7 Reasons Why Your Firm Can't Innovate

by Jeffrey Phillips

7 Reasons Why Your Firm Can't InnovateI was meeting with a group that is interested in fostering innovation in the state where I live and we were talking about the reasons why organizations don’t innovate. We talked about the lack of strategy and cultural barriers and a number of other reasons. There are hosts of very smart people writing books and research papers on this very topic, but it struck me that I should be able to communicate the reasons firms don’t innovate in a way that a fifth grader can understand, since some of the folks we work with..never mind.

At any rate, I created my alliterative list of reasons why firms don’t innovate, and if I get the time I’ll explore them in more detail over the next week or so. I encourage you to add your own reasons in the comments – alliterative or not, they are welcome as we begin to first name the reasons, and hopefully eventually debunk the reasons why firms won’t or can’t innovate. Herewith, Dr. Seuss meets Clayton Christensen.

Seven reasons your firm can’t or won’t innovate:

  1. The Tyranny of Today. Yes, I know that most fifth graders may not fully understand the word tyranny, but they understand the pressures of delivering “today”. Most businesses are so focused on delivering this week, or this month, or this quarter that they simply cannot or will not think beyond some corporately directed and reinforced time horizon. I’ve written before about the use of scenario planning and future forecasting to identify opportunities that are beginning to unfold. Very few firms use scenario planning effectively and most are comfortable reacting to market changes rather than being the “leader”.
  2. The Safety of Sameness. Innovating requires that you create strategies, products and services that make you different from your competition. As a firm gets larger and industries or market mature, being “different” seems risky or threatening. I was driving by my bank branch recently and it struck me that all bank branches look exactly the same – a squat square building with few windows and exactly three drive up alleys. I’m sure most are exactly the same on the inside as well – exactly three teller windows, a velvet rope alley to guide customers to the tellers, with offices along the periphery. Why is every bank and every branch so similar? Because there is safety in sameness.
  3. Inevitable inertia. Innovation is change, and as we all know change is difficult. One of the reasons change is difficult is simply overcoming the inertia of the way things are currently done. Even when change makes a lot of sense, overcoming the inertia that sets in around the way things are done is difficult. Since innovation is typically risky change, the inertia is even more pronounced.
  4. Creatures of the Culture. An organization runs on unwritten rules and informal processes we lump together in something we call culture. Corporate culture guides and dictates our thinking, and encourages activities and discourages activities and perspectives as well. We are all creatures of the culture of the organization we belong to. A culture can encourage innovation or discourage innovation.
  5. Fear of Failure. No one likes to fail, but innovation simply requires the ability to fail and keep going, incorporating the learning from the failure rather than punishing the failure. If the organization promulgates a fear of failure, it can’t innovate.
  6. Containing the creativity. Innovation requires creativity and divergent thinking. Any company that doesn’t promote creative thinking stymies innovation, since all ideas seem so similar to existing products and services.
  7. Cannibalization Concerns and Turf Toughness. Many organizations are afraid to innovate because the new product or service may undercut or obsolete an existing product or service. So these firms defend the existing products at the expense of new ideas and new products, and are disrupted by another firm. Additionally, a new idea may intrude on someone else’s “turf” – that is, someone else believes the idea should belong with their team and they resist it. Don’t underestimate the power of a bureaucracy that feels threatened.

These are the reasons why firms can’t, or won’t innovate – not an exclusive list, but an alliterative list. What we should address now is: having named our fears, are they really all that terrifying? Are they really that difficult to overcome? I think the answer is obvious. Some of these challenges may entail a significant amount of work, but it’s not hard work or difficult work, or work for rocket scientists. It requires focus and commitment, but there’s little here that any business so inclined can’t do. If we can draw that conclusion, then the next question is:

If these are the barriers, and they aren’t really all that significant, why don’t we see more firms innovating?

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Jeffrey PhillipsJeffrey Phillips is a senior leader at OVO Innovation. OVO works with large distributed organizations to build innovation teams, processes and capabilities. Jeffrey is the author of “Make us more Innovative”, and innovateonpurpose.blogspot.com.

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  1. Although I agree with your premise, Jeffrey, I believe you’ve omitted a bit of depth and therefore underestimated how difficult it is to enable innovation. In very large, multi-product companies, there are underlying business reasons for “inertia” and “bureaucracy” to which the business case of “innovation is great” may compare unfavorably. Therefore, it’s rational for top management to keep theses processes in place, even if they know they are a detriment to innovation.

    How can this be? Consider IBM. IBM has one of the most valuable brands in the world. Now suppose IBM wants to bring an innovation to market. If that innovation is not fully baked, there is a significant risk of loss of brand value with any failure. In fact, that loss of value may easily far exceed the NPV of the innovation. Therefore, IBM has processes in place to make sure everything, from incremental feature to potentially market-altering innovation, is absolutely, fully baked. Many would say these processes are bureaucratic, but they are a rational response to the relative value of a product launch versus the value of the brand.

    Or consider Frito Lay. I once heard a c-level exec there say, “We launch something. If it’s not at a $100M run rate within a year, we kill it.” How many innovations ramp that quickly, especially at $0.79/bag? But this is an entirely rational thing to say: new items must earn their shelf space quickly… competing both with other products and other F-L brands… or it’s simply a bad comparative business case.

    The above tells you why small companies tend to bring bigger innovations to market: a single product company looks at the absolute business case while a big company looks at the comparative case, including the potential down side. Generally, innovative cases pale in comparison… and thus there is inertia even without fear of change or cannibalization.

  2. I think another reason why companies don’t innovate is that those in charge are expected to have the answers and they don’t. We are still in the grip of the metaphor of the organization-as-person which means that the “head” thinks and the “hands” do, hence why employees were once called hired hands.

    A senior executive who liked to ask his direct reports for ideas got a new job and when he asked his new team members individually for their ideas, one old timer asked him: “Do you want me to tell you how to do your job?” This confirms that most employees don’t see thinking as their job, or that they should think only about their own, not more broadly.

    The recent call, in another article on this site, for executives to be more creative conforms to the old stereotype that direction should flow top-down. Until we break the spell of this myth, innovation will always be a struggle. See my site http://www.lead2xl.com for more on these themes.

  3. Clever alliteration! Innovation requires risk and incentives. Often those who innovate are rewarded no more than those who don’t when they are inside an organization.

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