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Why large organisations struggle to innovate

When working on a disruptive idea, you can choose to either incrementally improve existing or transform yourself. The choice is yours
Photo credit: Pixabay

Big organizations appear to have everything that takes to succeed with innovation. They have resources, they have leadership bandwidth, they have a brand, they have customers to provide insights and they quite often generate great ideas. However, very few organizations seem to succeed with innovations.

Startups on the other hand have little resources. They lack the people strength of large organizations, they struggle to reach customers, they don’t have a brand recognition and many a times have nothing more than a single idea. Yet they seem more likely to innovate rather than large organizations.

This phenomenon can be attributed to the way organizations react to ideas. The book The One device: The secret history of the Iphone by Brian Merchant, provides some interesting insights from Apple. At Apple, they saw phones playing mp3 songs as a threat to the Ipod, which in 2004 accounted for significant part of Apple revenues. There were 2 schools of approach to the Iphone at Apple. One team pushed for putting a phone into Ipod, a task that was seen as easy and Apple in fact had some prototypes developed. The second school took a very different approach to reimagining a phone without buttons. We of course know the rest of the history.

Organizations face the same challenge as Apple; they recognize threats and the need for innovation. But then they put in resources to protect and improve what they have. In fact Motorola stuck a partnership with Apple to put in iTunes in a phone and announced Rokr, a big flop.

Clark Gilbert and Joseph Bower, writing in HBR in 2002, call trying harder as being part of the problem. They provide a number of examples of organizations failing to innovate just because of the way they respond to threats.

Gilbert and Bower theorize that organizations have two potential responses to innovation challenges they come across; see an opportunity or a threat. Large organizations and start-ups respond very differently to this situation.

Source: Clark Giilber and Joseph Bower (2002) in HBR

Large organizations, begin comparing the opportunity with what they have. Most often, there is far more data about the existing business than about the new innovation opportunity. As a result the opportunity is often ignored. However, when the same challenge is seen as a threat, large organizations react with vigour, they mobilize resources and react very fast.

Start-ups react in very opposite way, they are excited about the opportunity and go full steam at it. On the other hand threats aren’t relevant for them.

The other perspective of dealing with innovation and disruption challenges is the way organizations deal with them once they are mobilized. Gilbert and Bower notice that organizations which treat the challenges as threat in the solution and execution phase tend to protect the existing business. Familiarity and attachment with what is existing, forces them to take actions that are incremental improvements and mitigation of risks.

Innovative organizations, such as Apple succeed in the disruptive change by simply treating these challenges as new opportunity in the venture building exercise. They deploy independent team, are flexible with plan and goals, but extremely agile on execution.

The message on innovation to large organizations is clear

  • Visualize the challenge as a threat, unless you do so, you can’t mobilize the organization to innovate

  • Separate the resources from existing organization for better performance

  • Provide funding and resources in stages

  • Cultivate outside perspectives rather than depending on internal insights to reduce bias

  • Consider the existing business model appropriateness, the disruptive innovation will most probably require a new business model.

  • Provide careful consideration for how the new business will integrate with the existing. Design different operating models if necessary

Hope this blog is useful to you and is insightful.

Do reach out to me if you need support for your innovation efforts.

Krishnan Naganathan

Krishnan is a leading innovation consultant and focuses on helping people and organizations innovate and build capabilities for innovation. He brings over 25 years of experience in the industry and consulting. You can reach him by phone / WhatsApp: +919791033967 or email:


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