
Why Big Companies Can't Innovate - chirau
https://hbr.org/2012/09/why-big-companies-cant-innovate
======
Animats
Some can, some can't. IBM was once very good at innovation.

What hurt IBM was not lack of innovation. They got that part right. It was
incremental production economies, the thing the article says is a big-company
problem. Others could make generic PCs cheaper than IBM. Others could make
disks (which were invented at IBM) cheaper than IBM. IBM eventually exited the
low end entirely.

3M, GE, and du Pont are big, old companies good at innovation. Westinghouse
was too good - too many high-tech products before their time.

Gerber, the baby food company, doing something stupid is not a good example.

~~~
magice
I weep to see people sharing my viewpoints. Too often, quasi-professional
observers of industries would make stupid anecdote examples into attention
grabbing but misleading and ultimately stupid stories.

To add to your examples (and to bring this closer to hearts of Hacker news
audience): Google released Gmail, GMap, GWT, etc. after its initial success;
Amazon unleashed AWS after domination of online marketplace; Microsoft jumped
into Xbox after establishing itself as "the tech company." Most notably, Apple
is only accepted as a mainstream "innovator" (with the slew of products like
iPod, iPhone, iPad, etc) after its revival and domination; before that, they
were merely a niche player and their products (the many colorful boxes) were
never quite celebrated as later creation as market leader.

~~~
Animats
Microsoft's XBox experience is more about throwing money at the problem. The
entire first generation of XBox devices was a net loss.

~~~
zekkius
Not just the first gen, they are billions in the hole still

------
notahacker
They can innovate. Startups often make shit products the market doesn't want
too, and often fail more slowly and expensively than the example of Gerber's
adult food line; the article could instead have talked about how Gerber _did_
successfully roll out a life insurance product. The followup articles mention
Xerox and Apple: two companies which produced more game changing products as
mature companies than 99.99% of Silicon Valley ever will.

If I was to propose my own cod theory of why big companies don't innovate, it
would probably involve them seeing innovation as driven by MBAs formulating
"innovation strategies" based on articles full of interesting anecdotes and
open-to-interpretation theories rather than management saying yes to a higher
proportion of projects their underlings want budget for.

~~~
nickpsecurity
One trip to Walmart or a large, grocery store shows you how much the big
companies can innovate. Actually, they do it even more than that but often do
focus groups in a form of fail-early and fail-fast. The bad ideas get weeded
out before they can soil the brand or dilute the earnings. What we see is what
at least seemed to work. It then usually makes plenty of money.

Also, the big companies' innovation usually nets them tens to hundreds of
millions in extra revenues or plenty of profit. They care about making money,
not growth to sell out. Changes the nature of innovation considerably.

~~~
nol13
Can't speak for all giant companies, but they care about percent growth. A
product that might be profitable, but millions profitable and not billions
profitable, it isn't worth the effort and gets axed or sold. A 0.1% profit
boost isn't gonna matter to share price. Not saying I agree with it, just an
observation.

~~~
nickpsecurity
It depends on the company. Many of the big companies... can't say most without
data... get their money through a collection of products and services. They
_do_ care about millions because a million here and there accumulates. The
low-margin business care down to the pennies of individual items.

So, that isn't a rule for big businesses especially in the Global 2000. Many
care about that stuff. There's just competing interests that can axe one thing
for another. The ones doing stupid, expensive stuff also make the news more
since "incrementally improved operation to make more money" isn't as exciting
over coffee. ;)

------
quaunaut
Well, folks are already off to the races reading the headline and not the core
of the story.

But, this is something I've thought of often over the last several years. If
perhaps, a better angle would be to build a business around Unix-style
philosophy, of "Do one thing, and do it well." Then, you simply start over
with another brand new, small thing, and grow it from there, while lending it
the HR resources of the core.

