7 Scary Truths That Kill Corporate Innovation

“Corporations can’t innovate!” We hear this uttered by startups sometimes.

The reality is they can. They see the headlines. They know the stats. They know there are ravenous, rule-breaking startups chasing them like monsters through a horror movie, snapping at their heels with game-changing ideas that are slashing up their business models.

They know the pressure to innovate has grown. They know they need to move fast to find and fix their blind spots before someone else does — and there are a ton of earnest efforts going on in many companies.

And yet, with all this desire and activity, why is corporate innovation so elusive? Because culture and circumstances can stop innovation cold.

Here are seven truths holding back your company’s innovation efforts.

Truth #1: You’ve Got The Wrong People Working On It

Identifying and deploying the right people — internally and externally — will make or break your innovation efforts. Do you have the right people working on your innovation team? Are you sure? Would you be willing to bet your future on it?

Companies sometimes assign their movers and shakers or their up-and-comers to high-profile innovation projects. But those who’ve been kicking butt at optimizing and executing an existing business model may not be the best ones to invent new models designed to disrupt and dismantle it. The innovation team is not for everyone. It shouldn’t be a perk or a rotating post or someone’s 20%-part-time job.

To find the internal personnel best suited for innovating, look for the employees you’ve seen taking calculated risks and who aren’t afraid to experiment. The ones who are comfortable trying out something that’s not quite finished, just to see if it works. The doers who are comfortable with “good enough” and who listen to feedback and experiment quickly.

If you’ve hired well, you’ll find these game-changers at all levels of your organization. They are inquisitive, pick up new skills quickly and aren’t afraid to rock the boat. They’re the employees who wear many hats and roll up their sleeves when something needs to be done.

If you haven’t hired well (and even if you have), it may be time to also look for additional help outside your company, because…

Truth #2: You’re Stuck In Your Own Bubble

As European royal families found out the hard way, too much intermarriage is a sure way to end a bloodline.

You have to shake up the gene pool and bring in smart people from the outside. To do this you need to drink a little “startup juice.” These startup outsiders don’t have baggage, don’t know what’s been tried before, will see your blind spots and aren’t beholden to the status quo. They’ll come with fresh perspectives and observations that never would have occurred to you.

Another misstep is soliciting outside expertise from within the bubble of the same industry. Many corporations’ networks are weak and industry-dependent. Smart problem-solvers from a completely different field can bring valuable insight. If your company is open to this but doesn’t know where to look, a matchmaker can find startups to partner with you.

Drink a little startup juice. Come on; it’s good. And while you’re at it…

Truth #3: You’re Moving Too Slowly

How many times have you heard this: “That’s a great idea. Why don’t you size the market and get back to me with a report next month.”

A lot of corporations do a great job collecting new ideas from employees or other sources, but move too slowly, lacking the ability to experiment, iterate and execute quickly. There are many reasons for this, such as the complexity of running a huge company, but even large companies can imitate the rhythm of a startup.

The mantra of the lean startup is “build, measure and learn,” and the more rapidly and cheaply you can iterate on this cycle, the better.

We recently spoke with an individual who launched an “idea machine” in their $100 million business. The group meets twice a month to discuss tech trends and evaluate employee innovation ideas. The ideas they think are best are given to an analyst to work on market potential and business plans for several months.

But why not get out that very day and interview customers and begin to home in on problems so you can immediately launch a solution or two and see what happens?

Many corporate executives say things just can’t move very fast in their organization, mostly because of the need for consensus. If you’re in this boat, the way decisions are made at your company needs to change.

Truth #4: You’re Incentivizing People All Wrong

The larger and more public the company, the more it’s probably focused on short-term or quarterly results. Executives and other leaders are expected to deliver on these cycles and press their employees to do the same. Thus compensation tends to be based on what best serves that rhythm.

The problem is that short-term incentives lead to short-term thinking and short-term risk taking.

Innovation, on the other hand, requires longer-term patience — and a lot of risk and failure. Innovations will not return a profit next quarter, next year or maybe ever, but when they do hit, it can be game changing.

So examine your organization. Is your compensation structure encouraging short-term thinking at the expense of long-term, transformative ideas? Are the people who make mistakes in the pursuit of something big celebrated? Or are they passed over for promotions? Does it pay to rock the boat at your company or does your pay structure encourage safe, low-impact performance?

