When conducting secondary research for The Chief Innovation Officer’s Playbook I came across a book review in the Harvard Business School Archive. The review was of a book published in 2000 titled Radical Innovation: How Mature Companies Can Outsmart Upstarts. Reading the article was an education in recent innovation history and highlighted just how fast the world is changing.
The premise of the book is that small entrepreneurial firms are the source of most radical innovations and that large companies have a tough time getting it done. It is now fifteen years after this book was written and it appears that things have gotten worse. The share of aggregate R&D investment made by firms of under 1000 employees continues to grow at the expense of very large enterprises. I have written about the diseconomies of scale in innovation and the incrementalism that is rampant in large companies.
The great thing about the book review is that it highlights some examples of large companies that are “outsmarting the upstarts.” Three of the positive examples were Polaroid, Nortel Networks and Motorola. If they were producing radical innovation in the nineties, then this is a real lesson in the difficulty of sustaining breakthrough innovation over time. Just like the now bankrupt companies profiled in Jim Collins’ Good to Great, these companies found it impossible to stay on top.
The history of the failure of large enterprises points to certain truths about incremental innovation. It allows firms to address the changing needs of current customers, but it must be supplemented by periodic infusions of breakthrough innovation. Without it, we invite eventual disruption, displacement, and ultimately, as in the case of Nortel, possible extinction.
Reading near history is instructive, but it also sparks a great thought experiment.
What leading companies would we put up on an innovation pedestal today that will be bankrupt fifteen years from now?