01 May 2009What Do You Think?

Do Innovation and Entrepreneurship Have to Be Incompatible with Organization Size?

by Jim Heskett
Like a good case study, this month's question divided respondents nearly down the middle, says professor Jim Heskett. Can managers lead both a large, established organization and encourage intrapreneurial effort inside it? Readers weighed in. (Online forum now closed. Next forum begins June 5.)

Summing Up

Where are the leaders that can help elephants avoid a stall? Like a good case study, this month's question divided respondents nearly down the middle on the question of whether or not organizations naturally "stall" because their size interferes with innovation and entrepreneurship. Several questioned whether organization size is the appropriate variable. C.J. Cullinane attributed it to "bureaucracy." David Wittenberg said that "Culture, not size, is the determinant." Adam Hartung's work has found that "stall points" are associated with continued "focus on execution … doing more of the same … when they stalled," not size.

Many reasons were put forth to explain why there is a perceived relationship between size and stalls due to general lack of innovation. Jeff Herman suggested that it can be attributed to a diminished ability of managers to "'personally' drive innovation and competitive advantage." Gerald Nanninga placed the blame on "infestation" (parasites that successful organizations attract) and "cannibalization" (fear of damaging existing businesses). Phil Clark pointed to the "boundaries" that form when organizations grow that present the "potential for clashes and struggle." Bob Brown attributed it to "risk aversion combined with lack of vision, drive, and prescience for the market in … second generation (managers)." Leighton Carroll cited "very strong finance and legal teams" as sources of risk aversion.

But other respondents concluded that it doesn't have to happen, and proposed antidotes to the phenomenon, starting with David Levine's "list" of "a strong force at the top … to drive a central vision and … give resources and energy to priority areas for innovation." Amy Sauers added findings that suggest that large firms succeed that "attempted to 'get small' (through the vehicle of) 'lean, mean, heavyweight teams.'" Another ingredient suggested by Eric Ries is that of a "built-to-learn culture (centered) around rapid iteration and customer insight." One way to address the challenge, according to Jeffrey Vetter, is to "separate out forward thinking groups from the day to day business." Dave Schnedler suggested hiring the best creative engineers, giving them "tremendous latitude," and insuring "no negative consequences" associated with failure of innovative ideas.

The right kind of leadership—capable of building trust, the willingness to take risk, and establishing a culture tolerant of failure—was cited often as the most important ingredient in supporting innovation and entrepreneurship in organizations of any size. If that's the case, one has to conclude from the comments that there is a shortage of such talent. Can someone lead both a large, established organization and encourage intrapreneurial effort inside it? Or are the requirements so different that it is too much to expect one person to be able to do, as Forrest Christian suggested? Referring to the same problem, Jim Johnson invoked my colleague Michael Tushman's work on "ambidexterity" among leaders, concluding that "Most leaders are just right-handed." Richard Eckel pointed out that "Business schools … teach 'mature' organization skills, primarily because entrepreneurial and creative organizational skills are not teachable." Do you agree? If that's true, we may have to look elsewhere for the kind of leadership we seek. Perhaps it will come from a "younger culture" that is now infusing organizations with "teaming and a desire to be more cohesive (which will) actually foster more effective innovation," as Paul Davis suggested. What do you think?

Original Article

On the day two weeks ago when I put this piece together, several pieces of news reminded me of the importance of this question. It was reported that Saturn dealerships were closing in anticipation of the announcement by General Motors that Saturn was one of three brands that it would drop. Saturn, arguably the most innovative undertaking by the company in several decades, is on the auction block. Consumers apparently loved the car more than GM executives, who couldn't figure out how to make much money with it. The same day, Google announced its earnings: In discussing the announcement, analysts reminded investors that 97 percent of the company's revenues still come from one source, search and advertising, despite the organization's emphasis on providing time and an organization for innovation among its associates. I remembered the airline Song, which had introduced service innovations until it was folded back into parent company Delta and oblivion, just one of several unsuccessful attempts by large airlines to compete with smaller, more focused, low-priced competitors. Then I picked up Stall Points, a book by Matthew S. Olson and Derek van Bever.

The books Built to Last and Good to Great have informed us about success. Stall Points is of the same genre in the sense that it is based on extensive quantitative research of a large database followed by more detailed examinations of a subset of organizations. But instead of success it deals with failure and its causes. The sample of organizations here is composed of 400 corporations that at one time or another have comprised the Fortune 100 since 1955 as well as some 90 non-U.S. based corporations. From the larger base, the authors selected 50 organizations whose experiences met the criteria for a stall and whose profiles were representative of the entire group in terms of industry mix and age. They were studied in-depth and provided the basis for conclusions of the study.

For the group as a whole, the authors found that growth rates: (1) increased up to the "stall year," (2) dropped precipitously in the following year, and (3) faced increasingly difficult odds of regaining momentum with the passage of time after the stall. Of the companies in the study, 87 percent had experienced a stall. Fewer than half of those were able to return to prior rates of growth within a decade after the stall. Of the reasons for the stall, 87 percent were within managers' control. The four most important causes of stalls were found to be "the presumption of an unassailable competitive position" by management; "innovation management breakdown," including such factors as slow product development, too much decentralization of research and development, or curtailed R&D spending; premature diversification from "core" activities; and a "talent bench shortfall." In the stalled companies, innovation suffered from a concentration on smaller and smaller niche opportunities, brand extensions, or generally ideas with small business impact.

All of the companies in the sample had reached substantial size at the time they stalled, suggesting that organization size must play a role in this mix of phenomena that includes "innovation management breakdown." But why do these phenomena occur, especially given what we generally assume to be the availability of superior resources to support innovative activities in larger organizations? Whatever happened to the focus on intrapreneurship (within large organizations) that fascinated us in the 1980s? How do a few well-known large organizations, such as Apple, Virgin, and Tata continue to innovate and support entrepreneurship? Or are they just delaying the inevitable? Do organization size, innovation, and entrepreneurship have to be incompatible? What do you think?

To read more:

Jim Collins, Good to Great: Why Some Companies Make the Leap … and Others Don't (New York: HarperBusiness, 2001)

Matthew S. Olson and Derek van Bever, Stall Points: Most Companies Stop Growing—Yours Doesn't Have To (New Haven: Yale University Press, 2008)

James C. Collins and Jerry I Porras, Built to Last: Successful Habits of Visionary Companies (New York: HarperBusiness, 1994)

Comments
    • Forrest Christian
    • Associate, TMC
    Perhaps the people who are thought to best manage large organizations are simply unfit to manage innovation and the creative project.

    Of course, Tata supports innovation in part by having an innovative organizational culture around accountability, apparently heavily influenced by David Billis's work levels. And Apple stalled and most of us were willing to write it off until Gates bought up 10% of the company.
    • David Levine
    • Student, HBS-HLS
    Professor Heskett,
    This is an interesting question. One thing that stands out about Apple, Virgin, and Tata is that they have a strong force at the top of their organization to drive a central vision, and perhaps more importantly, to give resources and energy to priority areas for innovation.

    When I look at Google, for instance, there are a number of products, including G-mail and YouTube, that seem to have the potential to be the next *big thing*, yet, for some reason they do not seem to have much energy and momentum behind them (perhaps the same was true for Song).

    Thanks for the great article, and I hope all is well. TEM remains one of my favorite courses over my 4 years here.
    • Amy Sauers, Ph.D.
    • Assoc Prof, MAN, SPC
    I studied under Dr. George Scott when he was running the large Delphi Studies on high tech firms' top issues. He found that the best firms were either small or attempted to "get small." The best broke into chunks of "lean, mean, heavy-weight teams." These teams were fully empowered - yet if they were under the umbrella of a corporation, I suppose they also had a little cushion, however unconscious, from the economy of scale gained through bigness.
    • Eric Ries
    • Author, Startup Lessons Learned
    I firmly believe that entrepreneurship is possible in all sizes of companies, sectors of the economy and industry.

    We often think of "two guys in a garage" when we conjure up the image of a startup. But this is misleading. In my work with companies here in Silicon Valley and around the country, I use this definition instead:

    A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.

    Of course, I work full-time evangelizing a methodology called "the lean startup" that is designed to help organizations create a built-to-learn culture around rapid iteration and customer insight in these extremely uncertain contexts. I may be biased, but I believe it - or something like it - is needed to help answer the question of how to create disruptive innovation.

    Thanks,
    • Richard A. "Tony" Eckel
    • President, Systems Synergy, Inc.
    Risk aversion; Success often depends on the psychological need to accept ultimate demise as a probable outcome; mountaineers attempting Everest. Risk aversion disables where success demands risk.

    Pack Mentality; Mature organizations see entrepreneurial success as a threat to the status quo and (directly or indirectly) act to disable the success when a threat to status quo is perceived as imminent (the stall). Creating a self- fulfilling behavior, defensive disablement then reinforces a status quo culture through attrition, natural selection, and pack discipline.

    Business schools (over)teach "Mature" organizational skills, primarily because entrepreneurial and creative organizational skills are not teachable. Or at least are not seen as securely profitable by the mature business school to develop effective curricula.

    Virgin and Apple have risk embracing leadership, explaining the market fear of Jobs' illness. Google is a risk tolerant environment whose measure of success is not how much revenue each innovation produces, but how combine innovation results drive the success of the core business; ad revenue. Suggesting that Google is not efficient because of the lack of direct innovation-revenue measures is the mark of a mature business analysis; yet Google thrives!

    Contrast entrepreneurial success and organizational maturity to Kodak, Xerox, and now GM; Mature management suppressed entrepreneurial development and led to their failures! Does anyone suggest that these companies are successes with year over year declines in revenue, profit, market share?

    Maturity of organizational management cannot be "cured", so it must be channeled appropriately. Selection of personnel for advancement must identify the characteristics of the entrepreneur, as well as the steward, to build the appropriate cultural environment for each of these organizational needs, and direct talent to areas in the enterprise where they can contribute to the success of the enterprise, or suggest alternative employment where their combination of skills, talent, personality, and desire can be most effective for individual success.

    It is not so much the size, rather the maturity, of the organizational leadership that determines the willingness to accept entrepreneurial risk. Examine Microsoft and you will see such an organization that has matured into a downward trend due to the loss of leadership who sees innovation as a prerequisite of success.

    Leadership that makes "safe" choices is on the road to perdition.
    • CJ Cullinane
    I believe innovation, and entrepreneurship have more to do with bureaucracy than size. The examples of Virgin and Apple point to this. By organizational design Virgin is geared to be innovative. Sir Richard Branson gives his people responsibility and authority to innovate, while Steve Jobs at Apple drives (leads) innovation through the company.

    A top down organization can stifle innovation by commitee, layers of approval, and 'not my idea' way of thinking. I have seen this in practice in both large and small companies. I have also seen innovation work at large and small companies. The telling factor in my opinion; bureaucracy. The effective companies both large and small cut the red tape and specialization of functions.

    Innovation and entrepreneurship can flourish in an organization that allows it to flourish by cutting the bureaucracy and red tape that often hinder these important attributes.
    • Jeff Herman
    • Business Development Consultant, Delta-Tek Partners
    I like to think of innovation as one source or example of "competitive advantage". Management of successful early-phase companies are often the creators, designers and implementers of innovation and competitive advantage. As companies grow and management rolls and activities change to adapt to a larger company environment, managements' ability to "personally" drive innovation and competitive advantage is diminshed. The business stalls.