The closest company to trying something like that, that I know of, is Google.
But even there it seems they've hit some stumbling blocks.

~~~
PantaloonFlames
When I worked for Microsoft, this part: "Then, you simply start over with
another brand new, small thing, and grow it from there, while lending it the
HR resources of the core."

...never worked. Because the core businesses (Windows and Office) were $10B
products. Investing a little bit to get a 0.1% move in revenue there, brought
in $10M more. It was bloody difficult to persuade anyone that the $ should be
invested in a brand new startup idea, rather than re-investing it in the core,
growing business. And who can blame them?

There were two businesses that mattered, and everything else was a
distraction. Actually after a while, the combination of Windows Server and SQL
Server became a business that mattered, too.

In those days, everything else was a weed that might/could grow, if it could
shoot up and grab some attention and look pretty, before the groundskeeper
just snipped it off at the base.

If you look at what succeeded at Microsoft since then, it has not been
"investing in some some small thing." It has been MASSIVE investments in
things, like Azure and Xbox. Of course, MSFT also made MASSIVE investments in
plenty of things that did not work out.

But the point is, proposing to start with a brand new small thing, was a sure
way to be asked to get with the program, or leave the company.

~~~
quaunaut
But a lot of that would depend upon support structure or company architecture,
right?

After all, if the idea of starting something new gets you asked to leave the
company, the company itself is probably hostile to new proposals, so it's
fundamentally against what I'm talking about.

I don't disregard what you're saying- but it's a _huge_ mentality shift, to be
able to do things like this.

I also think it'd be beneficial to run such an organization in a smaller side-
company, similar to what Alphabet does, than merely as a new department inside
of a huge monolith like a Microsoft. Otherwise, you risk just this sort of
thing, and being able to consistently maintain a culture of creation in
something meant to last a century or longer is incredibly difficult.

------
combatentropy
From the article:

    
    
      > corporations exist to make money.
    

I'm so tired of hearing this. Contrast this with Steve Jobs's quote:

"My passion has been to build an enduring company where people were motivated
to make great products . . . the products, not the profits, were the
motivation. Sculley flipped these priorities to where the goal was to make
money. It's a subtle difference, but it ends up meaning everything."

~~~
spc476
Public companies legally have to "increase shareholder value." If they don't,
the shareholders can revolt.

Private companies aren't beholden to this mandate. Nor are Google and
Facebook, which structured their public stock offerings to keep the founders
in charge.

Apple was an odd outlier in that the stock holders had complete trust in Steve
Jobs to ultimately increase the stock value long term, so let him spend the
money on R&D as he saw fit. How many public companies _not_ structured like
Google or Facebook are like that?

------
unabst
Businesses are built from the ground up to succeed in the business they are
already in. Any entrepreneur who's built one, or anyone who oversees
operations of a company knows that each component has a specific purpose, and
the process of ensuring they all work and click is painstakingly tedious,
fragile, and requires maintenance overhead (the guy overseeing operations is
one of them).

So to say "they have money and smart people, they can do anything, why not
innovate" is completely ignoring how businesses grow, come to fruition, and
ultimately profit.

Google's profit mainly comes from Adwords. Their history involves
entrepreneurship, an awesome search engine, a new philosophy for a top page,
and a ton of innovation. They even kept their innovative (and academic) roots
for as long as they could in the form of Google Labs, which one can only
assume they had high hopes for considering the talent they had and the amount
of freedom they gave them. But it was no Bell Labs or an IBM in their heyday.
It shut down in 2011, because the business arm couldn't justify it. They
didn't need hobby projects. Google needed bigger and faster innovation to meet
the scale of their resources and potential returns to match, so they focused
more on phones, cars, AI, and robots. And now they exercise true big corporate
innovation. Innovation is bought. They buy it, work on it, then sell it if it
doesn't work out (as they did with their headless robotic dogs).

Big corporations cannot pay entrepreneurs to be entrepreneurs under their
umbrella. No one can. They can pay researchers to do research, engineers to
build things, and designers to come up with new products and services. But
entrepreneurs are not for hire. The moment they're hired, they stop being true
entrepreneurs. But their companies are often for sale -- the business they
built from the ground up to succeed in the specific business they're in (or
just for IP if they're a technology play). And innovation is easy to measure
when it's already there for sale in front of you.

