Why is it so hard for large companies to innovate?

Giving a talk later this week on some of my experiences and lessons learned around making innovation happen in large and small companies.

I wanted to start off with a very specific question: Why is it so hard for large companies to innovate?

I have some insights from my ten years at Siemens way back when. At first glance you might actually think that this type of environment would be ideal to get things done. After all, there seems to be a lot of money flying around. People used to boast about how many tens of millions of dollars they had sunk into some failed initiative. We also had great customer access and strong credibility. You would have expected customers to work with us and to help us. And we had a deep and broad talent pool which should have allowed us to marshal the resources needed.

The difficulties became clear when we tried to come to grips with new business opportunities in the area of “multimedia”. This was just before the Internet conquered everything but we didn’t know that yet. We spent millions in internal resources and external consulting (the usual suspects) to identify markets and potential offerings. For all the good ideas we had on the drawing board we hit several walls when it came to defining how to execute. Hard walls. ¬†Especially:

  • Lack of investment capital. In a large company any business venture that doesn’t scale up to e.g. 500 million in year three is not very interesting. And therefore doesn’t get funded. Even though it may ultimately be huge and important. You just don’t know exactly when that will be.
  • Talent: Lots of talent in the organization but missing critical ingredients. Which we would have found very difficult to hire. Both rockstar engineers as well as creative as well as dealmaking talent comes to mind. We offered big paychecks, but to no avail. They just wouldn’t come.
  • Time: This is probably the hardest wall we hit. We just couldn’t imagine how we might get from here to there in a finite amount of time. Given that everything in a large company takes months not weeks and years not quarters, any implementation plan ended up taking many years. And you know that the world will be different in three or four years so it makes no sense to plan a project that takes that long. It just doesn’t. We simply had no idea for how fast a smaller, more nimble, and more focused company can move.

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