Let me make it clear from the start that I am a rabid supporter of innovation. Innovation propels us forward into new technologies, products and services, rather than simply standing still or incrementally extending from the current state. This rant isn’t about innovation in concept. It is about innovation as practiced. More specifically, it is about how innovation often gets handled – or mishandled – particularly inside large, well-established, successful enterprises.
I’m going to share an example. This example is not one I simply made up; this really happened. In fact, I think it happens often enough that it is a representative example of the end game for the work products of innovation in many companies – particularly those large, well-established enterprises I mentioned before. I share the example not to pick on the company (I have great respect for them), but to call attention to the issue in hopes that raising awareness will help improve the effectiveness of future innovations occurring in similar circumstances.
This company – let’s call it Constant Corp – was a pioneer in information systems technology and built a loyal global customer base served with reliable, enterprise-class products and services. Some of the most talented engineers in the world worked there. After being hugely successful in its initial business segment, the company has never quite been able to replicate that success to the same degree in major new markets. Constant Corp couldn’t innovate, right? Wrong! During the past 20 years Constant Corp successfully innovated (from a purely technological perspective at least) and developed nascent products in the following areas (there probably were many others):
- a unified multimedia communications environment
- a component-based development and deployment environment built on a rich metadata repository
- a powerful image format for what was at the time a purely text-based Internet
- an on-demand streaming video service using advanced compression algorithms
- natural language processing for mobile telecommunications
- ‘hypervideo’ – semantic analysis and tagging of objects in multimedia, hosted in an open source-based cloud with enterprise-class cloud management technologies.
Constant Corp is not the leader today in any of those markets. Most of these innovations never saw the light of day outside the company. These products were incubated inside Constant Corp by what were essentially the equivalents of small venture-backed start-ups. This work was often done years before other companies – many of them new start-ups – developed similar products and successfully built multi-million dollar businesses around them.
As I said, I don’t think Constant Corp’s story is by any means unique. Companies that are quite successful in a major market are more often than not unable to replicate that success through applying their subsequent innovation to new markets, or even to the same market for that matter. They become overly conservative and unnecessarily risk averse. For a while at least, talented engineers still innovate, but their innovations are slowly starved to death or killed off outright by growing numbers of corporate ‘antibodies’ whose job, it would seem, is to prevent new, innovative products from ever reaching the market. In some cases there is concern about eroding existing markets, which seems like a reasonable concern. The argument can be made though that if you don’t introduce a new technology yourself, a [new] competitor likely will. And in the latter case you will have very little control over the rate of migration to that new technology. But even valid concern about protecting existing markets shouldn’t spill over to products targeting new markets. Instead, innovations in new markets are sometimes stopped in their tracks by declaring them too far away from the company’s existing markets, even in the case of adjacent markets that should be relatively easy to pursue. When these behaviors happen, the companies that allow them to happen in effect become victims of their own previous success and are unable to capitalize on their subsequent innovation.
So what’s the solution here? Let’s start by acknowledging that large enterprises are often not successful at leveraging innovation from the inside out. Maybe that’s not such a good model anyway. Maybe a better model is to encourage outside innovators and entrepreneurs to do what they do well – to take risks, try new things, to fail more often than not, but to sometimes succeed. Seeing large enterprises funding ventures outside their own walls and acquiring start-ups at increasing frequency is in many ways a positive development. So let’s embrace that model and make it work even more effectively. It’s odd to think that in some cases that comparable technology developed outside might be valued more than something developed in a company’s own R&D labs, but maybe there is something about technology ‘bred in the wild’ that gives it an evolutionary edge. If this model works, maybe we’ll see more and better results for our collective innovation spend. Perhaps innovative technologies will find their way to market in better ways. Perhaps they’ll benefit from the combination of the spunkiness of start-ups augmented with the experience that large enterprises can bring in areas such as scalability and customer focus. It’s certainly worth a try.
- Young entrepreneurs and silver start-ups leading recovery (simplybusiness.co.uk)
- How CEOs And Their Employees View Innovation (ceo.com)
- What Happens When You Mix Corporate Leaders With Young Entrepreneurs? (urbantimes.co)