~~~
nickpsecurity
Counterexample: Goldman Sachs and Buffet's stuff. They hire and pay
entrepreneurs to be entrepreneurs, managers, and product developers. Many of
their top people bringing in big dollars have attributes of all of these.
Their job function just brings the money back to the parent company instead of
a random investor. There's nothing about big companies that prevent
entrepreneur-like activity within. Usually, just their management culture if
anything.

~~~
unabst
It's not a counterexample. What you provided is an example of an entrepreneur
managing business. Many large corps have tried this, and for the most part
have gotten more out of these efforts in the form of brand benefits and PR (as
an innovation first company, yada yada) than actual profit. Toyota in Japan is
highly entrepreneurial per se, except they still only make their billions from
cars.

And the problem with these efforts is in the entrepreneurs. If they're working
on sure businesses from scratch, then it's like opening a Starbucks where you
know it will make money. That's not innovation, that's just good aggressive
profit-sniffing business.

The best entrepreneurs will continue to quit their jobs to focus on their
companies. Hence all the ex-Facebook, ex-Google, and ex-Wall Street founders
doing startups. I doubt Jeff Bezos would have considered a career at Goldman
Sachs for what he hand in mind with Amazon. Doubt they'd even hire him to do
it.

And them hiring entrepreneurs to be managers and product developers is exactly
what I said. They stop being entrepreneurs.

------
olivermarks
Too many overconfident anecdotal HBR 'instructive stories' remind me of the
old adage 'an economist is someone who can tell you a thousand ways to make
love but has never actually met a member of their opposite sex'...the authors
often appear to be hackademics, VC bag handlers and other theorists with
little practical experience...

------
ktRolster
To be fair, most small companies can't innovate either. The ones that can are
the ones that stand out.

------
incepted
The whole article is about Gerber, it should have been called "Why Gerber
can't innovate".

As plenty others have already pointed out, the tech industry is currently
being led by very big companies that are frighteningly effective at
innovating.

Disappointing content from the Harvard Business Review.

------
zeveb
It's a good article, with a simple-enough premise: large companies do one
thing, well, and have difficulty changing to do another thing, perhaps less
well at first but better later. However, this leapt out at me:

> In it’s infancy,

You'd think Harvard could afford an editor …

~~~
TheOtherHobbes
No, it's a _terrible_ article. It's factually wrong, and then it tries to
explain, with parables and no real evidence, something that isn't even a
problem - at least, not in tech.

I'm even not sure it's a problem in most industries. I suspect that companies
that do the same thing over and over without any successful innovation are
freakish exceptions, not the rule.

It would be far more useful to (e.g.) think about how to match innovations to
the market, and how to create balanced corporations that include a working mix
of all the so-called corporate life stages.

------
eva1984
AMZN is pretty good at innovation, according to my recent memory....

------
twic
tl;dr: because innovation is what you have to do when you don't already have a
business.

~~~
bbcbasic
Call it an "executive summary" and you can charge for it

------
kangar00
From part 2 of this series: [https://hbr.org/2012/10/how-big-companies-should-
innovate](https://hbr.org/2012/10/how-big-companies-should-innovate)

"If the antibodies already exist within your organization to destroy new
endeavors, you need to go outside of the organization to overcome them."

Another option is to just fire or move employees that are resistant to change
and innovation to other parts of the company where their resistance to change
might be more helpful. I don't understand why this option is not considered or
discussed.

~~~
michaelt
Well, there's more than one way to block new endeavors.

Many organisations sometimes have costly problems, and try to learn from them
by adding new procedures to stop the problems recurring. After a few years, an
accumulation of such procedures can raise the costs of a new project
significantly - even though every rule is a reasonable one put in place with
the best of intentions.

For example, where a startup can test a concept with a PHP website on a single
server using MySQL, a large company might have standards calling for a high
availability configuration, a 24/7 support rota, monitoring logging testing
automatic scalability change management backups and security to these
standards/levels and independently audited, a bug bounty program...

Before you know it a project a startup could have prototyped with one guy and
a week needs several guys and several months - but the reasons for it are all
individually reasonable and firing the people behind them makes no sense at
all.

