I believe that there are only two types of organizations and understanding them is the key to understanding innovation*.
The first, Innovators, are good at trying new things. The second, Distributors, are good at doing the same things repeatedly.
Innovators are often called “startups” and Distributors “corporations.” This nomenclature is counterproductive for understanding innovation landscape, because “startup” is associated with young age and small size, while “corporations” with being large and old.
Neither age nor size is a predisposition to belonging to one group or another. A young, small company can be a Distributor, and a large and old one can be an Innovator. But they cannot be both at the same time.
A common misconception from executives at Distributor-type companies is that they need to adopt more of the startup culture to become more innovative.
I believe this assumption to be false. Assuming that the goal is to become more competitive and not to switch to the other type.
Innovators are risk tolerant; Distributors are risk averse.
Innovators are experimentation oriented, Distributors are process oriented.
These qualities exclude each other. If you want to become better at running experiments, your ability to maintain efficient processes has to decline and the other way around.
Instead of attempting to become more innovative, Distributors should strive to create mutually beneficial relationships with Innovators. This way both types of organizations can focus on what they are good at and combine the benefits of fast-paced experimentation and efficient delivery to customers.
- I understand “innovation” as new solutions to known problems or solutions to new problems. I do not qualify incremental improvements, e.g. more computation power of new generations of processors as innovation for this consideration.