Posted by & filed under Corporations, innovating.

Big corporations are clusters of amazingly smart people. They have resources, vast experience and deep knowledge of the industry. Be it banking, technology or pretty much any industry, the corporations are the rulers of the industry. At least till now.

Now startups with their amazing innovation power are taking over. Consumers are demanding better and better solutions, and big corporations can either learn how to really innovate again, collaborate with the startups or be left in the dust. To understand how you must first understand why. In this post, I am going to explain why exactly corporations are so bad at innovating.

Working together, but not really together

Big organizations do have plenty of smart people working together, but the problem is that they are not really working together. With big organizational size comes the need for structure, units, departments and all kinds of sections. There are departments for marketing, sales, legal and so on. The problem with it is that the employees don’t venture much outside their departments. They work with the same people all the time, and often with similar people. Marketing people with marketing people, sales with sales and so on.

To innovate, you need to have people with different knowledge bases and experiences working together, cross organizational boundaries. Even if people from different departments happen to work together, it is often just for a short time and for a specific mission. Innovations usually require time to just freely bounce around ideas. But with a focus on efficiency and the mission and hand, that is often just not possible.

To innovate different kinds of people have to work together. But in corporations that rarely really happens.  Tweet about it!

Quartile focus & the quest for efficiency

Corporations focus on making the next quartile better than the last. Innovations, on the other hand, require time. And that is exactly what such short-time focus does not provide. At the same time corporations look for efficiency. The same (or even more!) tasks are expected to be done with fewer and fewer employees. That leaves the employees no extra time for free thinking; creating new & innovative ideas. And even if they could squeeze in a bit of innovative thinking, why would they? Their performance score is based on how well they handle the tasks in their job descriptions, and that’s it! Such systems punish for trying to be innovative; ‘wasting time’. Even if the employees are told to innovate, fresh ideas rarely come on command.

Innovations require time. When you just focus on making the next quartile better, there isn’t enough of it. Tweet about it!

short-term focus quartile

Knowing their field too well

Another problem big corporations have is that they are the masters of their field. It obviously has a lot of benefits, but at the same time, they know their field too well. When you are so deeply inside, it is difficult to see possibilities for change. And often times the innovations that do come from within are fairly small. That is why big innovations come from the outside, from people who have a much less clouded view.

Resistance to change

Some corporations get cocky. They don’t realize that what has worked for the past 20 years, might not work at all now. They fail to recognize that with time also their customers, market etc. change and they need to change with them, preferably even lead the change.

Sometimes the organizations understand in principle that to stay on top of the game, they need to innovate and essentially: change. But to truly do that, you need to have the whole organization in it. But instead many big changes are faced with attitudes like: ”We have never done it this way” or ”We already tried this 30 years ago”. When you have lived too long in the same bubble it can be hard to recognize how much e.g. technology has changed over time. What was impossible before is often very much possible now.

You need to realize that what has worked for 20 years, might not work at all now. Stay current. Tweet about it!

Failing to fail enough

Being innovative requires tolerating failure. Like Ilkka Paananen from Supercell has said: most of their games fail, but they keep doing that to find the game that’s going to be on top. For big corporations, failure can seem daunting. Unlike the failures of smaller companies that often go unnoticed, everything big corporations do is scrutinized. They have a reputation to keep and they need to be careful of bad press and its influence on their brand, stocks and so on. But failures are a crucial part of being innovative.

Being innovative requires failures and the courage to fail. Tweet about it!

Failure failing success

Innovations don’t always seem so attractive

There are also negative sides to innovations, which can make them seem unattractive to corporations and especially their employees. New innovations often mean things can be done more efficiently and with lesser costs. And that often means the corporations have an excess of employees. They need to downsize, let go of people, and that is what no one wants to do. It is horrible for the employees; both for the ones leaving and staying, and very bad for the company’s public image.

Another obstacle is all the legacy systems big organizations usually have. Over the years corporations have invested a great sum of money into IT, machines and real-estate among many other things, and letting go of them often feels like just too big of a waste.

When you look at all these issues, getting corporations to innovate may seem like an impossible task. But it doesn’t have to be. There is definitely hope, but organizations need to take action now. What can they do then? One solution is (surprise surprise) to learn from the innovation masters: startups. In a future post, we will talk more about the different ways big corporations can innovate.

 

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Related post: 7 differences between startups and corporations

 

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