Why Innovation always starts small?
Have you noticed that innovation is associated with startups most of the time? Because the fact is, most of the innovation- digital or not, has been bred in startup environments. These startups start with handful of people, no massive marketing, sales, distribution or technology teams and are always cash strapped. Yet, they innovate!
On the other hand, we have giants. Big companies that are very well placed to innovate with their deep pockets, have large teams with really smart people from top schools around the world and have global footprints. Yet- they struggle to innovate.
In order to add innovation to their portfolio, they often buy these innovative startups. Some of these giants also fund start-up accelerators to fund and identify these potential startups. Why small startups can innovate but Giants cannot?
“The Secret of change is to focus all of your energy, not on fighting the old, but on building the new.” – Milman, 1980
Innovation stems from culture and it is this culture of innovation that these giants lack. There are certain cultural aspects in these giant companies that are hurdles in the path of these companies becoming innovative. This is precisely the reason “startup culture” is always associated with new and innovative products and services.
Four cultural aspects that big companies need to incorporate in their culture
1. Leadership needs to think long term- since it all starts at the top
Hamptons effect: There may always be misalignment between the best interest of large companies and their top leadership. (Windsor, 2017)
While I don’t agree with the word “always” in the definition of Hamptons effect, I do believe this effect exists. This statement may be too radical but often, in industry, many leaders are not starting their careers when they are at the top. They are rather rounding off their career and possibly looking at a safe retirement few years in the future. That makes them hesitant towards taking big, bold and riskier steps.
Create a chief of staff position for every CXO role and staff these roles with middle managers who have shown innovative potential. These individuals who are mid-career will think long terms since their growth will be associated with growth of the company
2. Short Term mindset needs to be changed
Short term thinking is a sure shot recipe for killing innovation. Leadership roles these days are facing financial markets and the company’s financial future is held hostage by the share price. This makes them think about short term financial gains. Based on the latest figures, Amazon now spends $16B in R&D and they make it a point to not turn a profit for a long term, investing income in the growth for the future of the company. They are thinking about building a company that will last 100 years. This is precisely the mindset every big company should have.
Educate your shareholders on why profits and income in the short term are not as important as being innovative and ensuring long term success.
3. Kill the Bureaucracy
I had many interactions with individuals who have worked in both start-ups and big entities. They tell me that they can obviously feel the big difference in the way pre-established processes function in both environments. Bureaucracy is rampant at big companies. It is not only prevalent in processes and Red Tape, but it has also got embedded in the culture of some companies, where new hires are supposed to “showcase” certain traits that the company defined (probably 30 years ago) for its employees to make the company successful.
Every company, big or small needs to reject bureaucracy if they want to last next 50 years without shutting doors or getting acquired.
4. Embrace and celebrate failures
Do we know of any big company that requires that there should be at least two “Big failures” each year in innovation domain and there should be documentation of key learnings? Worrying about failures kills creativity. For those of us who are tasked to think creatively, we should be driven by a sense of discovery and adventure, not fear of failure. Big companies also need to embrace imperfection and embrace messiness, which will then allow the employees to take more risks.