    To avoid the stall, management at growing companies must transform itself from being the innovators and creators of competitive advantage to becoming creators of organizational structures, processes, people, etc. that will achieve the same outcome--competitive advantage.

    It is a process of continuous re-invention.
    • Ulysses U. Pardey, MBA
    • Managing Director, Am-Tech, S.A., Panama, Republic of Panama
    Do organization size, innovation, and entrepreneurship have to be incompatible?

    Hopefully this comment could be useful, to some extent, for innovation and creativity matters. One could improve something which has been previously created; therefore, allow me to focus on creativity.

    Let us say, broadly speaking and for the sake of this comment, that:

    Innovation, businesswise, could be a change of an already-existing solution, i.e. an improvement. A looked-for creativity, businesswise, could be a not-yet-existing workable-useful-profitable solution to a need/problem which someone/few people can "see" and which the vast majority of other people do not see. It reads as a scarce source of potential big profit, mainly coming from very few people.
    Where do existing solutions - products/services - to an existing need/problem come from? What is their history - people, things and time then - and how do they compare to that need/problem to solve with today's resources - including awareness - in terms of people, things and time?

    Could we connect things we are not aware of?

    Could we be aware of such a connection?

    Success is in the comparison, failure is in the comparison and we can also learn by comparing.
    Could we compare things we are not aware of?

    Is awareness some kind of "education" we are not aware of and a latent key success factor for not-yet-existing advancement in business?

    Round-thing solutions (circles and the like ... wheels) seem to be all-time solutions .... so far .... this could mean that we are still missing something.
    Existing solutions seem to be framed/limited by our ignorance and/or lack of awareness, connection and comparison.

    Could awareness, connection and comparison be among the workable tools toward this profit-oriented would-be creativity in organizations regardless of their size? Therefore, what to do to make lots of employees creative or help them behave in a way which favors creativity in an organization? Could personal interests prevent this from happening? How to avoid this? Oftentimes we can read that something was discovered or a not-yet-existing solution was identified unintentionally, by accident. Awareness, connection and comparison at work together?

    Innovation compared to creativity? Could someone identify a not-yet-existing solution and the competition beat him/her with its improvements?

    What is the meaningful purpose of the size of an organization and its management?
    • Dianne Jacobs
    • Founding Principal, The Talent Advisors, Melbourne, Australia
    Success can lead to once entrepreneurial companies becoming cumbersome by the systems and procedures originally set up to ease the administrative burden. After all, highly directive or controlling styles stifle invention, learning and spontaneity.

    Companies must not only generate new ideas, they must be able to identify the most promising, act on them and bring them to fruition quickly and effectively. Effective execution requires high-quality decisions, buy-in from all stakeholders with the structure and resources to move forward. Sacred cows or turf boundaries limit deep, lateral solutions or the ability for joint execution and what results is a strengthening of the established silo network and group-think.

    The tone for innovative thinking resonates from the senior executive team by its agenda, dialogues and to what it gives attention. Context is seen as the formula for success. But it is also the unspoken or unacknowledged conclusions about the past that colours the thinking of what is possible for the future and the choices that can be made. If the team is too limited in its focus or too traditional in its thinking then the status quo is preserved. If the culture or mental age of the executive leadership is such that it either resists or overrides or is impatient, then cynicism sets in elsewhere in the organisation.

    Entrepreneurial thinking is, in reality, a group effort. People are a company's innovation channel - they connect the company to its customers and the marketplace. There needs to be a genuine commitment to create new contexts, simplify complexities, unite the silos and capture the synergistic effect that a diverse group of people bring to the creative process.
    • Philip Tribe
    • Entrepreneur / Student
    How many of the original entrepreneurs remained at the corporations in question once they became big? Apple and Virgin still have theirs.

    While management does a good job of implementing business efficiency, it seems that retaining the original entrepreneurs, even in consultancy role, is vital.

    No matter how large a company gets it cannot force intrapreneurship. That spirit comes from the individual not the organization.
    • Brian Glassman
    • Ph.D in Innovation Management, Purdue University
    Interesting thoughts professor Jim Heskett.

    Intrepreneurship is definitely an area which tends to go awye in large corporation, and I thinking it is hyper sensitive to so many different parts of the company's, like: processes, culture, people, and assets.

    I especially liked that Jim described the book "Stall Points" I will put this on my to buy list.
    • Peter Manda
    • owner, Manda Translations, LLC
    Innovation doesn't stop as the firm grows or is bigger but the process of innovation becomes scientific. A larger firm has the resources to pre-evaluate innovation, to finance it, and to channel its direction to be mission-consistent. It's the latter part (making sure that innovation is mission-consistent) that is tricky and becomes the source for downfall. This because rigid adherence to mission is equivalent to ambitious goal-driving; and that can blind companies to changes in the market which can lead to the companies demise (contrast Kyocera w/ Wedgewood).
    • Anthony Gardner
    • Partner, Accenture Innovation & Growth
    Definitely not incompatible, but rare nonetheless. The difference we've found is in how gravity effects the organization. When gravity does set in, will it hold and nuture the innovation aura or squelch it to protect what's been built? Leadership (big surprise?) drives organizational gravity and can build on successful innovation or surround, protect and all but smother it to death. The (becoming) classic examples mentioned of Apple and Virgin have made friends with gravity and their business is continuous innovation on many dimensions. Others not mentioned, have enjoyed innovation and then employed gravity to protect it styming new and or continous efforts. Commitment to people and structure, a rigorous innovation process, formal business unit links, a passion for non-organic innovation and leadership involvement will lead to a longer list of large, entrepreneurial companies.
    • David Wittenberg
    • CEO, The Innovation Workgroup
    Big companies most often get that way on the strength of one innovation based on one radical insight. Continued growth depends on continuous development of new, radical insights and the ability to invent solutions based on them.

    Growth rates achieved by breakthrough innovations are mathematically higher for smaller firms, but such innovations are equally possible for large enterprises. Culture, not size, is the determinant.

    The economic impact of any innovation is determined by the scope and exclusivity of the insight upon which it is based.

    If companies continue to innovate based on past insights after conditions have changed, they go bankrupt. Chrysler and GM are examples.

    If their insights remain correct but they cease to innovate, they soon lose their exclusivity. The industry or product matures, and the growth rate slows. Starbucks is an example.

    If they limit future innovation to insights with limited scope, such as demand for line extensions, they likewise see a slowdown in growth.

    Only those companies with cultures that support insight development and systematic innovation have any hope of capitalizing on a stream of radical insights for a long period. 3M, Apple and Procter & Gamble are good examples.
    • Phil Clark
    • Clark & Associates
    Three critical items impact company success when maturity (#5 Tony's definition maturity is a good one) and size takes over.

    One...Care Factor - I learned a long time ago that when you have enough people who care about an issue, company, or person, that nearly anything can be accomplished. Unfortunately, as companies become bigger, more people start caring about themselves than the company. When senior managers treat employees poorly or when employees only think of what they can gain...companies suffer. Look at many companies struggling and failing today. Everyone must understand that thriving companies are like living organisms, all parts are vital for the entire beings success.

    Two... Boundaries - In the world of meteorology the real weather occurs here cold, hot, moist, dry boundaries clash. It is no different in the social environments. When companies grow more boundaries are created and more potential for clashes and struggle. When divisions, individuals, or managers establish more boundaries and do not resolve the problems where boundaries clash...the company stalls. Some call it silos and others bureaucracy (#6 Cullinane), but the basics is boundaries of resources, power, and personnel. If your organization does not have the skills or will (care factor) to work across the boundaries organizations deteriorate and fail.

    Three...Human Factor - organizations are living, breathing entitities. We tend to forget that. We have spreadsheets, numbers, data, six sigma, lean, forms, figures, more figures, more rules, etc. We forget that companies are people...flawed, emotional and concerned people. When you treat a company like a machine you lose the momemtum of caring. Managers would rather address the people issues by the numbers than by the heart. Companies that have real life and a future...show real life at work. You can see it when you walk in the door.
    • Adam Hartung
    • Managing Partner, Spark Partners
    Researching my book "Create Marketplace Disruption: How to stay ahead of the competition" we took the Commerce Board data and added to it data from small companies. We then researched not only failures, but those who recovered from stalls.

    We did not find a correlation between size and failure - or success. Attempts to link with size proved spurrious, and had more to do with opinions and bias than anything we could find. Stalls were even more common in small and medium-sized businesses than large ones, and the probability of failure was just as great.

    Failure was tied to organizations continuing to focus on execution when they stalled. They missed market changes which led to a stall, and kept trying to improve performance by doing more of the same.

    On the other hand, businesses avoided stalls altogether, or overcame them, if they (a) focused primarily on future scenarios in planning rather than historical strengths and "core" positions, (b) obsessed about competitors and used competitor information to gauge market requirements rather than listening to their customers, (c) implemented internal Disruptions which caused rethinking the operational status quo, and (d) utilized White Space to test new innovations toward which they could migrate the business to create/maintain growth.

    Companies like GE, Johnson & Johnson, Cisco Systems and Nike largely make such practices the norm and as such avoid growth stalls. Companies like IBM and Apple that have dramatic turnarounds implement these practices to overcome lock-in to past, outdated practices and evolve.
    • Tom Dolembo
    • consultant, Dolembo Associates
    A great and timely question, Professor. I spent over 25 years in the midwest turning around, rebuilding, and co-owning companies. Many were family owned, some were parts of consolidations. We passed through at least seven major downturns, often starting the salvation process at dead low in the markets. Innovation, entrepreneurship and turns were linked together, as you suggest, and many process changes had to occur to make it happen. Often these changes happened on the fly, daily, in response to sudden customer demand or customer loss. Scale is absolutely an issue. Companies with over $10 million in revenues respond very differently than companies $500M or over $20MM. Strategy, oddly, is very similar. Once the crash happens, holding to a solid, customer based, flexible but focused vision is essential to ride out the storm. The response, and the resources for it, are very different.

    I offer Dolembo's Laws of Strategic Turnarounds. Use them at will, they work. Size doesn't matter.

    Dolembo's First Law:Innovation must be weightless

    Success is inversely proportional to weight of the product. If the major component of profitability weighs a lot, it is harder to broaden market against competitive "close bys". Strategy should always take into account the potential weight driven profitability of every component. Data and ideas, of course, are weightless, etc., hence their role in turnarounds. Increasing the value of the lightest weight product does wonders. Turn a cement company into a composite materials data company and zip, turn.

    Dolembo's Second Law: Visit the floor

    The best innovations are generated by the fringe team members. Rarely do the dominant members think outside the box, or have time or ability to think freely.

    Dolembo's Third Law: Look well off center

    The best sights and insights, in astronomy or in business, are well off to the side of the central image. The "edges" offer the only true options, never the center. Teams have to develop their peripheral vision.

    Dolembo's Fourth Law: Value the Plunge

    The deepest losses always occur just before the best idea surfaces. Never give up. You cannot fill up your hand until it is empty.

