Sunday, May 24, 2009

Who innovates better - the small or the tall?

Today's New York Times has an article by Steve Lohr "Who Says innovation Belongs to the Small?" which makes the argument that "These days, more than ever, size matters in the innovation game".

I beg to differ.

While it might be true that it takes the resources of large companies to implement fundamentally new things, large companies are extremely bad in recognizing the value of these fundamentally new things. Managers like to preserve the status quo, which means that new ideas inside a large company have a much harder time to succeed than if they are set free in the ecosystem of small startups reminiscent of the wild wild west. Other articles in today's NYT give compelling examples, such as bestselling author Jim Collins and Daniel Carasso, founder of Yoghurt giant Danone. It would be hard to envision for both Carasso and Collins to have found any traction for their groundbreaking ideas in large organizations. People with radically new ideas have a hard time to succeed in large organizations. Rather, they follow what I call the three-year-rule: Once they come to a new organization, they identify and try to implement new ideas inside their company. After three years of trying and being frustrated multiple times they usually leave the company and start afresh at another organization. Or, like Messrs Collins and Carasso, they don't join any new organization anymore, but start on their own. But they might still leave some of their creative ideas behind which are then picked up by the large company, leading to success stories like the ones described in Mr. Lohrs' article, such as IBM creating a large datamining system, or (even!) Microsoft starting some social software applications.

So, to put it in a nutshell, it does not matter at all if the innovation is promoted by a large or a small organization, what matters is the collective intelligence and creativity of the creators of the innovation, how well they are embedded into a support network, which can be inside or outside an existing organization. All things being equal, I'd rather say, in agreement with Clayton Christensen's arguments, that chances outside of organizational boundaries and restrictions are much better for a new idea to succeed. Sorry, Mr. Lohr.

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