Thursday, February 23, 2012

Where Innovation Happens

Innovation seems to happen more frequently and meaningfully in small businesses. Why?

Larger companies have a proven business model, and those companies typically hire employees to execute those business models, not discover new ones. This tends to foster innovative thinking to make the business model more effective and efficient, with lots of corporate resistance and barriers to considering new, better ways that veer too far from the norm.

Smaller companies are searching for the way to become big and are often much more open to innovative ideas, business models, and perspectives. These companies are also able to adopt and absorb changes much more quickly, whereas the inertia of larger businesses can be hard to redirect, especially if it requires getting onto a completely new set of tracks.

There is certainly value that comes from each scenario I described above, but this is part of why it is so hard to grow into a big company and still stay competitive. This is also why so many people write about innovation, because large companies are trying a lot of different tactics to be innovative.

I think the real lesson is this: innovation needs to be fostered and empowered as far away from the proven, successful business models as possible. If you run a large company, get R&D away from the rest of the business. Start completely new businesses away from the parent organization and allow as little contact as possible between the two. The employees of the parent company will try and figure out how to fit new ideas into the existing successful business model, and nothing will stifle innovation faster!