Companies have found a couple of ways to deal with this challenge.

Some carve off their innovation teams and protect them from short-term business cycles. These groups are given the autonomy to act and execute like a startup, foregoing the restraints and legacy issues present in their parent company — ideally to create something so successful that it could significantly enhance or replace the core business some day. Those teams need to be have ownership and freedom, so they’re invested in creating a big success.

Other companies have created internal venture capital arms, buying or partnering with startups instead of spending money on their own R&D.

We spoke with Daniele Dondi from ING Innovation Studio about innovation compensation inside of a company with strict compensation policies.

This is a very very hot topic. Luckily from my side I couldn’t play with it because there is a policy of ING that we don’t give bonuses to internal employees especially not in the function that I mentioned (innovation), so bonuses were not an option. But what I mentioned before about the upside are clearly different. If the startup is successful the founder can get real, big financial upside. If an internal team is successful one of the employees will most likely get the promotion but of course it’s not comparable of being the CEO of the next big thing. At the same time the risk is different. The startup guys, it really eats us every evening, they share an apartment while the ING apartments still have a salary at the end of the month. So I think that in the end compensation is not the driving force, the driving force is the motivation of the internal employees to create something new that can really change their life of the customers if they want. So finding these people is important, because the financial motivation is not that strong. I don’t believe in motivating internal employees with financial compensation.

Listen to the full interview here:

Make sure your incentives match desired outcomes.

Truth #5: You’re Using The Wrong Tools

Technology can be a great accelerator or a big quagmire. How do you experiment quickly, when it takes forever to build the technology? The answer: Don’t build all the technology yourself (or don’t build technology at all — test and iterate with a minimal viable product process). Look for the tools that offer fast ways to launch and learn quickly and worry about the technology scaling only after you’ve determined the parts you really need to scale.

Many corporations are hesitant to play with hacked-together, off-the-shelf-software, opting instead to stop and build internal proprietary systems or wait until all of the features are “just right” before launching. In the time it takes to do that, a thousand startups will have bought, built, or hacked together software, launched, experimented, and repeated the cycle with real customers in the real market.

Also beware the vanity metrics trap. “My product is doing great because I got 5,000 Facebook likes!” That may look good on paper and make you feel good, but is it actually creating value in the business? Know which measurements matter at which stage of your project.

Truth #6: You’re Expecting A Silver Bullet. By Next Quarter

While corporations can be as slow to turn as the Titanic, in other ways they are impatient, probably due to those quarterly financial demands (see above). There is unfortunately no silver bullet.

It’s not enough to only hold innovation training and expect everyone to suddenly become “intrapreneurs” with instant results. It’s not enough to try a single solution and give up when it doesn’t work.

Corporations need to get into the habit of long-term thinking with short-term execution. It takes time and patience to launch, measure, iterate, launch, measure, iterate. Over and over and over. This “slow down to move fast” methodology requires time, patience, and the talent to execute.

Truth #7: Your Company’s Proud Legacy Is A Blessing And A Curse

Your decades-old company may have enjoyed incredible success. It may have defined a generation, monopolized a lucrative industry — changed the world even. That’s the blessing part.

The dark side of legacy is when it becomes baggage, and baggage is something start-ups do not have. That’s why they’re able to move so nimbly and cut through the noise.

Hearing things like: “That’s the way we’ve always done it” is big trouble.

Because even hundred-year-old companies can be overtaken breathtakingly fast. It’s hard to see the value in trying to disrupt oneself — until oftentimes its too late (Ex: Kodak, Blockbuster). Disrupting what you’ve been so good at for so many years can be extremely hard to do. Setting out to transform it may seem sacrilegious, but a necessity. Use your size, resources, and relationships to act quickly and execute.

In the end, the path to disruptive innovation can be scary, but it’s even scarier when you’re unprepared or slow to respond. Don’t let those ravenous, rule-breaking startups make you another statistic in the long line of those who acted a little too late. The choice is yours.


Econic helps forward-thinking enterprises innovate by providing training, research and matchmaking services that tap into emerging startup opportunities. Econic leverages relationships with an unprecedented network of startup communities, accelerators and proprietary data sources to help you partner, invest, acquire or learn from startups aligned with your strategy and growth goals.


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Brian Ardinger & Josh Berry