Are the dynamics of innovation changing?

Are the dynamics of innovation shifting in ways that favor larger companies more than entrepreneurial ones?

Ran across an intriguing article in Sunday's New York Times. The author, Steve Lohr, raised the question of whether current trends may create a shift in advantage in innovation -- from entrepreneurial companies to large ones. The argument is that many of today's biggest problems are in complex fields such as energy and  the environment -- and that solutions will need to be multidisciplinary rather than the work of entrepreneurial inventors. "The pendulum of thinking on innovation does seem to be swinging toward the big guys,"  Lohr wrote.

The article brought to mind for me an interview I conducted with Harvard Business School's Clayton M. Christensen last fall. An edited version of the interview with Clay Christensen appeared in the Spring 2009 issue of MIT Sloan Management Review -- but one point that didn't make it into the published version (due to space constraints) was a brief observation Christensen made about established companies and disruptive innovation. Christensen noted that he had become "a lot more optmistic" in the last five years about leading companies' ability to successfully innovate disruptively, if the management team understands the principles of disruptive innovation.

Still, though, there's certainly research suggesting that large companies often have difficulty successfully managing corporate venturing programs designed to foster innovative new businesses. As authors Rita Gunther McGrath, Thomas Keil and Taina Tukiainen observed in "Extracting Value From Corporate Venturing," a 2006 article in MIT Sloan Management Review:

Executives wax and wane in their enthusiasm for launching new ventures outside an organization’s core business. In their more enthusiastic moments, leaders often see corporate venturing initiatives as sources of organic growth and vitally important engines of renewal. However, in their more disenchanted periods executives may see new ventures as high-risk, foolhardy distractions from effectively running the core business. What’s more, such pessimism isn’t wrong. Corporate ventures are risky and they usually do not produce hoped-for results.

What do you think? Are the dynamics of innovation changing in ways that favor larger companies? And are large companies getting significantly better at managing innovation -- or not?

6 Comments On: Are the dynamics of innovation changing?

  • dunphy | May 29, 2009

    Our work at Brendan Dunphy Associates is predominantly with corporations in the ICT space in Europe and I would give a qualified “yes” to the second question. I think it is clear that the work of Christensen has increased awareness at the leadership level of the challenges they face when it comes to instigating radical innovation. However, this awareness is rarely acted upon with the result that they still struggle to create an environment that is capable of generating disruptive innovation. There appear to be a number of deep-seated reasons for this associated with their personal & corporate attitude to risk & reward, inappropriate culture and behaviour and the sheer difficulty of envisaging and effecting the scale of change required without disrupting the current operational efficiency of the business and short-term goals. Partnership, ventures and acquisitions are a typical response to increase innovation capacity and ‘import innovation’ but success is very patchy given the lack of knowledge and discipline as to how best do integrate and nurture these activities.

    If, as the article suggests, the bigger challenges we face require ‘boundary busting’ only possible via larger organisations (and public bodies?) then we are certainly going to need significant innovations in innovation to make this a reality given the differing cultures, language, traditions and business models this will entail.

    Maybe we can learn from the application and adoption of Disruptive Innovation theory to better understand the practical constraints corporations pose to any innovation theory and thus better help them assess the both the opportunities on offer and develop the new innovation capabilities that will be necessary to thrive in the future?

  • navindu | May 29, 2009

    PETER BHATT, CEO, BUSINESS GROWTH CONSULTING INT’L, INC., bgciinc@yahoo.com , 702-845-5462
    ——————————–
    INNOVATIONS are the foundation for substantial and sustainable RPM (Revenue, Profit & Market share) Growth. Innovation is NOT Invention. Innovations are how creatively you apply Inventions for desired benefits.

    Even though innovations are universal, every business has to develop their own vision / strategies for discovering, evaluating and implementing innovations for desired results.

    Large corporations have so many factors prohibiting them from looking at implementing innovations. Factors like obsoleting past products before predefined life cycle ends, “Not Invented Here” culture reflecting huge EGO, obsolete corporate culture, obsolete senior management team, etc. GM, Chrysler and Ford are GR8 examples. And look, what is happening to them as a result!!

    Innovation does not have to be “disruptive”, “destructive” and/or “Radical” in most cases to produce phenomenal short and long term results. Most of the innovations are “incremental” producing GR8 results.

    Most of the businesses are not directly in emerging “Green Energy & Environment” business. They can greatly benefit from continuously and concurrently implementing Product, Process and Management Innovations. Every CEO’s and Business Owner’s main mission is to create “Tactical Comfort & Startegic Security” for their company. “Tactical Comfort” means high probability of achieving desired quarterly targets over next 12 months. “Strategic Security” means high probability of still being in a very successful business 5 years from now!! Innovations will make it happen for them !!

  • David Kline | May 29, 2009

    My experience working with companies large and small is that the advantage now lies not so much in size — i.e., whether a firm is large or small — but in a firm’s ability to collaborate in its innovation efforts.

    Studies consistently show that a growing share of innovation is taking place outside the centralized R&D labs of large corporations, across networks composed of both large and smaller firms and even individual inventors.

    One recent study in particular noted that whereas some 80 percent of major innovations during the 1970s had come from inside a single company’s own R&D labs, by the dawn of the twenty-first century, more than two-thirds of major new innovations involved some sort of inter-organizational collaboration — either between private firms large and small, or between firms and federal laboratories or research universities.

    Recognizing that fact, 7 out of 10 senior executives surveyed by the Economist newspaper two years ago stated that their best strategy for accelerating innovation was to increase collaboration with other firms.

    Even that New York Times article cited above makes the point about the need to take a multi-disciplinary approach to innovating complex new health and energy technologies.

    So again, I think it’s not a binary question of large vs. small. It’s more a question of a firm’s ability to collaborate not only internally but also across company lines.

  • Martha E. Mangelsdorf | June 2, 2009

    Very interesting points — and lots of food for thought in these comments.

    Best,
    Martha
    Martha E. Mangelsdorf
    Senior Editor
    MIT Sloan Management Review
    http://www.sloanreview.mit.edu

  • kuiper | October 14, 2009

    I am searching for a previous article (which I read in the printed version of the magazine) which explained how when big companies innovate in an area in which some small companies are innovating, the big companies bring legitimacy to the new innovation.
    I would appreciate it if someone could point me to this article.
    My email address is: femialla_at_hotmail.com. (pls replace the _at_ in the email address with @)

    Thanks

  • kuiper | October 14, 2009

    I am searching for a previous article (which I read in the printed version of the magazine) which explained how when big companies innovate in an area in which some small companies are innovating, the big companies bring legitimacy to the new innovation.
    I would appreciate it if someone could point me to this article.
    My email address is: femialla_at_hotmail.com. (pls replace the ‘_at_’ in the email address with @)

    Thanks
    Femi Alla
    http://www.linkedin.com/in/femialla

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