The following article was first published on PwC’s Digital Pulse online publication as a friendly head-to-head debate between myself and my colleague Tony Mittelmark on the topic of digital innovation in big business. For the full read including Tony’s opposing argument click here
My take on why big businesses can not successfully innovate:
- ‘Channel 9 on the brink as banks circle’, Sydney Morning Herald, 26 September 2012
- ‘Fairfax slashes 1900 jobs, closes presses’, ABC News, 19 June 2012
- ‘Kodak files for bankruptcy’, The Guardian UK, 19 January 2012
- ‘Borders Australia and Angus & Robertson chains collapse’, Smart Company, 17 February 2011
In today’s digital era, disruptive innovation is turning industries upside down as new markets give way to the rise of the ‘lean start up revolution’. But what does this mean for big companies? Are they all doomed, or, is there hope that they can successfully innovate their business models and survive?
Honestly? The outlook is dim, most traditional ‘big companies’ will not survive the shifting economy and it all boils down to three key challenges that CEO’s must overcome:
1. Big companies… A world within a world
A true disruptive innovation is one that creates a new market by applying a different set of values to existing problems and in the process designs a new solution for a different set of consumers.
In contrast to this, big companies by their very nature are focused on the exact opposite. CEO’s, executive leaders, managers and employees are structured in a hierarchical model that drives operational efficiency through a risk management approach in order to protect existing revenue streams. These companies are not positioned to risk success in new, undefined markets.
They are generally large complex and mature environments; literally a world within a world. Individual career success is largely driven by internal politics and the majority of challenges that are faced each day are operationally generated – risk, finance, branding, legal. The impact this has on innovation is two-fold.
Firstly it generates an inward focused culture as opposed to an external consumer-market focus, essentially disengaging the organisation from its customers and the rate of change occurring within the external environment. Secondly, this structure often hinders companies unfortunately rendering them unable to compete with the rapid speed and agility of emerging and often disruptive startups.
2. Don’t underestimate the value of ‘I’ in innovate
Call it capitalism, greed, ego or just human instinct to survive. People are far more successful when they have their backs against the wall, are empowered to make a change and are in a position where they will be rewarded for achieving their vision.
For large organisations enabling this type of environment is quite difficult with the majority of big businesses wrapped up within a blanket of bureaucracy amid a hierarchical structure. In turn this often disempowers staff who find their individual voice and idea’s are continually washed out by decisions from above, crushing any sense of control.
Don’t underestimate the value of ‘I’ in innovate. In order to truly drive disruption and transformational change through innovation, an incredibly empowered, accountable, motivated and visionary individual (or group of individuals) needs to exist.
3. Innovation is about change… and change is inherently difficult
The final challenge successful innovation at a large scale must address is change. As cited in Wikipedia: ‘The word innovation derives from the Latin word innovatus, which is the noun form of innovare ‘to renew or change’.
So what do we know about change? We know that regardless of its form, change is inherently difficult. The longer a certain process or structure has been in place, or the larger the size of the beast that requires shifting, the more difficult it is to successfully drive that change.
For large businesses the cycle of change (starting from satisfaction, denial, resistance, exploration, hope and then commitment) takes far too long, and by that stage other new agile disruptive innovations have already gained market acceleration. How can your business change fast enough to innovate at the speeds set out by smaller, more nimble organisations?
Is there hope for large businesses to successfully innovate and compete against the growing number of digital disruptors? There is always hope, but the reality is that it is a far more difficult journey than most people understand. For CEO’s in the digital era, the challenge for them is balance the focus on today’s revenue, with the commitment and investment required to disrupt and innovate to create tomorrow’s revenue stream – a very difficult challenge indeed.
What are your thoughts on this? Can big businesses successfully innovate? What strategies do you employ to drive innovation within your business?