------
ogrev
I think this is hard for most companies to understand. The natural growth
pattern is to take what you're good at, tweak it and sell it to another
market. The problem is that instead of creating a process or product that's
tailor made for the market it's meant to serve instead you get something
that's close yet just not right.

What the article is implying that the only way to combat this is for there to
be a substantial buffer between the established company its innovation group
lest their be some amount of tainting. They only thing innovation group should
be provided is money to try to come up with their own solutions without any
interference or guidance beyond the main goal. Quite honestly I think this is
impossible unless you hire people with nearly no knowledge of the established
processes at the company unless you want intellectual incest. Maybe a single
manager might suffice but beyond that I don't think it would work.

I have to wonder how amazon is coming up with its new ideas. They seem to be
batting at least .100 when the field is batting 0.

------
thomasjudge
Gamestop is not really a good example to end the article with as a company
that has given up on innovation. They've pursued the other strategy: buy it.
Since 2010 they have made several acquisitions including Spawn Labs, Simply
Mac, BuyMyTronics, Spring Mobile, and a bunch of Radio Shack stores.

~~~
dragonwriter
That's buying something, but is it innovation?

~~~
nickpsecurity
" that has given up on innovation. They've pursued the other strategy: buy
it."

Writer claimed they were doing the opposite. Or am I misreading what you're
asking? Did you mean to ask if buying something was itself an act of
innovation as in other comments?

~~~
dragonwriter
I was asking if the things that they are buying are fairly described as buying
innovations.

~~~
nickpsecurity
I'd say so. You can build it or acquire it. Steve Jobs, echoing Picasso, used
to say that "good artists create but great artists steal." Allegedly, anyway.
;) I'd also say, as some others did, that it takes a certain amount of insight
to see through the noise of the market to spot the claims (eg innovations)
that will become part of your vision and integrate with your offerings. A
track record of doing that right most of the time is certainly a form of
innovation even if not as brilliant as a startup. Each time, the company's
portfolio is stronger and providing more value to customers and shareholders
that competition might not have.

------
otterley
This article was written in 2012. Mods, can you please update the link?

------
kristianp
Has HBR recently changed its page layout? There is a 20% top bar, that hides a
few lines of text when I hit page down. I couldn't finish the article, too
frustrated with that POC top bar.

------
Avshalom
As a note though: walk down the aisles at your nearest Target and you'll find
just as many single serve pureed fruits+veggies in the food aisles as the baby
aisles (many coming in the same pouches and a couple the same branding). I
admit, marketed toward parent who want to spend too much money trying to get
their middle schoolers to eat vegetables at lunch more than adults proper.

------
Alex3917
This example doesn't make much sense, since adult baby food is one of the
hottest food trends right now. It's usually packed in squeezable pouches
rather than plastic containers, but other than that it looks like they were
just ahead of their time.

------
pbreit
It's still all just humans making decisions, nothing structural or
insurmountable.

------
cowardlydragon
Once you have ossified middle management machiavelli banally evil sociopaths
that only care about maintaining their miniempire, all the big companies can
do is leverage monopoly power, startup gap, and government largess to persist.

------
meeper16
Xerox Parc innovated. It's usually based on the a high pain point the founder
has with the product.

------
Pica_soO
Google can?

~~~
ThomPete
I think innovate meant in the form of creating successful businesses. Most of
googles revenue is still advertising.

~~~
dragonwriter
> Most of googles revenue is still advertising.

That doesn't mean that Google's other businesses aren't successful. There are
lots of independent, successful businesses with vastly less revenue than
Google's advertising operations, so why wouldn't an internal Google business
that is profitable but has vastly less revenue than its advertising business
be evidence that Google can create successful businesses?

~~~
ThomPete
Sure but I think that's the spirit it's meant in.

I.e. why is it hard for companies to mostly have one cash cow and not develop
several. Or why is it hard for them the develop a new business as old ones die
out.

~~~
ktRolster
_why is it hard for companies to mostly have one cash cow and not develop
several_

In other words, why can't more companies be like Apple? Or Oracle, or
Microsoft, for that matter.

