortable to share ideas in the future.  Remember, ‘safety and security’ are basic needs on Maslow’s hierarchy.  When employees realize they can share any idea without being shamed, they’ll feel safe and motivated to do so again.

Early Ideas Get Crushed by Too Much Logic.  Most companies train and reward employees to value logic and analytical thinking.  Firms with a successful track record of incremental innovation are often lured into using familiar research and modeling techniques to evaluate game-changing innovation.  Unfortunately, truly novel ideas are usually so ‘new’ that traditional methods of evaluation don’t always work and can lead to a false negative.  Even your consumers might not even be able to wrap their heads around your first concept or prototype.

Game changing innovation takes patience and faith.  You have to accept that you can’t always get the answers to questions you are normally accustomed to with incremental innovation.  If you bombard ideas too early in the process with heavy doses of logic, you run the risk of killing ideas that have potential but just need more time to incubate.  The trick is to manage your constraints effectively.  Loosen your financial, technology, and market research constraints earlier in the development process so ideas have a chance to breath and develop.  Tighten the constraints as the concept edges closer to commercialization.  Learn more about managing constraints in this great paper by James Euchner.

They Don’t have Enough Creative Thinkers in R&D.  In my opinion, the true heroes of innovation are the product developers, engineers, and scientists working in R&D and manufacturing for they’re the ones that convert ideas into commercial reality.  Success won’t happen if you have too many rational and pragmatic managers who are quick to say ‘that’s impossible.’  Make sure you have creative and curious R&D talent that’ll jump at the chance to solve your toughest challenges (especially when a solution is nowhere in sight).

There are Few Strategic Thinkers in the Strategic Planning Department.  Similar to the difference between managers and leaders, creativity is an important differentiator between strategic thinking and strategic planning.  Most strategic planning departments are too focused on the execution of planning processes which has led some like C.K. Prahalad and Gary Hamel to conclude the practice is nothing more than ‘form filling.’  Innovation needs strategic thinkers who constantly look forward into the future and can turn data and trends into insight.  Just because your planners appear to be busy doesn’t mean they’re thinking about the right things.  To learn more about the difference between strategic thinking and strategic planning read this paper by Jeanne Liedtka.

There’s a Presence of Narcissistic and Ego-Driven Individuals in Key Positions.  My biggest innovation successes came on teams where trust and collaboration were high and in environments where open communication occurred between all levels.  As soon as a big ego joins the group, it seems politics, arguments, and a silo-mentality soon follow.  As big companies venture into innovation they have to root out the command and control personalities sitting in critical positions.  Not only is this style is out-dated (it’s only really useful for crisis situations in my opinion) it completely shuts down creative engagement.  This type of leader tends to bully and shame those who disagree with them into following their ideas.  When they’re in ‘gate-keeper’ positions, I can guarantee you that your promising ideas run the risk of devolving into mediocrity and you’ll struggle to keep your pipeline filled.

In summary, it may seem there are many forces working against the big company when it comes to game-changing innovation. Many of the issues are cultural in nature and ultimately fall on the desks of the senior leadership team.  In my opinion, most can be addressed as long as the executive team is committed to change and willing to change their attitudes and behaviors.

At Miles Finch Innovation, we developed a teaching tool called the Idea Climate Equation®.  If you look at each variable in the equation and reflect on the significance of their position you’ll begin to see how this simple equation relates to many of the challenges noted above.

Our belief is that creativity is our natural default state and is usually smothered by the analytical thinking we’re taught to value in corporate jobs.   Consider that before you buy into another consultant’s sure-fire innovation process or bring in another speaker to teach you how to become more creative.  Instead, take a good look into the mirror and ask yourselves, “What are we doing that interferes with creative and innovative thinking?”  If you’re honest enough to have that conversation, you’ll take a big step toward creating the innovative culture your employees are probably craving.  The good news is that most companies simply need to get out of their own way.

Miles Finch Innovation helps companies navigate the messy territory of corporate innovation.  We’re strategic thinking partners who can help you get unstuck and identify creative solutions to your toughest challenges.  We also love to train and speak on the subject of Creative Leadership.  Email us or call us at 860-799-7505 to learn how we can help you help you unlock the creative potential of your employees.