    It's not the size.
    • Gerald Nanninga
    • VP, Retail Ventures, Inc.
    Two Concepts: Infestation and Cannibalization. First, when a company becomes large and successful, it attracts parasites, like moths to a flame. A parasite is an employee who is looking for a safe haven, a place already creating a lot of cash flow (which they want to tap into). They are not risk-takers. It is amazing to me how quickly a company can become infested with these parasites once the reputation gets out there. These parasites suck out the entrepreneurial drive.

    Second, great new innovations succeed by obliterating the status quo. All of that "new" growth comes by taking share away from older industries and business models. When you have nothing, the rewards in reinventing an industry look huge--making the risk look worthwhile.

    However, if you are now the market share leader, the reinvention ends up stealing from yourself (cannibalization). All of that reinvention looks like taking money out of one of your pockets to put into the other pocket. Why spend a ton of money and take a huge risk of destroying the core if the reward is the hope that you will get back all the share you already had?

    To avoid the stall, a company has to diligently fight against parasite infestation and accept the virtues of self-cannibalization, realizing that it is better to cannibalize yourself than to have an outsider do it to you.

    I am reminded of the SS Kresge company in the 1960s. They knew that for their new Kmart division to succeed, they would have to destroy the Kresge variety store core. They were willing to cannibalize themselves, and Kmart thrived for decades.

    Then, when the supercenter concept came about, Kmart's first reaction was to try to build a supercenter that did not take share away from the core Kmart stores (avoid cannibalization). This resulted in a disaster supercenter called American Fare, a short-lived phenomenon. This time, by trying to protect the core, they killed the future of the company.
    • Bob Brown
    • Brightwood Advisors
    Prof. Heskett is spotlighting a widespread phenomenon in my view. While spending a large portion of my career in the Personal Computer business, this stalling would occur again and again.

    Many of the great companies in their early stages like Compaq, Dell, Adobe, and CompUSA were founder driven. These founders had a unique feel for customer preference and built great products often on gut instinct. They also set the pace for high energy and dedication in their employes. Subsequently the companies were fun and challenging to work in.

    The second generation managers were often "seasoned executives" from other large companies. But they lacked this spark which made them fun, so early employes left. And their customer decisions didn't have the same accuracy, so product differentiation suffered. It appeared to be risk aversion combined with lack of vision, drive, and prescience for the market in the second generation.
    • John McNett
    Central vision is key to avoiding stall points, but is incomplete without leadership - not managers - to nurture the spirit among the ranks. A manager may do very well at hitting a company's objectives without ever knowing if they work as a collective to inspire growth or merely work toward a plateau.

    Companies akin to Apple, Virgin, and Tata are not delaying the inevitable - they are working hard to avoid the inevitable. Along the way, they are showing the rest of us that it is possible to keep entrepreneurship from being squelched by an organization's size by making it part of the culture.
    • Jim Johnson
    • Principal, EnterCap Partners, LLC
    Very important issue. May I offer my ideas about some of the causes. I expect there is not one but many and many we don't know we don't know.
    1. Clayton Christensen's ideas are relevant here. Disruption seems to frequently come from smaller firms encroaching on the neglected, smaller, less profitable segments of larger firms. He list a number of reasons the big guys don't see it coming or don't know what to do. In part, these smaller segments are too small to matter in the scheme of things.
    2. The three you mention (Apple, Tata, Virgin) have serious founder presence--coincidence?? I think not. Many large companies are run by "professional" managers--e.g., top MBA grad's or insiders that up through the ranks. The deep incentives are just different. In area the man who sold Boscov's dept store chain bought it back to save it from bankruptcy. Let's see what happens.
    3. Many larger co's just can't seem to bid farewell to legacy segments that have gone over to the commodity realm. too much revenues involved but shrinking profits. there is emotional attachment, relationships that transcend shareholder commitments.
    4. It seems many larger firms just can't resist pulling smaller, higher potential businesses into the legacy infrastructure becase of purported economies of scale.
    5. managements can see that a newer market may require a different mindset that the core business. So they assign a legacy veteran executive to run a new business. Many exec's simply can't change to the required style. they run the new business with the same playbook as the legacy businesses.

    There are exceptions. I work with one firm that has made a remarkable transformation (I'm not taking credit for it) from slow growth, tired brands in larger, westernized countries, unfocused, sku proliferation, hockey stick forecasting, boxed in by "big box" customers etc. But a new CEO changed that with 3-5 very clear, deliberate, disciplined changes to investment, no tolerance for go-nowhere product development projects, cutting advert to "prettyfy" the financials, clear and visible performance objectives, shifting resources to smaller higher growth markets outside the English-speaking footprint. all very basic, good management practices.

    In my opinion Ram Charan has pretty much nailed this issue in two of his books--Know How and Every Business A Growth Business. It can be done. But the leadership is much more scarce than it appears. I belive Michael Tushman refers to being able to run mature and new businesses simultaneously as ambidexterity. Most leaders are just right-handed.
    • Anonymous
    Broadly, it's about giving the money and letting go. If a maverick part of an organization is funded for future innovation, there's a propensity to keep it on an administrative tight leash to protect that investment. Excessive control stifles free-thinking, and the venture's purpose is defeated (87% of the time, as you point out). Think GM and Saturn.

    Financial backing is a huge competitive advantage, other factors (like the flow of ideas) being equal. It's also a key difference between a start-up and the right-brain subsidiary of a bigger entity. Provide the financial support and leave the innovation to the ideas people. Step in with marketing/legal/financial muscle when appropriate. Think Tata and Nano.

    No, size is NOT incompatible with innovation. Control is.
    • Leighton Carroll
    • President, Wireless Maritime Services
    Great discussion. I would like to expand on two points - Bureaucracy and Failure.

    Bureaucracy - Having started two new businesses inside a large corporate parent I think the answer of stall points is not solely one of "bureaucracy". To me that's too simplistic. Every company has some bureaucracy and approval layers. I have had to sit with C-levels of a very bureaucratic Fortune 500 firm multiple times to get a business off the ground. That's just par for the course. The real question is one of culture, process, and need.

    Large organizations tend to have very strong finance and legal teams. This of course makes sense given the money involved and law suits that sadly seem to follow size. Unless a company purposefully sets up a process for R&D or innovation, the natural byproduct is risk aversion. It creeps in slowly over time without company leadership being fully aware. With more and more approvals being required, going for capital with a speculative business case gets tougher and tougher. Unless there is a process in place and a commitment from management, companies will naturally focus resources where they will have the highest payback. This usually means spending money where there high certainty for capital return and in a part of the business that is well understood. Obviously this is not a recipe for innovation but is part of the culture of many successful large businesses.

    Failure - In large organizations there is a real fear to fail. Innovation requires failure. It's part of the learning process. Mature innovators will throw away many more ideas than they've invested in than the home run they are lauded for. The difference is that they know when to pull the plug and when to invest based on ongoing checkpoints. If a company does not have a process to drive innovative solutions, most people who I have worked with are loathe to risk a great deal (personally or professionally) on new ideas if the repercussion is damage to their career. Innovators in these types on environments tend to be the true mavericks and often leave a business to find organizations better aligned with their passion and tolerance for risk.

    Companies like Apple live and even thrive on innovation - whether technical or business model. Some companies compete just fine without heavily innovative cultures (Wal-Mart and many big box retailers come to mind). Creating singleton innovations inside of any large company is doable. It depends on the level of passion the internal innovator/entrepreneur has. How much innovation takes place at a company overall is really a matter of how the culture and internal processes support innovation. Creating an innovative culture is a conscious decision from senior leadership.

    So in the end, like everything else it seems, it comes down to leadership and priority. If driving innovation is a sustained priority for top management then the culture, management structures, financial and legal support, and innovation process are put in place. If it's not a priority or less so of one, innovation takes a back seat to making numbers and sustaining competitive advantages in current markets. In many cases some companies lose their way as they don't realize they've grown to a point where the level ongoing innovation and creativity needed to compete (which is different for different businesses) is stifled due to the natural rigor larger companies employ on making numbers.
    • Govind Gadiyar
    • Freelancer
    Dear Sirs

    Finally one way to achieve innovation is to create a culture which overcomes stall.

    One of the ways is to create a 'string of pearls' or create islands of excellence that informally interact with each other often to share and innovate spontaneously.

    This is the real challenge to the leadership. Size creates the challenge for leadership to adapt.
    • Anonymous
    I am a bit curious as to why Tata was part of your "Example Companies". The fact that the "Nano" was developed was probably not because of the "Entreprenuership" that existed within the organization but simply the great vision and leadership of Ratan Tata which has run down through the generations of the Tata family. Tata has always pioneered in developing national icons whether it is in the steel, hotel, airline, automotive or IT industry. Tata has great national appeal primarily due to the great leadership shown by Ratan Tata and his ability to pick the best leaders in the industry to execute his vision. Despite all this his name is rarely seen in any of the rich billionaires lists.
    • Derek van Bever
    • Chief Research Officer, Corporate Executive Board
    As co-author of the book Stall Points, imagine my delight at coming upon this extremely well-informed discussion, sparked in part by Professor Heskett's generous reference to our work. I welcome any and all on this thread to visit our site to learn more about our findings; as Professor Heskett's summary of our work indicates, the project presented a daunting quantitative and qualitative research challenge, and the dataset and tools we have created are proving helpful for answering a range of timely and urgent questions related to strategy and resource allocation in a downturn.

    I thought I would chip in two additional insights to this conversation. The first is that, for reasons we were never able to understand with precision, the average company size at stall has been increasing at a real rate of about 4 percent annually since the late 1950s. We believe that the best explanations for this phenomenon are the continuing globalization of markets, the development and integration of new information technologies, and the spread of increasingly sophisticated managerial practice and education, but there could be others. The median size at stall in the Fortune 100 today is about US$40 billion in revenue.

    Second, I thought I would pass along what we came to regard as the core takeaway from our work. Our analysis of hundreds of stall points in leading companies led us to the fundamental conclusion that the strategy assumptions that a management team holds most deeply--has known so long or so well that they are no longer actively debated--pose the greatest danger to growth. In other words, it's not what you know that isn't so that will stop your growth run--more than likely, it's what you know that's no longer so.

    Some of the comments above glance at this observation, but I thought I would articulate it from our perspective in the hope that it might be a helpful thought guide.
    • Graeme Harrison
    First of all I've really enjoyed reading everyone's take on this important subject.

    I speak as an officer of a company on the verge of suffering exactly this sort of stall. I'm sure that the reasons for this are different in every case, but some observations that I have to offer are:

    1. The fear of failure comes to outweigh the thrill of the possibility of success.

    2. The process of managing rapid growth becomes all-consuming and no-one has any time to look at the big picture.

    3. Related to the above is that the growth spawns middle management infrastructure and the focus of day to day business gets diverted to the process of getting things done (often in the most convenient and safe way) from that of thinking about what it is that should be done.

    4. Managers have to grow with the business and often when it is growing quickly, they cannot keep up. They revert to their comfort zones and become concerned with not being seen to fail rather than contributing valuable but risky insights which might lead to innovation, success and further growth.

