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Digital Pulse

in·no·va·tion – A creation resulting from study and/or experimentation. The act of starting something new.

dis·rup·tion – An act of delaying or interrupting continuity. An event that results in displacement or discontinuity. The act of causing disorder.

Digital change is a journey, not a destination.
It requires agility and flexibility to underpin a continually evolving business environment.

Industry Change – The ongoing economic, technological and social development of commercial business and market sectors.

Is digital innovation viable for big business?

A buzzword that is being bandied around the corporate sphere -‘innovation’, can define the ongoing success of a business and its differentiation within an increasingly competitive market.

A challenge that we and many other organisations are facing… is how within the quagmire of process, policy and traditional practice do you break out and innovate? In turn raising another question… can big businesses successfully innovate?

In the first article of an ongoing series, we put two of our experts (Anthony Mittelmark and Simon Doukas) head-to-head to battle out this question, presenting the reasons for and against. We will leave it to you to decide through comment who presents the more compelling argument and invite you to share your thoughts on this subject.

Big business can successfully innovate

Anthony Mittelmark

One need only look at companies like Google, Apple and Microsoft if you want to understand whether or not big businesses are able to innovate. They lead the NASDAQ and they are valued as leading innovators globally.

Although as few as ten years ago many tech pundits would have said Apple was dead, through its innovative creations the iPod, iPhone and iPad – the company is now in essence writing the book on innovation.

Many other large companies such as Proctor & Gamble (P&G) spend up to $2B per year (in fiscal year 2012) on research and development, without which small inventors would not have the funding to bring their innovations to life. One could say that P&G was built on an innovation culture.

Being one of the largest companies in the world, Google allows its employees to spend up to 20% of their time creating the next generation of innovations and these ideas go well past the ‘core operating sweet spot’ of the search giant. Google has led the way in the development of robot-controlled cars – a business that is completely out of its online realm, yet this is innovation in its purest state.

Even the state of New York sponsored 15 hackathons resulting in 200 participants producing over 600 ideas. Traditional media operators have also not failed to impress. Take for instance, HBO GO, which got every moving part in the streaming puzzle to work perfectly. Not only can you watch all of HBO’s programming via this channel, but there are all kinds of digital bonuses especially for series like ‘Game of Thrones’.  The networks has worked out ways to reduce fan-churn after the finale of a series and has base of five million subscribers which is growing.

Another innovation success story for a company that has been around for ages is Siemens AG. In the wake of the Fukashima nuclear reactor cooling issue, Germany decided to phase out their own nuclear energy technology and this allowed Siemens to introduce a new ‘combined cycle’ gas power plant that achieves record 60% efficiencies.  Siemens is also building components for electric cars, have pioneered a hybrid electronic plane and have introduced revolutionary scanner technology that allows doctors to view organ position, function and metabolic activity simultaneously.

You want more? Look at IBM. They have been around since 1925 and yet they continue to develop super computers, which assist health professionals to make sense of complex diagnostic issues and associated treatments.

There are also innovations in sport. The US NFL continues to inspire fan loyalty even though it has fewer games than any other sport and it maintains this insane passion all year round by developing new events and integrating the serious fan into the draft and even player scouting. The NFL also has a venture fund. Companies like ESPN, Electronic Arts and DirectTV have all benefitted from the NFL’s investment strategy.

Another example from yet another industry is UPS. The company expanded its digital parcel interface, allowing customers to tap directly into its sophisticated logistics system and enabling them control over parcel pickup and delivery. The new service assisted UPS not to miss deliveries; it reduced cost and inspired a high degree of tangible loyalty. UPS recognised the shift to e-commerce and immediately innovated, initiated a better customer experience and reduced cost by making the process self service.

So… can big business innovate? Of course it can. It is the big business R&D budgets that filter down to smaller businesses and enabling them to fund their innovations, which are nothing without an audience. Innovation is not a one off exercise. Doing it once is luck but repeating it over and over for decades in the case of IBM, The NFL and even Microsoft is real mark of the innovator. It is only via big companies with big budgets that innovations reach a stage where they can be released commercially. One need only look at the long list of innovations emanating from the global military complex to understand that big business can not only innovate but that it must be present in the equation for innovation to be brought to the broader market.

