The innovation paradox

In modern business, innovation is a buzzword often celebrated in boardrooms, but seldom witnessed in action. Despite vast resources and access to elite talent, organisations frequently stumble when it comes to launching new products that can meaningfully grow their business beyond their established core.

This is true at almost all levels of scale (Google, for example, with search still accounting for around 80% of their revenue despite having launched hundreds of products over a quarter-century). Why, with such advantages in finance, talent, brand and distribution, is it so rare for lightning to strike twice in mature companies?

In startup mode, companies exist to learn – testing, failing and adjusting until they find product-market fit. They are unhampered by the baggage of success or reputation and haven’t yet grown large enough for process or communication friction to appear.

At this stage, businesses are nimble entities capable of building, testing and pivoting rapidly. Because there is little at stake, there is little at risk, so they are able to try things that are unproven, perhaps even radical, until they find something that sticks.

However, success changes things. When a business finds traction, their growth evolves to support it. Instead of existing to learn, they start to know. They build teams of experts, following policies and structures that optimise for scale, profit and the reduction of risk.

While these changing dynamics are crucial for stability and medium-term success, they have an equal and opposite effect on their agility. By this stage, an organisation has completely evolved – a different animal altogether which no longer has the features required for disruptive thinking and innovation.

Key blockers for corporate innovation

Inertia: Success breeds comfort and comfort becomes inertia. The larger a company grows, the more it resists deviating from tried-and-true plans. They lose the urgency and impetus to explore and the average risk/return appetite shrinks. Incremental improvements become favoured over bold but uncertain ventures and this becomes the embedded default position.

Culture: As companies expand, their cultures tend to become more conservative. The appetite for trailblazing gives way to preservation of what they have found. Behaviours start to become more inward looking and values tend to become more retention-focused, such as community, wellbeing and customer centricity. This change is not negative per se; it just shifts the focus and attracts a new type of talent that is more suitable for stability, but less suitable for innovation.

Structure: With growth comes complexity. Organisations become hierarchical and compartmentalised, which hampers communication and slows decision-making. New ideas must navigate through this labyrinth, often losing momentum before they can gain traction. This often causes people’s motivation levels to drop as they see their ideas or efforts thwarted and they begin to assume ‘someone else does that now’ and get more myopically focused.

Budgeting: Financial frameworks in large companies often focus on short-term results, sidelining potentially revolutionary projects that do not promise immediate returns. In short, ‘low-hanging fruit’ tends to win the budget process. Less important, but more immediately measurable things, usually trump more important but harder to measure things. This approach is counter to disruptive innovation that requires faith, time and patience to reach fruition.

Fear: There is a genuine fear that new products might cannibalise successful existing ones or waste resources. This fear, while understandable, can prevent companies from taking necessary risks to stay competitive in rapidly evolving markets. However, in the fast-paced market, failing to innovate can be more dangerous than failing to try, as competitors are always ready to fill the innovation void. Most business leaders intuitively know this, but still find it difficult to act on when they don’t have the resources, skills or idea development pipeline.

Key unlocks for corporate innovation

Belief: Fostering a company-wide belief in the possibility of innovation is crucial. This requires a fundamental shift in mindset from all levels of the organisation, embracing a vision for change and the transformative steps necessary to achieve it. To get past natural scepticism, people need to feel that their leaders are committed, see the shift from evolutionary to revolutionary thinking and experience the changes to roles, structures and success measures that will support innovation.

Focus: New product development requires undivided attention. But attention is a very scarce resource and most organisations vastly underestimate the time spent on ‘BAU’. Combatting this requires determination – from setting up separate physical locations to defining new structures and potentially entities which can shield them from bureaucracy. When support or interaction with the parent is helpful, this should be on a ‘pull’ basis from the team, as opposed to a scheduled ‘push’ (reporting, approvals or other processes). The goal should be that 100% of any people-related spend contributes to learning and exploring market opportunities.

People: Innovators thrive on uncertainty. They need to be multi-talented and deeply experienced in the job you’re aiming to do. It’s crucial to honestly assess if the skills exist in your team. If they applied for a new job in the nascent R&D department you’re considering, would they get it? Are they incredible collaborators? Do they have exceptional levels of empathy? Do they truly understand strategy? Have they ever built anything zero to one? Have they worked in highly cross-functional teams? Do they have an unquestionable reputation for delivering outcomes? Consider the alternatives and where you might access these skills and talent otherwise.

Process: While minimising unnecessary friction, a structured process for developing new products remains essential. This should balance art with science – creativity with data-driven decision making. This process requires expertise to run effectively and a reliable playbook for navigating the many steps through ideation, creation and validation. Harnessing the chaos and providing the waypoints, checks and balances on the path to success. This combats ‘shiny object syndrome’ and ensures focus remains on building what customers actually need and achieving meaningful business outcomes.

Expectation: Be brave in setting expectations. Many people will need to accept that they will have little or no visibility (or control) over things in ways they are used to and that results will be hard to gauge for some time. For the team themselves, this requires being clear on the strategic aims and long-term business outcomes that they are expected to drive towards, then providing the autonomy, resources and space needed to experiment (and potentially fail) on their path.

How we can help

We have a number of experts and champions in our team dedicated to early-stage venture building. They bring decades of experience launching tech-centric ventures around the globe, across many verticals and business models. This means we will venture beyond simply building to spec and dive deep into the strategy, creative, marketing, business development and operational functions crucial to successful innovation.

Our teams can operate standalone or help to augment existing teams that you may already have focused on early-stage opportunities. We bring the playbook, the expertise and the team to manifest new products for your company and market.

We can help ideate, validate, create and operate new products that keep your business at the leading edge of your market and ensure your ongoing prosperity as the pace of change accelerates around us all and the risk of disruption grows. Let’s talk. Email us now.