    I also concur with many of the points made above and look with admiration at the maverick entrepreneurs that have driven the continued success of companies such as Apple, Virgin and Tata. It seems to me that it is easy to have one innovation - to be a 'one hit wonder' but infinitely more difficult for that to become a continuing central part of a corporate culture so that customers come to expect it from you.
    • Srinivasan
    • Director, Hewlett Packard
    I would look at innovation in two different perspectives:

    1. When you are creating a great new idea (e.g. when Google started search or when Sabeer Bhatia started Hotmail).
    If you look at such a pioneering idea - it's invariably created by a small organization. The entrepreneurship, the risk taking ability everything is very large - except the size of the org.
    The odds of success may be low; but once in a while when such entities succeed they make a tremendrous difference.

    2. Large organizations can innovate - by continuously improving (on the basic core idea) e.g. Intel and it's x86 chips - which has been one of the reasons why the desktop/ laptop is globally prevalent - and performs much more that what was possible twenty years ago with a large machine.

    I think it's pretty difficult for a small company to innovate on a continuous improvement model (since the size and scale and don't provide it the volumes that are needed); and for a large company to innovate with a break thru idea (since the idea is invariably too small at the beginning compared to its size and volume of business).
    • Shabbir Merchant
    • Chief Value Creator, Valulead Consulting, Bangalore, India
    Let's understand what causes Innovation:

    a) 'Bright Ideas' by individual employees / small teams

    b) A culture that allows nurturing of those ideas

    c) High tolerance for failure (whilst trying out new ideas)

    d) Organisation's Vision which revolves around creating something new

    When an organisation becomes too large it falls into the trap of:

    a) Unprecedented focus on quarter profits (at the cost of long term investments)

    b) Obsession with scale, rather than an obsession for creating something new (what happened to Starbucks when they went on an expansion frenzy)

    c) Process Straitjackets - which curtail the creativity of individual employees & teams. 6 Sigma is good, but you can't have innovation without allowing for mistakes (with due apologies to Jack Welch)

    If organisations, whilst growing large, were to avoid these traps, innovation is definitely possible with the same nimbleness of a small organisation.
    • Mohammad Razipour
    • Vice President, Planning & Development, SIDCO, Tehran, Iran
    May I venture to suggest that we should draw a distinction between entrepreneurship and innovation in startups and established companies which have gone public?

    Jean Baptiste Say, the French economist who reportedly coined the word entrepreneurship, has said, "The entrepreneur shifts economic resources out of an area of lower and into an area of higher productivity and greater yield."

    Entrepreneur, as an "undertaker" has the grave task of proving that he/she is able, and has the right idea, to create wealth from the otherwise idle, or under-utilized resources. His/her mission is accomplished when the venture goes public i.e. the entrepreneur receives the trust of the public and thereby wealth is created. Judging on the basis of this definition, we cannot expect that big and well established companies pursue entrepreneurship, unless they find an innovative way to do it. So if we make a parallel between "Organization size" and the stage in which the organization is in .i.e. "infancy", then the answer is: yes, entrepreneurship is incompatible with the "Organization size".

    Now turning to the issue of innovation, we know that innovation is the product of teamwork and is built and evolved from a platform. In other words, we must have something to start innovating it. If we have nothing, then we must first be creative to create something and then start innovating it. Thus we conclude that, in this context, innovation becomes a purely management issue and it can therefore be considered to be completely independent from the size of the organization.

    As regards Google, and the issue of innovation within this company, we must remember that in Google all innovation is dedicated to and directed at attracting more visitors to this search engine, as the number of visitors determines the cost of advertising. We therefore are constantly witnessing improvement and increasing of free services to the visitors. We must also remember that Goggle's core competence lies in the unique and versatile system used in their "page ranking", which is the best one.

    Having said the above, let's remind ourselves that management can cause innovation go astray, as we are currently witnessing its catastrophic results in banking and financial institutions.
    • Joan Koerber-Walker
    • Chairman, CorePurpose, Inc.
    What a wonderful discussion. Having spent the last 30 years working within and with "Innovation" oriented companies both large and small, here are a few observations on the differences.

    Small companies often see innovation as the path to differentiation, early market penetration, or even basic survival. Whereas, larger companies tend to look at innovation as a product development strategy.

    At a small company, innovators often 'bet the farm' when launching a new innovation. This make or break mind set adds a sense of urgency which is often missing in their larger counterparts.

    Lastly, smaller companies tend to embrace creative destruction (http://tinyurl.com/cvhpl5) while some larger firms (or competing groups within them) see it as a threat to their existing products and markets. These companies need a strong internal champion to protect the potentially destructive innovation.

    The emergence of Distributed Processing and Personal Computing in the 1980's is a great case in point. Apple and Microsoft (then small firms) emerged and grew through iterative innovations. Xerox had one of the most prolific innovation centers of the day in PARC yet missed riding the personal computing wave due to in-fighting between competing internal product groups. Conversely, IBM and HP benefited from having strong leadership champions for their server and personal computing lines and were able to catch the wave.
    • Jeffrey Veffer
    • Partner, Brandsential
    Having worked in a large corporation doing innovation, I can agree with several of the key points raised by other contributors.

    There was an established culture which strained to operate within the boundaries set up at the executive level which were contrary to the process of fostering innovation. For example, to control costs all new spending activities (even down to a seemingly inconsequential amount) had to be approved by a centralized expense management team. But since one of the key mandates for our team was to look for new ways of doing things, we were more often fighting internal bureaucracy to get approvals than actually fulfilling our objectives.

    This stemmed from our location within the product development part of the organization and within that this structure we found old metrics that governed the objectives for the existing corporation were tacitly transferred to our team. These included short-term quarterly-focused constraints that made it very difficult to innovate and moreover to communicate internally that what we were working on wouldn't deliver revenue in-year.

    What I found perplexing is that Executives publically stated that they wanted the company to become more innovative but wondered how to get the employees to become more "entrepreneurial." The employees were suspicious about this new "buzzword" and wondered how they could become more "innovative" within the day-to-day constraints of their objectives. So there was a fundamental misalignment between the two groups with each unclear about how to proceed.

    Overall it convinced me of the need to separate out forward thinking groups from the day to day business so they can concentrate on creating value without having to negotiate internally with existing ways of doing business and creating some short-term wins. Even if the top executives truly believe in innovation, they have to be able to begin change the culture to accept the new ideas, not view them with suspicion.
    • Anonymous
    I'm sorry. I couldn't get past the structural flaws in the study that I could see just from this article's description. Both "Built to Last" and "Good to Great" which I have read, had the same structural flaws. These issues have been cited in other popular works, so I won't beat the dead horse.

    It must be said, however, that what you've got is nothing but dust in your hands: information of no value, and perhaps even detrimental to your cause. Taleb calls what I see here the narrative fallacy, and I see it repeated in the comments.

    Now, if I were forced to go out on a limb to engage in this activity, I'd take a look to the biological world and attempt to understand how what is "big" (an insect population, an elephant) survives from a reproductive standpoint. After all, they've gone through the iterations already and the resulting strategies may work well in the business world. I think a couple of strategies are apparent just from those two examples: Shotgun (as in VC) and nurture. Note that each species has such a strategy and most companies do not.

    Offspring survival is successful innovation. Next I'd try to find all of the examples of companies that are taking those steps TODAY, and at least that would be a move in the right direction. Last, I'd see what happens... and then tell what happened.

    What I wouldn't do is look at a pool of past failures. We tell the story after the fact and thus get to pick and choose the history. This is a major problem even when our intentions are just.
    • Anonymous
    Dear Professor Heskett, as usual you bring to us one of the most important questions in the economic world.
    Two points:
    First. The strategic position of big size companies.
    Second. The nuclear competencies of little companies.
    As a result, the first are able to develop market relations, see and promote market opportunities with financial interest.
    The second usually develop specific competencies, test products, and have under a small affordable environment, talent with the freedom to show your best in specific fields.
    This is perfect fusion, and with responsible independence in the relation between these two different worlds, we see development and a synchronic articulation.
    Best Regards,
    • Saurabh Dwivedy
    Imagine an over-sized, heavily overweight individual: When the body accumulates unwanted fat which deposits itself wherever it can find a place, do the vital organs such as Kidneys, Heart, Liver grow in proportion as well? No. There is no such evidence. What then happens to the Individual? A single regular sized Heart, Kidney or Liver falls woefully short of such an individual's requirements for survival and surely he or she suffers, badly.

    I would liken innovation and entrepreneurship to Heart and Kidneys and the overweight individual to an oversized Corporation. The incompatiblity can now be grasped more easily - except that, as is always the case -to every rule there is an exception; verily in this case you have the Tatas, Apples and Googles of the world. Their organization size till date has not impacted I&E (Innovation and Entrepreneurship).

    However, Professor Heskett has raised a pertinent question: Is it really an exception or a disaster waiting to happen? No body knows. It may however form an interesting research subject to investigate if there is a causal relationship between I&E and Corporation Size or are the relationships purely random.

    For I&E to prosper in any organization, in my opinion, one or more of the following must exist:

    Fresh Talent Pool with no past baggage to color their judgment.

    Strong leadership that recognizes that innovation can be of various varieties: Let the "functional innovations" come from the functional pool; The leadership itself should innovate to provide an ambience that 'supports' innovation and not 'stall it'.

    A strong tactical need for an organization, which must innovate to differentiate or face perdition and so on.
    More often than not - Organizations that reach a stalling point inevitably get sacrificed at the altar of "big egos" of a few big individuals (or for behemoths - a few big coteries of individuals) running them.
    • Anonymous
    I think it is very important to note the following with respect to Innovation:

    a. There is little predictability in terms of investments made on Innovation and R&D.

    b. A penny earned is better than lofty ideas that could "probably" yield results. Hence, Corporates who have been successful will tend to play safe.

    c. There has to be an element of patience with the Top Management.

    d. The Top Management should get unreasonable with folks who are given the charter to run Innovation and demand results.

    e. One should not look at assessing Innovation through existing processes, tools and procedures.

    It is highly probable that if an organization has been successful in the past, Innovation may not be very appealing as a Value proposition.

    The R&D and Innovation groups should be separated from each other completely for Innovation to succeed.
    • Khaled M. Taha
    • Consultant, Deloitte
    First of all, let me commend everyone for responding with their valuable insight. I couldn't find a single comment that I could disagree with, and I've certainly gained knowledge.

    The truth of the matter is most of the comments focus on these two views:

    Management stalls due to risk-averseness, and complacency.
    Management should provide the culture, structure, support, drive, and incentives for innovation.

    And I couldn't agree more, but while we've all been focusing on the internal components of the company have we committed, and perhaps repeated, the grave mistakes of overlooking the external components?

    Perhaps I deviate from the original question a bit, but bear with me. Your organization can be the best vehicle in the world, but once those who drive it are blind to what is happening outside, you can bet that it's crashing.

    I'm not going to go on a spiel, but I have two words to contribute to this discussion:

    "Market Orientation".
    • Ganesh Ramakrishnan
    • General Manager - Career Planning & Development, Oracle Financial Services Software
    Many interesting perspectives. Some additional thoughts:

    1. Some have stated that size is not the issue, culture (or something else) is. The point here is that as an entrepreneurial and innovative startup succeeds and grows, the increased size in terms of people and operations mandates the need for structures and processes that typically weigh against the entrepreneurial and innovative spirit. It is in the very nature of growth that a larger system would tend more towards stability (and mediocrity?). It requires a conscious shake-up to start afresh in a new orbit.