Big businesses can not successfully innovate

Simon Doukas

  • ‘Channel 9 on the brink as banks circle’, Sydney Morning Herald, 26 September 2012
  • ‘Fairfax slashes 1900 jobs, closes presses’, ABC News, 19 June 2012
  • ‘Kodak files for bankruptcy’, The Guardian UK, 19 January 2012
  • ‘Borders Australia and Angus & Robertson chains collapse’, Smart Company, 17 February 2011

In today’s digital era, disruptive innovation is turning industries upside down as new markets give way to the rise of the ‘lean start up revolution’. But what does this mean for big companies? Are they all doomed, or, is there hope that they can successfully innovate their business models and survive?

Honestly? The outlook is dim, most traditional ‘big companies’ will not survive the shifting economy and it all boils down to three key challenges that CEO’s must overcome:

1. Big companies… A world within a world

A true disruptive innovation is one that creates a new market by applying a different set of values to existing problems and in the process designs a new solution for a different set of consumers.

In contrast to this, big companies by their very nature are focused on the exact opposite. CEO’s, executive leaders, managers and employees are structured in a hierarchical model that drives operational efficiency through a risk management approach in order to protect existing revenue streams. These companies are not positioned to risk success in new, undefined markets.

They are generally large complex and mature environments; literally a world within a world. Individual career success is largely driven by internal politics and the majority of challenges that are faced each day are operationally generated – risk, finance, branding, legal. The impact this has on innovation is two-fold.

Firstly it generates an inward focused culture as opposed to an external consumer-market focus, essentially disengaging the organisation from its customers and the rate of change occurring within the external environment. Secondly, this structure often hinders companies unfortunately rendering them unable to compete with the rapid speed and agility of emerging and often disruptive startups.

2. Don’t underestimate the value of ‘I’ in innovate

Call it capitalism, greed, ego or just human instinct to survive. People are far more successful when they have their backs against the wall, are empowered to make a change and are in a position where they will be rewarded for achieving their vision.

For large organisations enabling this type of environment is quite difficult with the majority of big businesses wrapped up within a blanket of bureaucracy amid a hierarchical structure. In turn this often disempowers staff who find their individual voice and idea’s are continually washed out by decisions from above, crushing any sense of control.

Don’t underestimate the value of ‘I’ in innovate. In order to truly drive disruption and transformational change through innovation, an incredibly empowered, accountable, motivated and visionary individual (or group of individuals) needs to exist.

3. Innovation is about change… and change is inherently difficult

The final challenge successful innovation at a large scale must address is change. As cited in Wikipedia: ‘The word innovation derives from the Latin word innovatus, which is the noun form of innovare ‘to renew or change’.

So what do we know about change? We know that regardless of its form, change is inherently difficult. The longer a certain process or structure has been in place, or the larger the size of the beast that requires shifting, the more difficult it is to successfully drive that change.

For large businesses the cycle of change (starting from satisfaction, denial, resistance, exploration, hope and then commitment) takes far too long, and by that stage other new agile disruptive innovations have already gained market acceleration. How can your business change fast enough to innovate at the speeds set out by smaller, more nimble organisations?

Is there hope for large businesses to successfully innovate and compete against the growing number of digital disruptors? There is always hope, but the reality is that it is a far more difficult journey than most people understand. For CEO’s in the digital era, the challenge for them is balance the focus on today’s revenue, with the commitment and investment required to disrupt and innovate to create tomorrow’s revenue stream – a very difficult challenge indeed.


What are your thoughts on this? Can big businesses successfully innovate? What strategies do you employ to drive innovation within your business?

3 Comments

  1. avatar

    A large factor in innovation is having an infrastructure that’s pliable enough to support it. Locking things down with high capital costs makes it far more difficult to “fail fast, fail quickly”. Without that safety net, the cost of getting it wrong becomes too high. End result – companies are no longer able to learn from their mistakes.

  2. avatar
    Manoj Santiago says:

    Simon, thanks for interesting insights. I would be curious as to your views on how successful companies such as Intel and now Telstra have/will be in trying to foster external innovation and subsequent integration into their business models.

    • avatar
      Simon Doukas says:

      Hi Manoj, thanks for feedback.

      There is no doubt that external innovation has significant benefits but I agree the integration back into the ‘mother ship’ can be risky. I would always advise planning for the integration from the beginning, one method in supporting this is by including key stakeholders and broader teams into the process from the onset. A collaborative co-creation environment will assist in both the speed and success of the innovation as well as the future integration of the initiative.

      * Note – integration is not always necessary and in many cases should not be integrated at all.

      Hope that helps.

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