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Are Big Companies Really Innovative Dinosaurs?

A recently published paper suggests that big companies are actually more likely to succeed when chasing technological opportunities than their smaller peers

· Agile Zone

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The innovators' dilemma has long since slipped into the lexicon of modern business, with the difficulty organizations face in behaving ambidextrously enough to thrive at both efficiently going about their work and disrupting that work at the same time.

It’s part of a broad heuristic that says that big companies are bad at innovation and smaller, nimbler start-ups are much better at bringing radical changes to the market.  It’s a heuristic that needs reevaluating, at least according to a recently published paper that suggests that big companies are actually more likely to succeed when chasing technological opportunities than their smaller peers.

Nimble Giants

The study explores how innovation occurs in big companies, with a particular focus on the differences between success and failure.  It argues that when the company is already successful at doing something, they have a good chance of succeeding at bringing a new innovation to market, but their motivation to do so is lacking.

Indeed, they also suggest that failure in one field is not a panacea either, with companies that have previously failed likely to make bigger punts in future, with similarly poor chances for success as their previous effort.

So, rather than most radical innovations coming by way of the start-up community, the authors contend that the majority actually come from large incumbents, because they have both the resources to develop ideas, and the capacity to make some punts in different areas.

So how can big companies do this?  The authors suggest that the best approach is to be as recombinative as possible.  This is a concept I’ve touched on a lot recently as studies suggest that an ever growing number of patents are taking what already exists and applying it in novel ways.

Of course, both of these studies looked primarily at patent data, which is not quite the same as innovation, as the vast majority of corporately owned patents don’t ever make it to market in a new product or service.

Indeed, a study I wrote about last year suggested that recombination of existing ideas is great for iterative innovation, but less effective for radical, breakthrough innovations.

Regardless of whether you strive to be recombinative or not, however, there is much you can do to get better at innovation.  A good place to start might be with the three box model developed by Vijay Govindarajan.  This posits that companies separate what they already do well (box 1) from what they want to radically change (box 3), with a strong focus also given to what the company needs to stop doing (box 2).

It’s a nice model as it goes a long way towards helping companies develop the kind of ambidexterity required to thrive with innovation.  If you would like to learn more about the 3 box system, I can recommend this short course from Emeritus.

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Published at DZone with permission of Adi Gaskell, DZone MVB. See the original article here.

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