Beginning in the 1980s, science was concerned with why companies as successful and innovative as Xerox, Polaroid, Kodak, Nokia, AT&T or Yahoo – to name but a few – seem to have gradually lost their innovative power and were pushed out of the market by competitors.

Not only were there doubts that these large companies would be able to revolutionize the market again in any way and be proactive; they didn’t even seem able to react to new competitors and products. Like a rabbit in front of a snake, these former pioneers of the respective industries apparently passed out.

Reasons for failure

However, there was no specific reason for this – it was the sheer amount of reasons that caused companies to fall into shock rigidity:

  • inertia within the organization (as a tanker takes a long time to change course)
  • growing bureaucracy(more and more formalism hinders agility)
  • lower risk appetite (it could endanger the share price)
  • the fear of cannibalizing oneself and one’s products (better not change anything, we earn well)
  • Deeply rooted processes (it was already costly enough to align all employees with the existing processes)
  • blind trust in existing technologies and products (“never change a winning team”)
  • almost fanatical pursuit of existing business models (better to stick to what we know)
  • Incorrect incentive systems and the short-term view of certain key financial figures (if that doesn’t pay off in 6 months, it’s crap)
  • Shortsightedness and excessive self-confidence of the management (what does someone want to tell us?)

It seems as if every company – the bigger, the worse – is inevitably afflicted by these pathological findings.

As if it weren’t bad enough, no supposed expert will fail to emphasize this in the same way. Through this constant repetition it does not become more correct in the matter, but the general opinion nevertheless manifests itself. Meanwhile, managers are pulling themselves out of the affair by stressing that they would like to be more innovative, but that it is common knowledge that for the reasons I have mentioned this is hardly possible.

The consequences

Critically reflected innovation is considered a total waste of money in large companies. It is better to distribute the money saved to the shareholders, who can then invest in small, agile start-ups via venture capital – in our opinion a mistaken assumption!

But it does work…

If a company would set out to systematically develop an innovation strategy, establish an innovation process and establish an innovation culture, then any company can innovate sustainably from the inside – regardless of its size.

Adapted from “Creative Construction: The DNA of Sustained Innovation” by Gary P. Pisano