    2. The few exceptions cited required unorthodox leadership from individuals who had the rare ability to fight against this phenomenon. They also needed to change themselves and their leadership approach. What Steve Jobs had to do in the early days of the Macintosh and what he did to bring out an iPod, I suspect, are not exactly the same. I would argue it was not even the same Steve, given the many lessons he would have learnt from the NeXT years and from the transformation of the industry in the 1990s (not to mention his own personal growth). Ratan Tata's achievement is a completely different story.

    3. The role of a strong, visionary individual to drive the next-generation innovation cycle cannot be overemphasized. It seems appealing to think of an innovation culture with multiple intrapreneurs successfully operating within an overall benevolent, lightweight bureaucracy. Sounds utopian.

    4. The aggressive growth of the HCL Group in India under Shiv Nadar is said to have been based on a model called 'fractal corporation' but the concept doesn't seem to have received much attention.

    5. The impact of social networking and organization-wide knowledge management initiatives is yet to be seen in large organizations across a broad spectrum of industries. These, IMHO, are likely to nurture more pockets of entrepreneurial excellence within companies that permit a bit of the messy, trial-end-error "serious play" process of innovation.
    • Ebenezer Akonnor
    • student, MSM/RUCST MBA - Ghana
    Innovation largely depends on leadership within organizations. A proper understanding and acceptance of the associated risks gives an urge.

    An organizational culture that is risk averse deflates innovative action no matter how simple its implementation is.

    Leadership and decision makers within organizations must understand the need to properly structure relations between innovative and entrepreneurial activity on one side and strategy on the other.

    Again the fluidity of information management within organizations and rapidity of responses to such information (duly assessed) allows highly bureaucratic setups to adopt to environmental changes effectively.

    The focus of organizations as they grow should be on relationships between strategy and structure and how to effectively manage them within the context of uncertainty.
    • Ganesh Ramakrishnan
    • General Manager - Career Planning & Development, Oracle Financial Services Software
    One more thought on how to retain and inculcate innovation and entrepreneurship despite increased size:

    Perhaps the agile approach as used in the software development field could be extended to build agile organizations in the true sense. I have in mind the core principles (or mindset/philosophy) of the agile approach:

    Change is not a problem to be prevented/managed but is a basic fact/reality to be accepted and factored into how we operate.

    Shorter cycles, iterate to fail fast and course-correct.

    Activities are planned and driven primarily through customer/user-driven 'stories'.

    Trust smaller focused teams to deliver, encourage collaboration with frequent stand-up meetings.

    Strive to maintain processes, controls and metrics at just-enough levels.
    • Dave Schnedler
    • President, Corporate Planning Forum
    While I have not read the book I assume that it is an expansion of their March 2008 article "When Growth Stalls."

    I was dismayed by this article because it leveraged, but did not give attribution to the work done by Dave Logan HBS MBA at the time that he was Director of Corporate Development for Hewlett-Packard. Logan and HP's Corporate Development group executed a very extensive study initially and in concert with the Corporate Advisory Board which now, twelve years later is emerging as a book by these authors. Dave Logan is the person who should be contacted and interviewed regarding this book.

    The central thesis is that like trees, companies can only grow to be so tall. But no one has yet been able to explain to my satisfaction why this should be the case.

    Hewlett-Packard sustained 15% CAGR for over 50 years with an extensible model which worked very well until the late 1990's. That model involved hiring the top 10% from the best technical schools into an environment where personal success depended upon invention. Engineers were given tremendous latitude, and when their effort did not succeed there was no negative consequence other than a short time in the penalty box working on somebody else's project. Not only did this ethic motivate HP engineers to seemlessly and continuously migrate the company from test equipment to semiconductors, medical equipment, computers printers and software, but it created a gene pool of technical talent for many other successful cpmpanies. On the face of it, HP never ran out of space to grow, as all of the high tech high flyers of the last ten years have shown.

    My untested personal theory has nothing to do with corporate size. HP had always attracted the best talent by offering a pleasant place to work, excellent colleagues, and job security. I believe that this value proposition was usurped by a new compensation model -- why work for HP when one could launch a startup straight out of Stanford and become a millionaire practically overnight (aka Google).

    The rise of venture capital meant that HP and other established companies could no longer attract the talent unless they changed their compensation model, and they never did. It all happened too slowly -- traditional HR compensation models gradually strangled the innovative competitiveness of HP and other companies.

    So in answer to your question, I see no reason why large companies cannot continue to innovate, if they cultivate the right environment, attract the right people, and reward them competitively.
    • James Townsend
    • Director, Time-Warner
    I love this issue; it is something that I have thought about in my 25+ years working for small and large, public and private, innovative and conservative companies. After much deliberation, I have come to this very simple conclusion: Innovation (and success with innovation) hinges on three very important and interrelated things -- ownership, passion and vision.

    When wealth and potential wealth is concentrated around the corner office in a company, it's hard to instill a sense of innovation without dispersing some of that potential wealth to the lower ranks. Innovation and success with innovation requires long (really long) hours and commitment to vision that supercedes the normal day-to-day still required from a company. "Innovation" is comparable to starting a new company altogether.

    Lower-level workers in an organization will not give up their evenings and weekends if they think all their passion is going to ultimately serve the corner office or wealthy stock holders elsewhere. If, however, they are given significant ownership themselves (emphasis on significant), mangement can move mountains with their workforce. After all, the rational decision workders are making boils down to "is it better to spend extra time on some innovative idea for the company, or for myself -- perhaps building my own start-up.

    But ownership and passion don't count for much without clear vision from the top. Apple stalled when it lost its visionary. All the stock-options in the world couldn't help Apple with a stay-the-course, buttoned-down CEO like John Sculley at the helm. You mention Song as a potential competitor to Jet Blue that stalled. Were you aware that the CEO of Jet Blue often times heads out to the tarmac to hoist bags with the baggage handlers? Those types of activities would never happen at Delta (unless it was a publicity stunt).

    Most of the companies in the world that remain innovative and forward-looking typically have visionaries at the top who often times do not have MBAs or formal corporate backgrounds. Google, Apple, Virgin, BMW (still owned by the Quandt family), Microsoft (still innovative and very much owned and influenced by Gates) are all companies that are led by non-traditional heads. Innovation, in effect, doesn't work well within established businesses. Innovation challenges established businesses. Innovation points to how slow, and stupid and bureaucratic established businesses have become. And that's not something management will ever want to hear from their own rank and file.
    • Pat McAnally
    • President, MPowered
    I would agree with Mr. Townsend's comments about ownership, passion and vision and add that these are not about organizational size and structure per se but about the human variables of the business.

    If we look at one premise from the article: the presumption of an unassailable competitive position" -- it translates to arrogance as the organization becomes the fat and lazy 800 pound gorilla. You also see many companies which stall when passion and vision are replaced by politics and where no one dares speak truth to power. These companies often suffer from a a "talent bench shortfall" because a talent for innovation is not always compatible with a talent for politics.

    It would be interesting to look at the companies who haven't stalled to see if their culture is such that it gives a more supportive context to innovation.
    • David Beale
    • Owner, WesternAu Pty Ltd
    Organizations fail as directors break communications with technically creative people and routine managers are placed as more important than innovators. When management has to be served as paramount then if innovators don't quit they waste time and energy satisfying the paperwork and egos of non-creative parasites.

    Invention happens by needs being defined accurately. The definitions of the needs illuminate the means by which the needs can be met. When visualization and vision is understood and shared by inventors and directors, then innovation happens.

    Creative people usually need clerical assistance and encouragement; they leave companies or stop producing when too much mental, physical and spiritual energy is squandered to please the demands of records keepers, bean-counters, planners...that cost more and produce less than free-flowing R&D.
    • Santiago
    • Director, Nobiles Agropecuaria
    Not true. Innovation and entrepreneurship are going to be on top of the agenda in any company IF the CEOs are interested, no matter if you are big or small.

    We do not have to think that everything we read is true.
    I personally think that what is very important is not complaining about any mistakes made when trying new things: That's the real opportunity.
    • Richard A. "Tony" Eckel
    • President, Systems Synergy, Inc.
    While I respect Mr. Townsend's position and opinion, I would very much debate the positive assertion of Microsoft's innovation status.

    Microsoft has been incubating and launching large numbers of products, yet is in the same position as Xerox of the 70's; unable to turn a technology advantage into a market advantage. In the last ten years, there have been no major successful (defined as profitable) product introductions.

    Search Engine, Mapping, Start Page, Net Service, Personal Finance, Support Server, Office Online, Web Hosting, Social Networking, and many more. In every category, Microsoft has ceded to competitors. The last success: Internet Explorer (1995).

    While the reasons for Microsoft's inability to maintain innovative leadership are debatable, it is clear on the face that Microsoft is in the slow decline representative of the post "Stall" behavior described in the original article.
    • Yogendra Vashishtha
    • B.E. (Electrical Engg.), Ph.D., Asset Innovation & Research Manager
    Having worked in small and big companies in India and overseas, I am confident to say that the size of the organisation does not matter as far as innovation is concerned. There may be observations which appear to be skewed but that is more because of population size, sampling technique and period of time in consideration. Let us go back to the first principles. We need three ingredients to make innovation happen:

    a) Somebody wants it to happen or entrepreneurial willpower - the leadership sees innovation as a necessary thing for a sustainable business. It is not simply riding on the wave of another buzzword called innovation. This also means being passionate, having patience and taking risks. This 'fire' to make a difference is easily seen in family owned or proprietary businesses. Every business from a shopkeeper to Tata tries hard to innovate according to their needs, size and complexity. But all of them have a common goal. This 'entrepreneurial will' can be created in any type of business and in any size. Competent leadership can make informed decisions. Sometimes incompetent people make to the top and their whole agenda for survival is to keep status quo.

    b) Somebody is ready to do innovation or entrepreneurial instrument - everybody wants to get innovation done but need somebody to do it. Identifying and grooming right minds to do the job is very important for good results. All the publicity, posters are of no use without having someone whose mission in life is to innovate and who has the capacity to do so. Nurturing the talent and retaining them is important aspects of this.

    c) There is an action or enterprise effort - there is an instrument and there is will power but to hear 'innovation music', the instrument needs to be played. This means entrepreneurial will power should be converted into providing right environment and facilities to allow the instrument to be played. Providing business directions and budgets are important to the flow.
    • Kapil Kumar Sopory
    • Company Secretary, SMEC (India) Private Limited
    When I started my career (in a commercial bank) almost 45 years back, we were told to treat the organisation our own in the sense an entrepreneur does. We developed love for the organisation and a close relationship which led to loyality. We would be very concerned about the business growth and would feel upset if results were not encouraging. I feel that entrepreneurial spirit amongst one and all goes a long way to well-knit the functioning for best possible results. This is very necessary in small and medium sized set ups but even the larger ones need to emphasise it as far as possible.

    Innovation involves thought processes to evolve improved systems and procedures to match the needs imposed by changing environment. Mitigation of risks needs to be in focus too. Not only meeting but beating the competition has also to be endeavoured by adopting innovative steps. There is hardly any business activity where innovation can be ignored. Routine and outmoded functional styles have to be replaced by more novel mechanisms particularly in the present turbulent times.

