For the last 16 months in my blog posts, we have been touching upon the many reasons that disruption and innovation is so complicated in large enterprises, which also include the tech giants.  Michael Malone’s June 2^nd article in WSJ titled: An Innovation Slowdown at the Tech Giants, prompted me to share the following thoughts with you. I like many of Michael’s arguments but he needs to go deeper to explore the symptoms, causes and remedies.

Let’s look at some of the ways that large enterprises innovate:

1. Organic Innovation:

(We will come back to this in a moment.

2. Acquisition-Based Innovation:

While the pattern in the past decades was to attempt to innovate internally far more, Cisco from the start had a model of growth through acquisition. Many companies such as Oracle pretty much acquire innovation by buying companies, strip the staff and integrate the technology into the existing product stack. More recently, we see the model of companies allowing acquired companies to run as independent subsidiaries (maintain identify and independence in some capacity) such as Softlayer, labeled as an IBM company. These are all respectable models of innovation.

However, we should be mindful of one thing: If  a company ONLY innovates through acquisition, what does that do to the culture of the company? The thousands of highly talented and brilliant engineering staff who were hired to innovate? Do these individuals become ‘integration and maintenance’ staff rather than ‘brains who can disrupt and innovate’? Over time do the staff in these ‘only acquire-innovation mindset’ companies become disconnected from their impact and role in innovation? Are they inspired, energetic staff and highly engaged? As we discuss in the chapter on acquisitions in ProVoke, acquisition is a fantastic way to disrupt and innovate, however, it cannot be the only way and has to be planned carefully. Else, a tech giant simply owns a technology (i.e. Skype at Microsoft) versus Skype bringing truly integrated disruption and innovation to Microsoft (This is just one of many examples). In contrast, when I look at Google and how acquisitions are mindfully integrated into highly functional offerings, or Facebook buying Oculus and starting the Virtual Reality journey of Facebook, these make sense.

 

To dramatically disrupt and innovate outside of the lines, acquisitions are fantastic. However, unless we do this mindfully, we will end up alienating a large percentage of the brilliant minds in the company.

3. Companies That Refuse to Innovate

Kodak and BlackBerry being painful such examples.

Now, as promised, returning to #1. Organic innovation.

Why are large enterprises and tech giants so afraid of innovating and coloring outside of the lines  SO MUCH???  Facts: It is not because of lack of resources. Not because of diversity or brilliance of ideas. Or lack of funding. Not because the brilliant minds elect to become bored, stale and complacent and certainly not because the talent believes it is not possible to do this organically.

Main reasons: relentless drive to focus internal staff to sell and to sell and support more of the existing products. Fear that disruption and innovation may kill the existing product line revenues. This of course, naturally leads to the conclusion that the staff do color ‘inside’ the lines and hence over time, management feels that the only way to innovate is to acquire…. I will leave it to you to connect the dots.

Acquisitions are fantastic and I LOVED building my last company and selling to Oracle in 2006. However, I would LOVE to see the tons of products that the great minds at Oracle can disrupt and develop, once given the freedom to step and color outside of the lines.

 

Stay tuned, next blog will focus on intra-company crowdsourcing and building on my April 2013 blog which I titled: IP-Liberation as we start connecting the disruption and innovation dots together.

Disrupt | Innovate | Lead