Can Companies Continue to Innovate as they Grow? December 21, 2006
Posted by robzel in Apple, Apple Computer, Business, Innovation, Mac, Macintosh, Microsoft, PC, Personal Computer, small business.trackback
Innovation…The word conjures up images in one’s mind. Perhaps you think about companies like Apple Computer, or great individuals like Thomas Edison or out of the box thinkers like Albert Einstein. I bet if you created a list, the list would be filled with many individuals, but only a handful of companies. Why is that?
I think part of the reason can be illustrated by way of example. Microsoft was once a small company (I know that is hard to imagine today). You might even have called them a small innovative company back in the 80′s. Through the MS-DOS operating system and the BASIC programming language Microsoft became the de-facto standard running on most PC’s. Through smart marketing and decent product, they were able to leverage their advantage with other software packages including the much loved and often hated Windows operating system. Over time, they were able to muscle out most competition and their software has become a standard worldwide.
Fast forward to today. I think the best illustration of Microsoft are some terrific Apple commercials that depict Apple vs. Microsoft as personified by two people. The Microsoft actor looks a little like a heavy Bill Gates; smart, but a nerdy kind of guy. The Apple actor is more hip; sort of a hip and smart cool California dude. In the commercials, the message communicated is an insecure Microsoft guy, trying really hard to please, but struggling to figure out how. His solutions to problems are depicted as complex and contrived. As a contrast, the Apple dude is cool and relaxed. You get the feeling through him that Apple products are cool without hassle. The PC guy makes you feel like PC products (running Windows) are more complex and difficult to work with.
Another example is the new Microsoft Zune MP3 player. While I don’t own one, I have read reviews. All the reviews suggest that it is a decent product. However, it fails to be something truly innovative, instead copying many of the capabilities of the ipod with some improvements. Hardly as innovative as the first ipod.
Microsoft faces the same problem that many once innovative companies face as they grow larger. As the size and complexity of an organization grows, so too does the number of groups that get involved in any process. Decision making capability typically becomes distributed across many different departments each of whom want to have input into the final product. Thus, in many larger organizations innovative ideas get squashed or have so many hands involved that the original concept gets lost or homogenized in the process. This is especially true in public companies who are under pressure to gain revenue as quickly as possible and cut costs at the same time.
I do think Microsoft and other large companies have a potential solution to the innovation problem: Create small companies within the larger company. Allow these teams of people the advantages of the resources of the large organization, but give them the freedom to innovate without the corporate bureaucracy. Apple has been able to avoid having to do this because of the dynamic and visionary nature of their CEO Steve Jobs. While the Zune has not been a runaway success, Microsoft is on the right path in having appointed J. Allard to lead the team developed the Zune. J. Allard is like the cool Apple guy personified. He and his team successfully created the X box 360 and will likely continue to improve likelihood of success of the Zune over time.
This type of strategy is very difficult to institute for a large public company. So much of many larger companies corporate DNA surrounds hierarchy and control, that it is difficult to delegate decision making authority to a small group of people. However, companies that do not develop solutions to continue to innovate eventually will wither and disappear. Not only will they struggle in an increasingly competitive marketplace, they will seed talent to those companies that continue to provide opportunities to innovate.
I must agree with you that big corporations should start a smaller subsidary or few subsidaries which will only focus solely on innovation. They will not touch anything on the ‘big corporate world’ until they are mature enough. They should just concentrate on creating innovative stuff and let their creativity runs wild.
I like this idea a lot: smaller is better. I read (from the “Tipping Point”) that there is a rule of 150- that is organizations start becoming ineffective when they grow past this number. Companies like W.L. Gore apparently have taken this to heart and organize their groups, even buildings, with no more than 150. Do have to ask, if you create smaller groups which focus on innovation how could this affect the morale of your larger workforce?
Hey Robert,
Great article. I agree with you that Microsoft is starting to (slowly) get back on the right track, but they still have a long way to go. I recently read a great book “Good to Great’ by Jim Collins, and I thnk it should be mandatory reading for Microsoft executives in power.
One of the major themes of this book is that all good companies that turned into great companies spent a lof of time and resources on realizing their strength – how they can get ahead, and then concentrated all their efforts on implementing that plan. That includes ruthlessly eliminating parts of their business that are not part of the master plan.
Microsoft should realize that desktop software is not the way to greatness anymore. While it allowed them to become what they are today, concentrating their efforts on new editions of Windows and Office is harmful to them in the long run. They should embrace the 21st century and web-based software, instead of doing everything in their power to fight it.
I think whether they’ll be able to do it or not should be a great storyline to watch.
Thank you all for your comments. In response to nkilkenny, I believe in the Tipping Point one of the examples used with the rule of 150 is the company Gore (the maker of Gore-Tex among other products). In this example they have solved the problem with the larger organization by essentially creating smaller companies within the larger company. Each separate company of up to roughly 150 people functions as a stand-alone and so I assume morale is less of an issue.
In a larger organization, the solution is not so simple. In my corporate experience, it was important to create a feeling of collective ownership while at the same time being careful not to dilute a concept or idea. To do this either a single person or small group of people would be responsible for a product or project. These leaders would borrow members from other groups or specialty functions within the organization. This collective team would be responsible for the delivery of the product or project. The leader of this team would be able to preserve the original concept and steer the team in the right direction. Each team member would have ownership over the delivery and design of his or her component in the larger project. This type of hybrid approach worked to combine the dynamics of a small team while leveraging the advantages of the larger organization.
[...] there is no oops about it, Steve Jobs has another potential hit on its hands. In my post on December 21, I talked about how it can be difficult to innovate in a large company. Apple under the leadership [...]
Yes,
with the benefit of hindsight it is easy to say that MAC are doing it