    In my view, size of a company is not relevant while talking of innovation and entrepreneurship and these should apply equally to all.
    • Linda Garcia
    • Online Marketing Professional, Lindasportfolio.com
    I hope you don't mind but I'm going to talk in plain english. I hope I can shed some light from my perspective. Despite the recession, I have worked with many small companies over the years and have been a major contributor to the net profitable growth of these small companies. One of the common characteristics of all bosses was their willingness to pretty much let me do whatever I wanted as long as I could explain the reasoning by way of documentation and in-person conversations, support it with substantial evidence and quality work, track progress and report on real sales numbers and ROI, have a plan and so on... The most important characteristic that really stands out in my mind is whenever I had an idea or wanted to do something they never brushed me off but rather would listen intently and ask a lot of questions and I can certainly understand why, after all I was spending lots of advertising dollars and these were all privately owned companies. That meant I had to make sure that they completely understood my reasoning and I had to explain it well and in plain english as most of my past bosses did not have any formal college education, but rather had accumulated their fortunes through hard work, good and intelligent ideas and decision making and excellent managerial skills. I could not use industry terminology or I would lose them completely. However, industry terminology is not necessary if you know how to communicate well and really know your "stuff".

    One thing they all had and understood well was good logic and they understood an excellent idea or work when it was substantiated and accounted for. I'd like to point out that upon hiring they didn't just let me take off and do anything I wanted but rather with time they quickly would realize that everything I did was successful in regards to profit. With time, and sometimes rather quickly, they trusted me and let me take on as many responsibilities and tasks that I wanted to as long as they were related to marketing.

    The key point here is it starts with trust. One of the reasons why they trusted me from the onset is quite plainly because I had a degree. Believe me, I used that angle to my fullest advantage upon being hired to gain trust, though I did it very subtly. I knew they had to trust me to allow me to grow and take on huge responsiblities, especially when it comes to a private owner and you're spending a lot of money, more money than they have ever spent before. Once sales profits are increasing and money is rolling in they didn't care how much I spent as long as there was a high ROI and you're improving the brand of the company and increasing awareness of products, etc.

    I think more companies and managers need to trust people more and expect more of them. They need to see and realize the true potential of their employees, whether they're educated or not, whatever school they came from, however they dress or look... No offense, Harvard friends, I know that you are all great people and it is one of the greatest educational institutions in the world. I think sometimes humans, especially those from the upper tier of society, fail to offer the same opportunities to those of lower classes because they don't believe in them because they don't trust they have the same intellectual capabilities. I think this phenomena also exists in large companies; a separating of classes and a distrust of human potential and capability. I think sometimes the distrust stems from another person's lack of education or obvious class differences such as schooling, appearance, and the way that a person might speak. What I mean by "appearance" is the way the person carries herself or himself, the style and type of clothes and shoes they wear, and other physical attributes.

    I remember going into one interview with a huge automobile company (of which I will not mention the name) when I had just moved to Los Angeles. I had sat down with the interviewers and had a great interview. You know what I mean, you just kind of know when the interview went really well. As I was walking out one of the interviewers decided to walk me out. As we were walking she stared intently down at my shoes (and I was staring intently at her wondering why she was staring so much at my shoes) and her total persona changed. I knew at that point that I had lost her especially when she bid me goodbye. From that point on, I always made sure I had a good pair of shoes on for interviews. Then I couldn't help but wonder how many companies and likewise people lose opportunities because of the shoes or the clothes they wear. "They don't fit in." "They don't fit the part."

    I don't believe that people, such as the one mentioned above, are ill intentioned but rather they retreat to their safe place and what they know best from their own perspective and experience.

    I do think when people and companies start trusting and putting more faith in human potential, our society and economy, here and around the globe, will flourish beyond our imagination.
    • Susan Whoriskey
    • Founder, Whoriskey Associates
    Passion = Disruptive innovation; Lack of passion = Stall
    • John Arnott
    • CEO, The Arnott Design Group Inc.
    Jim,
    I cannot pretend to have read every response but a quick scan failed to identify GE as one company that manages to blend both and what I find fascinating is that Jeff Immelt has made it happen in such a different manner than his predecessor.

    He has demanded remarkable performance; 11% organic growth/yr - that's a new $15+ billion in new business each year! (maybe a stretch this year!). He made a clear distinction between organic and M&A. No division head could hide behind the numbers. He has made sure that no division is too big to be able to perform or it is broken up or divested. He has championed the need for innovation and personally conveys the culture. He continually invests in the life-long learning embedded in Crotonville.

    One thing that has really impressed me is his willingness to do this in the public eye; very accountable - no manager could possibly claim he did not understand - the whole damn world knows!

    His manners may not be the 'carrot and stick' preference of Jack Welch but were I a shareholder or boardmember, I'd think I was in pretty good hands.
    • Juan Aguirre
    • Partner-economist, DIPROSA Honduras
    We stall because we attempted to diversify into lines in which in fact we had limited expertise. Once we went back and innovate in the lines we had expertise we began to growth again. Complacency with success and over confidence, did not let us innovate. INNOVATION IN THE LINES WE KNEW BEST, was THE KEY but that required changes in the "people" and that is easier said than done. Saludos.
    • Imelda Bickham
    Size doesn't matter. Consider the following scenario, which could take place in a large or small organization.

    John is going on and on, describing the most innovative idea that the xyz company has come across in recent years, his boss looks at him and says: "great idea, something to think about..." But her words do not reflect her thoughts, she is actually thinking: "John is always coming up with pie in the sky ideas to fix the world. I wish he would finish the project status report he owes me, so I can get my boss off my back". Later, she thinks some more about John's idea and considers bringing it up for discussion at the next staff meeting. She decides against it, people are busy as is, and what if the idea turns out to be dud? She has done quite well so far, she is being groomed for the COO position; she can't afford any mistakes just now.

    What gets in the way of innovation?

    Focus on routine matters with deadlines.

    Fear of failure in the broadest sense of the word, including not only loss of income but loss of image.

    Clinging to what worked in the past.

    Weak, risk-averse leadership.

    It takes extraordinary leadership to be at the top of your game and still look for ways to do better, think Tiger Woods and his swing. Organizations will not exhibit this level of leadership on their own; it will take a culture of innovation that can only be established from the top down. Once established, the leader can step down and the culture will remain in effect for a short while due to inertia. Eventually, the new leader will make his/her mark, whatever that may be.
    • Victor Aaen
    • Physician, California Department of Veterans Affairs
    I have a theory, which I call the "Three, Five, Seven and Three, Two, One of Work Force Management in Prosperity and Poverty" which may be applicable to "The Stall."

    When there is a job that takes three people to accomplish, usually three people are hired. When all goes well there are opportunities to expand services. Two more people are hired and they in turn do well and see other opportunities on which to capitalize. Two additional people are hired bringing the total to seven who are all productive.

    Hard times come--the state or federal budget goes bad, the stock market goes down, there is a shift in the population or buying trends, etc. Administration sees the problem and cuts back the work force back to five. Expectations are not met and the work force is cut back to the original three because that is how it was when "we did it well" and had the "right number of people."

    The three remaining workers are now trying to do a job that had expanded to more than twice the workload of the original three. There are different expectations, requirements and systems in place. The work force is now spending considerable non-productive time justifying the additional overtime needs, redoing what was not done right the first time because of time constraints, answering regulatory requests as to why something was not done and rewriting budget reduction proposals. They become less productive and revenue or work output falls even further.

    Administration is "forced" to cut positions further, justifying the decision with "non-productivity," "fiscal constraints" or "industry standards." The two remaining workers are now trying to do a job that has now been reduced to what should be an adequate load for four. They cannot keep up. There is more overtime and sick leave. Moral drops further. The best worker leaves to take a position with the competition; increased pay, decreased workload and better working conditions. Now one person is left and it is acknowledged that the job cannot be done by one person so the department is either closed and the worker fired/transferred or the department becomes nonfunctioning with another department assumes the functions that the original three workers originally accomplished. The sole remaining worker counts paperclips.

    With each change in work level, administration needs to carefully define what needs to be done and what is elective. The elective activities need to be defined and factored into both outcome expectation and workload assignments. As work force levels change, outcome expectations need to be adjusted. The minimum standards of what is to be done needs to be redefined so that expectations are realistic. Often the mission of the organization needs to be redefined and ways of doing business need to be changed. Our healthcare systems have not adept at doing this. Education and corporate business are not far behind at being inept.
    • Allen Roberts
    • MD, Strategy Audit
    Some very useful comments have been made, I think the ones by John Arnott just above touch on the key element I have seen in 30 years in and around the Australian food industry.
    Every stakeholder in an organisation, particularly employees, watch what the CEO does. They also listen to what he says, but if that is different to what he does, the "what he does" is the model followed.
    The culture of an orgainisation adjusts to accomodate the views, priorities and behaviour of the CEO.

    When the CEO acts as the Chief Marketing Officer, and he/she should be in every organisation, the culture of the organisation adjusts to acccomodate the things that are important to marketing success. Focus on customers, delivering value to the markets best served by the Value Proposition, Innovation, and the associated corporate ability to learn by doing.

    Some years ago in a HBR article, Gary Hamel said something that stuck with me, "When a company runs out of innovation, it runs out of growth". I think that is true, irrespective of the size of the company, it just gets harder to push against the status quo and inherent risk aversion of a bureacracy as you get bigger.
    • Robert van der Have
    • Researcher, VTT Innovation Studies
    I think one plausible explanation can be found in managerial cognition. To illustrate, last week I spoke to a real intrapreneur from a global Finnish firm that is one of the world leaders in their market. He and his team had spotted a market opportunity that could be easily acted upon with their existing technological know-how. When presenting this to the higher management, they encounted a lot of skepticism simply because the perception was that the idea was "not technologically advanced enough". Even after laudatory customer responses in a trial, they had a hard time convincing. Eventually, their stubbornness won, and the project is in development.

    This case shows that management can have mindsets that have been formed over time, and in which even the term 'innovation' becomes substantially restricted. This may not be the best climate for innovation and intrapreneurship.
    • Varun Sahay
    • Consultant, VARUNSAHAY Consulting
    (All of the companies in the sample had reached substantial size at the time they stalled, suggesting that organization size must play a role in this mix of phenomena that includes "innovation management breakdown.") The key word here is suggesting and in my opinion deviates from the key focus point. The key focus point is product innovation and to support product innovation entrepreneurship and good management is required.

    Companies stall with mismanagement, poor direction, a mistake in planning, budgeting leading to the competition taking a huge market share reducing profitability. Example banking sector YESTERDAY innovative products mortgage CDS helped banks like Citi, Lehmann & Bear Stearns (Amen) Meryll take the lead and today banks like Goldman who did not actively participate are winning. There was no major growth in organisation structures here.

    Tata is a manufacturing conglomerate and is innovative in its automotive segment; the steel section is comparable to ThyssenKrupp conglomerate steel segment and it a world class steel manufacturer. That also if you do not look at the debt from the acquisition of Corus! Having said that manufacturing companies have long product lifecycles but need to constantly improve productivity and introduce new products to compete in emerging markets and existing markets and vice versa. ArcelorMittal controls 10% of the worlds steel production and employees over 330000 employees, a world class organisation that is suffering today (stalling) due to low (no) demand and a huge debt burden. Is this the end for AM I don't think so it's just a difficult time which through effective management can be properly balanced.

