Can a Big Company Innovate Like a Startup?

October 5, 2015 John Gorup


Innovation is not always big and splashy, like a hoverboard or a taco-delivering drone. Innovations can be small improvements to processes or products, which — when done consistently — can result in real value. As Professor Greg Bunch said in a recent edition of Chicago Booth’s Capital Ideas, “Innovation is adding to, or subtracting from something, in order to benefit someone.” The “someone” can be customers, employees, or shareholders.

For a big company, simply proclaiming “we shall be innovative” does nothing. A proclamation like this might even do worse than nothing — it can result in fear and disengagement. A commitment to innovation requires an environment that allows it to thrive. Below are 5 common barriers to innovation at big companies:

  1. Diversity of thought. I had an English professor who, rumor had it, graded papers based on how closely the student’s ideas on Shakespeare followed his ideas. So, a few of us spent a weekend at the library reading articles he published in literary journals. Amazingly, he found our final papers to be brilliant. We all got good grades, but had no original thoughts.
    When we think of diversity in big companies, we usually think about race and gender. Most companies have improved their hiring and promotion processes, but fail at getting diversity in thought. For example, job interviews tend to measure how closely the candidate thinks like the interviewer. And for people who make it through the interview process, conformity of thought gets rewarded with promotions over new ideas.
  1. Performance evaluations. Too many employees at big companies live with a performance evaluation process that kills innovation. Successful projects result in a bonus, while a failed project results in termination. Corporate leaders who want to build a culture of innovation have to rethink their employee’s incentives. The kind of risk-taking that leads to innovation cannot occur through corporate fiat. Creating a more innovative company requires leadership to not only move toward a Fail Fast mentality, but also to make fundamental changes to existing HR policies.
  1. The Sunk Cost Fallacy. The 3 million dollars your company spent on that bad IT project is never coming back. Wasted money should have no impact on future business decisions, but over and over again, it does. Innovative companies don’t let past failures determine their future.
  1. Lack of resources. Most companies are understaffed. Their employees fight to keep up with their day-to-day work, so imposing on them the mandate to be innovative will do nothing but cause frustration. Companies that want an innovative workforce need to give their employees room to think. The Talent War in the market and within companies is creating a barrier to innovation in big companies.
  1. Entrenched bureaucracies. I recently read a book by Leo Maxim about a family’s life in East Germany. One of the startling things about East Germany is how long that country lasted once it was clearly a failed state that no longer made sense. Part of what kept this state going was an army of entrenched bureaucrats who lived off the bureaucracy. While a lot less stark than the tragedy of East Germany, a lot of big companies live with a similar bureaucratic mindset. Change is scary, but bureaucracy is the enemy of innovation.

So to answer the question “Can a big company innovate like a startup?” The answer is yes, but it takes strategy and leadership.


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