Why Big Companies Fail at Innovation (And 4 Ways to Get Better)

Written by

Davin Wilfrid

Published on

October 25, 2019

Innovation is more than a buzzword. For large organizations, building a sustainable innovation management practice can be the difference between bottom-line growth and obsolescence. 

But they’re struggling badly. Innovation statistics are easy to find, and they paint an ugly picture of the challenges of innovating at large companies.

McKinsey found that while 84% of global executives said innovation was “extremely important,” only 6% were satisfied with their own organization’s ability to innovate. That kind of stagnation is unacceptable in an age when “digital native” organizations like Amazon and Google are quickly gobbling up huge markets previously dominated by established enterprises.

54% of executives struggle to connect innovation with strategy 

Source: PwC

Why is Innovation Difficult in Larger Organizations?

It’s difficult to separate the concept of innovation from the tech-forward startups that have captured the world’s attention for the past few decades. In the popular imagination, companies like Uber, Airbnb, and Rent the Runway are almost synonymous with innovation. Meanwhile, larger organizations are perceived as lumbering dinosaurs incapable of finding new sources of revenue.

Of course, there are plenty of examples of large, established organizations that are very successful at innovation management. 97-year-old USAA is responsible for mobile check deposits, a technology the company developed to give service members the ability to deposit checks while deployed. 117-year-old retailer Target has built six billion-dollar in-house brands over just three years.

But these stories hardly reflect the experience most people have while trying to drive innovation at large organizations. The challenges of innovation are difficult to pin down, but broadly they stem from a single problem — successful organizations are built for performance improvement, not for innovation. 

Big companies, with their functional and business unit silos, rigid hierarchies, and fidelity to shareholders, have been painstakingly architected over hundreds of years to optimize productivity and production. Bringing new products to market or finding new sources of value introduces risk – 95% of new products fail – which is exactly the thing all optimization work was designed to avoid. 

How Do Big Companies Manage Innovation?

We work with over 30% of the Fortune 1000, helping them get from strategy to execution faster. In the past 3 months, we’ve helped companies drive over 135 different innovation initiatives. Here’s what our customers say are the four ways they are driving improved innovation delivery at their large organizations:

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Tying innovation to strategy

The drive for efficiency and productivity makes it difficult for companies to tie innovation efforts to corporate strategy. Smart organizations are adopting frameworks and policies to allow innovation to flourish on their own terms while being integrated into the overall company’s goals. For example, see how Corteva Agriscience is exploring new models to drive innovation with agility.

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Balancing their innovation portfolio

Too many organizations fall into the trap of setting an innovation agenda without effective innovation management. Inevitably, those tasked with developing innovative new products or processes disappear from view, making it nearly impossible for senior executives to assess which initiatives are working and which are not. Smart organizations manage innovation initiatives from a central source, and can quickly rebalance and reprioritize based on the actual value delivery across the entire portfolio.

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Accelerating innovation delivery

Because innovation is about placing smart bets and quickly assessing success, getting faster at project delivery is more important than ever. Leading organizations accomplish this by moving toward adaptive organizational structures — moving internal and external resources quickly in order to optimize time-to-value.

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Enabling innovation at scale

What happens after innovation? Too frequently, organizations fail to capture and disseminate insights. Just as frequently, the hand-off of innovative new products and services to lines of business is fumbled or dropped altogether. Smart companies stay focused on not only the development of potential new sources of revenue, but also on the smooth delivery of those innovations to the business.

Ultimately, there are many challenges to managing enterprise innovation. Smart innovation leaders need to address culture, organizational structure, strategy, and more to be successful. 

Learn More

Want to help your organization become an innovation machine? Download our new eBook 4 Behaviors of the Most Innovative Companies

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Written by

Davin Wilfrid

Published on

October 25, 2019

Davin is the Director of Content Marketing for Catalant. In his spare time, he builds terrible-sounding instruments.