    Apple is a consumer electronics company and Virgin is a travel, entertainment and lifestyle company which basically differ in scope and scale from manufacturing companies like Tata. Virgin has grown through major diversification all properly managed from one central holding company (venture capital co.) where companies are spun off if ineffectively run, something like GE! Apple is a purely innovations company which is bringing out new products in different segments all the time beating the product lifecycle and has enough recurring revenues to last it for a couple of decades. Goggle has a core business search and advertisement based revenue for which it again has the scale that no one is able to beat as it has a captive growing market which has still to mature taking BRIC countries!

    All of the world class companies have had great visionary leaders, entrepreneurs who have led their companies through years of growth by pure focus on innovation, operational excellence, product leadership or price.

    Organisation size, innovation and entrepreneurship do not have to be incompatible but need to be properly managed i.e product lifecycle management, stars, cashcows, dogs and question marks need to be monitored and the organisation needs to be constantly innovating itself to face new political and economic challenges. There should be teams within large organisation that are only responsible for monitoring and controlling product innovation based on political, market, economic situations and having strategies to be implemented in certain situations. These teams report to the management and work in cross segment and divisional teams to implement measures to fend off stall situations.

    Time is a factor for decision making and in large organisations that stall bureaucracy is a major contributor to long time being taken for decision making. Either the corporate strategy is aligned with the business unit strategy then decision making is made easier and is curtailed to budgets, products and geographical constraints. Using the above model the teams are corresponding with ground staff getting constant feedback about markets, geographical and economic situations which they constantly use to fine tune their business plans.

    Take today: how many companies did anything about this financial crisis before it became one! From my research there are a few manufacturing companies that challenged the future before it became the present hence cutting production, increasing inventory and increasing its account receivable turnover ratio.

    The inevitable is a point in time and it can be that Apple dies with Steve Jobs or Berkshire Hathaway dies with Warren Buffet Arcelormittal dies with Lakshmi Mittal and Virgin dies with Richard Branson and the list goes on but that would be too easy as then whatever happened to legacy and succession planning.

    More important is that to revisit Schumpeter's book, Capitalism, Socialism and Democracy to understand The expression "creative destruction" and its relation to this article.
    • Sujeet Prabhu
    • Manager, Larsen & Toubro Limited
    I feel that the way an organisation has to manage innovation and entrepreneurship has to change as it increases in size. Most organizations fail to understand this and hence reach a stall point.

    For smaller organizations, the entire innovation cycle is relatively localized but still can produce a major business impact. As organizations grow in size and diversify, innovations have to break down geographic and business silos to make an impact. This requires a fundamental change in the way an innovation process is managed and will increasingly have to be driven from the top down, with top management creating the culture and systems to allow ideas and knowledge to flow seamlessly.

    Innovation and organisation size do not need to be incompatible but the way innovation is managed has to change.
    • Edward Hare
    • Retired Director, Strategic Planning, Fortune 250 Mfr'r
    Two words.....politics and values. Anyone who's ever worked near the top of an organizational pyramid has probably experienced how politics and personal interests can stifle an organization. Or turn a sound idea and let it die without continual refinement. Internal corrosion spreads like wild fire. "Work" becomes less about what one really accomplishes and contributes and more about what one "appears" to be doing or being connected to the right mentors.

    Toss in an obsession with short-term results, and wildly excessive compensation for executives and the results are pretty predictable. Large organizations are particularly at risk......unless they are blessed with unusually well grounded and selfless management. A rarity in today's world.
    • John Durgin
    • IT Manager
    If you talk to the people and they are more interested in SOX compliance, and business contingency strategies than new product development. Run!
    • A. Gupta
    • MBA Student
    Not every organization in a business fails, and that proves the fact that every factor contributing to the failure was always under the control of the management, be it external or internal.

    I would believe that it is the presumption of unassailable competitive advatnage over a long period of time which hurts companies most. As the organization starts evolving, the distance between the employee and the organization starts growing. I have been in situations, where I just could not see value being added to the organization by my own project.

    Organizations become reluctant to change and it becomes difficult to convince people to scrap a couple of proects, because of the kind of investment already made.

    People need to be given time and resources as Jack Welch said "Giving people self-confidence is by far the most important thing that I can do. Because then they will act. " One just cannot expect everybody to come up with something new every other day. There has to be a margin for failure.
    • Mukundhan
    • Student
    I think the research/innovation output solely depends on the quality of people in an organization. There isn't sufficient data to suggest that innovative/creative people prefer small organizations to larger ones. So the dearth of innovation output cannot be tied to organization size alone.

    Research talent, like any other talent, needs nurturing. In a large organization, it is easy to overlook a potential innovator. In the absence of a concrete HR policy that maps people with their skills, the services of a few innovators could be lost when they are assigned to a wrong profile.
    • Baris Avci
    • Business Development Manager, Coca-Cola Turkey
    As far as I can see, all organizations must change themselves to avoid a stall. In today's world, HR management is getting more and more important. In this context, the organizations should always take their talent bench as a priority. And the employees on the bench must be ready any timeto replace their managers, being broad- minded, visionary and innovative. It should noted that the corporations should also develop strategies to keep these talents within the company. That is because they are the only force to keep an organization away from a stall.
    • Walter P. Blass
    • Visiting Prof of Mgm't, Grenoble Graduate School of Business
    I realize that AT&T is not representative of all largest organizations, but specifics from real history teach me more than theories. AT&T muffed the significance of the transistor once Bell Laboratories had discovered the effect, and only learned how to apply it to their own business when the Japanese came into the market with transistorized products! Likewise, Charlie Brown gave away cell phone service in 1982 to the spun-off "Baby Bells" when he believed McKinsey's advice that there would never be more than one million users in the U.S.

    My personal experience at AT&T was that what Clayton Christensen says about large organizations is true: they can handle sustaining technology change, but not disruptive technologies, witness the two stories above.

    The comments about HP and Tata also deal with a crucial element: leadership. Until Lew Platt took over at H-P, its CEO's were not risk averse, were willing to break with precedent, accept new ideas, reorganize the company for new strategies. Interestingly, Carly Fiorina was in that mold, but she lacked the ability to implement her strategy, and to convince management to follow her. George Fischer had the same problem at Kodak, another giant that fell before smaller innovators. And now we see the same problem with GM and Chrysler. Oh, where are you, George Santayana when we need you: " Those who cannot remember the past are condemned to repeat it."
    • Phillip Gelman
    Companies stall when the accounting department and the financial guys become more powerful than the innovators: designers, producers and marketers. Retail merchants hire buyers who must meet their numbers because Wall Street expects certain profits per share to keep the stock price up.

    Every so often - sometimes by accident - an interesting new product sneaks into the mix or a buyer stumbles on something new which transforms the sales. As organizations get bigger, the product mix shrinks: too many products are hard to handle, the accounting departmen doesn't want to send out so many payments, IT has too many SKUs to handle....

    Timid or overworked buyers find it easier for Heinz to manage the ketchup section, P&G the laundry section, Hallmark or American Greetings to run stationery...until each chain looks like the other. If we consumers are lucky, specialty stores develop, experiment with new products and make a place for themselves in local, then regional markets.

    Management must decide: Trader Joe or Albertson, Target or WalMart, General Motors or Hundai.... One can please the creative people or the accounts; very few have pleased both.
    • K.M. Hamm
    • Human Resources, MN Non-profit
    At what point does an idea become so culturalized and established that innovation becomes an issue? Let's take cell phones. They have really affected the culture. Someone added a camera to the cell phone. Another cultural change resulted. (Go to a concert. No more lighters held aloft, only lit cell phones.) Once a culture changes to some amount based on an innovation, can further innovation occur along the same line? My thought is that it would be more difficult. Perhaps innovators need to look more at resulting cultural changes to be able to plan for further innovation. Maybe it isn't what we're building, but who we're building through this innovation. And, of course, there is often more money to be made short-term in the status quo.
    • Randolph Revoredo
    • Project Manager, ITB foundation, Cabildo de Tenerife
    I work as a managing executive hired for a large organization, an island government, $1 billion approx annual budget, to create for the island university a entire and new highly specialized research institution committed to reverse aging; and I can tell you it does not matter whether the push comes from public or private whenever the entrepreneurial spirit is in the right place in the organization: the top. Otherwise a innovative project like this would be unthinkable.
    • Kumara Uluwatta
    • Senior Lecturer, Wayamba university of Sri Lanka
    Innovation is sometimes regarded as a competitive advantage. It is believed that introduction of innovative systems are leaded to cost reduction and increase the gain of interested parties. And also it is believed that the trusting relationship is greatly influenced by the innovation. Also trusting relationships among employer-employee, buyer-supplier and organization with other interested parties etc. is regarded as a competitive advantage, because trust can increase the gains for firms as well as interested parties. Sometimes with big resistance to these types of changes under the innovation policy, the expected outcome cannot be achieved. Not really the size of the organisation, the cultural anthropology is mostly influenced. The problem of cultural asymmetry is influenced by a coalition of workers and unexpected trustless faces among different interesting groups are influence the innovation capacity too. As per to my research on this innovation, it was found that, the same model or well packed framework cannot be applied to each situation. Not only the size finally it is a matter of people belong to the organisation
    • Paul L. Davis
    • Management, Boeing Manufacturing/Quality Systems
    I think they do not have to be. I think that entrepenuership and innovation are not necessary conditions for each other. Particularly in the younger culture I manage, a teaming and desire to be cohesive actually fosters more effective innovation.

    I have to say that most larger organizations tend to be lethargic and entrepenuers have a difficult time being patient and progressing in the company. Americans live in an economic culture of power and money, our corporate executives rely on power and influence. An entrepenuer wants the power and influence reward for their innovation. The trait of the people who have had remarkable sucess in innovation and have the entrepenuer spirit for the most part benefited from a disruptive technology or business environment.

    The sucessful large company in innovation and keeping the entrepenuerial spirit has many times benefitted from having their large programs spin off technology at the right time. Many times the result benefits not so much the innovator as the power holder. But this makes sense due to the power holder managing and moving up the ranks using their power and influence to be in a position of authority on the program. This so-called entrepenuerial spirit many times relies on the old axiom, "Being in the right place, at the right time." There are genuises who understand the marketplace and the market's attention span enough to meter innovation and entrepenuerial spirit in palatable doses, they are few.

    We are not a country and culture that nurtures innovation, that is our biggest challenge. If the support and network were there, we would have better results for all of the world's people. Our brightest would have more opportunity to create and experiment. As long as education continues to become more elusive due to cost and we have to scale back social programs to cover debt we are at risk. We need to have a better dedication to longterm, less distraction and attention to fads and fancies.
    • Karen Caswelch
    After 24 years working for General Motors, I found that even within a large company, there were varying levels of innovation, most of which were tied to the business unit culture. Those businesses which understood their history of excellence had the potential to be innovative. Think Packard, Holden, Allison Transmission. All of the employees in those businesses would tell stories about their founders and took pride in the success of the individual entity. The rest of GM, which had a rather muddled culture, never could understand these smaller entities and struggled with leveraging their strengths.

    At any level, I think it's about reinforcing the culture, and you do that through people. The best companies, when hiring both university graduates and experienced hires, spend more time assessing the cultural fit than the technical capability.

    Given the fact that most companies really don't understand their own culture, and don't spend the time reinforcing the positive aspects of their culture, is it any wonder that as they get too big, they lose that unique aspect of their business which led them to success in the first place?
    • Nicky Bushnell
    • Managing Director, The Marketing Therapist
    I do believe that entrepenuers and innovators exist in organisations of any size. however, the success or failure is often dependent on the infrastructure, systems and processes and expertise and leadership qualities within business to explore, develop and successfull take an initiative to market... andkeep it there! New intiatives and innovations are at risk through rapid growth momuntum - from a (cute baby) really neat idea, soon overtaking the company's ability to support the demand (screaming, demanding monster). In my business in New Zealand, we constantly finds this is the case with client orgs. with a history of $mm turnover have imploded to a floundering weakling. While we don't want to quench the flame of innovation, we do need to ensure we don't get burnt.
    • Shruthi Sridharan
    • Human Resources, Standard Chartered
    In my view they are not incompatible with size -

    I would like elucidate this with an example - if we were to steer a small boat it would be much easier to do so than a large sail boat; in the latter we would need to use trim tabs to steer the rudder; in a similar manner in large organizations - the innovations happen in small pockets and are incremental in nature as they chunk up!

    For instance Microsoft or a google are large IT product companies who epitomize innovation and churn out products every day; these are large corporations and have sustained their ability to innovate and are known for fostering creativity and innovation.

    My view is that human beings are inherently creative and no matter where they are ; they will find new ways of doing things; in the current economic scenario - keeping cost flat and improving effeciencies have become imperative and this leaves organizations no choice but to think out of the box and innovate new ways of reducing cost.

    These are initiatvies or process improvements and have an incremental effect and like I said - the terms are relative.

    An innovation in small organization or an incremental change in a large organization is about relativities; both are imperative and organizations keep reinventing themselves - in one its visible in the other it take time to see the change!
    • Adnan Younis Lodhi
    • Section Officer, Ministry of Commerce, Pakistan
    In my view, innovation and entrepreneurship is almost incompatible with the size of the organization.

    I am from Public Sector and Governments are not best known for either innovation or entrepreneurship but even in public sector, when departments grow, they tend to become more and more inefficient. New & small departments usually display vigor and vitality. The passage of time only make them dull & lull.

    There is something inherent in size & time that stalls.
    • Dhaval
    • Engineer
    Dear Jim Heskett,

    In my view I don't consider the size of the company to be prime factor for curtailing innovation or entrepreneurship in enterprise.

    According to me its not actually size of enterprise which affects the innovation or entrepreneurship but its mindset of people managing such a big company. Managing team of such companies is habituated of seeing profit figure in their company's balance sheet every year on year. Hence that makes them quite reluctant or better to say they are glued to existing methodology of work or products which in past has proved to be profit making and has helped them to see the positive figures in their companies balance sheet. This reminds me of acrobat walking on the rope; if you see carefully them walking on the rope then you will notice that they shall make as less movement of their body as possible; the answer to this question is quite obvious that while walking on the rope they know that keeping less possible movements shall help them to balance and successfully walk on the rope till the other end. Very similar to that once company attends particular size (actually, size in terms of
    employees mostly reflects the company's strength as profit making enterprise) the people in management who drives its knows which all process and products have brought them to profit making; hence then it becomes difficult to diversify in terms of innovations for them because any new things are not assured of good returns.

    Hence till STALL YEAR every company as mentioned in your example shows positive towards innovation; also I would guess STALL YEAR shall also be coinciding with year when company is at its TOP in terms of revenue generation and profit generation. Hence after STALL year company management tries to maintain momentum in profit year on year at cost of less innovations. Because new things requires time, money and risk. However such companies inspite of having time (in terms of resources) and money, they are not ready to risk their balance sheet figures.

    Concluding I would say at beginning stage enterprise doesn't have anything to loss and they are hungry for success by which ever means of innovation hence till STALL year companies shows good towards innovation; however when it attains one particular stage where it has achieved positive figures in their balance sheet it becomes difficult for them to try out anything new (innovation) and to risk their progress path.

    I worked with India's top IT company and had experienced same. This question has always haunted me while I was working. Thanks for putting it in words.

    Dhaval Malaviya
    • Ozer Yildirim
    • Freelance Project Manager, Istanbul, Turkey
    In my opinion, organizations resemble people in development phases. At the start-up phase, an organization is like a baby. They can gradually grow in the first ten years. And of course, organizations are supposed to grow with their managers, senior managers and also team members in the first ten years.

    While the companies are developed by their managers, including their CEOs, senior managers will get old or lose enthusiasm along the way like all humans do. Top Management getting older as the company gains experience can not keep their innovative and entrepreneuerial spirit because in time they simply lose their excitement and enthusiasm in their hearts.

    The companies' growth trend synchronizes perfectly with the human life cycle. Here, I would like to emphasize the fact that the top management of any corporation should definitely open the way for younger senior managers. All the companies should change their top management as soon as a possible stall appears.

    As a matter of fact, CEOs of companies should be changed and the top management should be reorganized at every ten years. Likewise, the companies should even modify their logos/mottos for a more innovative outlook, as well.

    Next, older senior managers should be retired or replaced in order to encourage upcoming senior managers because senior managers with many years of experience in the same company gets tired of struggling with the same old problems in the same old structure.

    In fact, managers rooted deep in the organization don't like change at all. I would like to remind you that the fluctuations trigger innovation in the companies. However, old minds prefer regular and stable moves in their companies. To make a long story short, companies should change fatigued and play-it-safe managers who lost their enthusiasm before they are stuck deep in the stall.
    • Annabelle Hoffman
    • innovation and creative facilitator, Above the competition
    Innovation and Entrepreneurship can happen successfully if you're big or small. Has absolutely nothing to do with size.

    I worked in a department, one of four people with each responsible, of plus $20 million in annual revenue.
    We were all stars for many years. The company gave us the responsibility with the authority to do what we thought was necessary. The structure was set up in such a way, that there was very limited supervision and no blame whatsoever for mistakes made. We all took calculated risks and therefore profited immensely. Most of us had very high adversity quotient. There was a great deal of trust, and the department team's architecture created a larger sum than the possible total of its parts.

    Management supported the team with financial control, as well as financial incentives. We were entrepreneurs of our own business. Our life consisted of reinventing daily.

    We lived through several recessions because management spurned us to act. One specific question was during the time, when in November you could throw a bowling ball down the aisle of the mall and never hit anyone, "If you could get anything,
    What could you sell a lot of?" We actually sold 27,000 prs of jeans in three weeks when the average weekly sale was 3,000prs.

    So yes it's in the architecture, in the hiring, in the trust, the people. NOT THE SIZE.
    • Richard Wallace
    • VP Learning and Development, Schnedier Electric
    In my dissertation research I found that the concept of "strategic intent" was critical in an organization being able to sustain innovation. The problem being worked has to be claer and a fit into the strategic outlook for a company otherwise there is little chance of success. It may be as a company gets larger it is more difficult to define an organizational fit for ideas as the sheer size becomes an impediment. However, it isn't impossible - just more difficult. It is obviously easier with two guys in a garage but over time the garage gets bigger and so do the organizational issus.
    • Dr Rob Smorfitt
    • CEO - Corporate Innovation and entrepreneurship, Innoveur
    Insufficient information is provided here and I have not read the book yet, but I would be interested to know whether the stall point was in any way linked to the organisation life cycle. Certain theorists suggest that the organisation will enter a stage where they need control and so they introduce the necessary control systems (bureaucracy). Does this in turn correlate to the departure of the entrepreneur, or the conversion of the entrepreneur into a manager? Does this correlate to the stall point? I am in no doubt that the entrepreneurial spirit dies when the entrepreneur leaves or morphs into a manager. Therefore there is perhaps an indirect link to the organisation's size, but a link which is dependent on whether or not the entrepreneur remains in charge as an entrepreneur. There are many examples but Virgin's Branson would be a classical example. The Branson example would therefore possibly not see a stall point, irrespective of the organisation size due to the ongoing entrepreneurial input.
    • Vivek
    • Business Management
    I have worked at startups as well as large $40B+ companies. At a startup the primary thought is the innovation and all of the nurturing required to get there, while the back office work is the after thought.

    At the large companies, without the entrepreneur as the chief, it becomes more about judging evolution of offering rather than innovation. The primary thought is administration followed by that evolution.

    This order of operations seems to have a profound cultural impact on top of the basic human discomfort with change.

    The examples of Tata and Virgin both appear to be conglomerations of entrepreneurial ventures. Apple seems to have followed a pattern of Innovate, Stall (heart attack), Innovate. It will be intersting to see if they could survive a stall out on the wireless device front.
    Especially since their outward stance is rather closed-source.

    The Pakistani MOC Section Officer's note is the most honest about the challenges battling incumbencies versus a greenfield effort.

    Can't wait to learn more about Stall Points! Although I do agree that these narrations are often after the fact and miss out on much of the gritty tactical decisions made on a daily basis.
    • Suraj G. Jadhav
    James's point that in stalled companies, innovation suffers from a concentration on smaller niche opportunities, brand extensions, or ideas with small business impact could be because stalled companies innovate at adjacencies and do not necessarily focus on breakthrough innovation.

    Maybe it has a lot to do with risk appetite, internal stakeholder buy-in and a fear of market reaction. Also adjacency innovation may be easier to execute as it relies on existing capabilities, probably to the same set of customers, however making it at best an incremental innovation. The fact that it is incremental raises questions about its acceptability, impact and more importantly sustainability because its easier to drop smaller innovation attempts.

    Can we imagine a Shai Agassi's Better Place coming from Detroit? Also it may be easier for large size organization to buy innovation, realizing that buyout is as important as building from within, even Google has acquired companies, e.g. Google Earth (Keyhole), Google Maps (Where2Tech) thus making skills at all aspects of M&A more important that innovation itself.

    Tata specifically is an interesting company. The entire Tata group has 114 companies in various sectors, old and new. They have been in existence for 140 years and touch so many lives, particularly in India, but consumers might not even be aware that the product they bought is from a Tata company. While Nano made it famous world over, when I recently bought books from Landmark, electronics from Chroma or a Himalayan water bottle, it never readily occurred to me that it was a Tata product.

    To me Tata seems to operate like a VC firm ... identifying opportunities whether adjacent or not; providing capital and talented human resources; and giving freedom to the new company to shape up as an independent entity. In a way, the innovative companies they germinate, benefit from the mothership yet shape up as distinct independent innovative companies.
    • Jaime Amsel
    • CEO Strategy
    Great professional conversation starter and even greater contributions!

    I think we need to add to the equation that the dynamics of a small group are very different from those of a big group and also the intergroup [competition] dynamics among small or big organizations.

    Isn't it paradoxical that those big organizations who have the resources to innovate and where risk taking is less risky for the organization, seem to have more trouble nurturing innovation and entrepreneurship. Size matters.
James L. Heskett
James L. Heskett
UPS Foundation Professor of Business Logistics, Emeritus
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