Sorry guys – size does matter

Bank of America’s plans to shed 16,000 jobs by year’s end has compounded gloom about the US economy and the future of big business. At the other end of the scale, online pioneers provide authentic examples of an alternative pathway to multi-million dollar success.

Against this backdrop, the relentless demand for innovation continues. Both investors and employees are on the lookout for the next best thing, the next Apple, the next Kickstarter. Where to look? Who does the innovation mantle rightly belong to – big business or start-ups? Global monoliths or entrepreneurs? Or both?

When it comes to innovation, LinkedIn founder and investor, Reid Hoffman, argues for an entrepreneurial approach. In fast-changing, complex environments, all successful executives need elements of the “entrepreneurial mindset”, Hoffman says, the ability to thrive in ambiguity and to tap or build networks to share knowledge, information and resources. “It doesn’t mean everybody’s going to start a company,” he says. The competitive advantage is in “assembling the network around the idea”.

Hoffman’s argument is supported in part by Forbes magazine’s latest global innovation study. Researchers found the leaders of innovative organisations – global players of considerable scale in their industries – exhibit similar ‘discovery’ skills to many entrepreneurs: they challenge the status quo, they deliberately observe the world, they network with diverse types, they experiment relentlessly, and they develop new insights by connecting disparate pieces of information.

While large companies struggle to break down silos and embed collaboration, small organisations face their own obstacles when it comes to sustaining innovation, says innovation adviser and author, Stefan Lindegaard. “It is difficult to find good cases on how smaller companies have engaged with open innovation”, he says. “It is also difficult to give strong advice on how such companies should engage with open innovation.” The reasons? Small companies are most often based on one product, service, technology or platform; they don’t have the organisational infrastructure, or need, to engage in open innovation; and while they have a role to play in an innovation ecosystem, they get the back seat.

“Big companies get the driver’s seat,” Lindegaard says. “In open innovation, companies either control the projects or they contribute to them. Big companies prefer projects where they are in control whereas smaller companies do not even get a choice unless they have something unique that allows them to run an ecosystem.”

While critics would argue that’s not necessarily a positive for the innovation cause, Scott Anthony, author of The Little Black Book of Innovation, disagrees. “Many still see large companies as the problem, not the solution,” Anthony says. “Hot new start-ups show up and are lauded daily. So it might seem counterintuitive to suggest that large companies are where the innovation action will be. But the shift has already begun.”

He posits several reasons for the shift, notably that big companies increasingly are taking a page from start-up strategy and combining elements of entrepreneurial behaviour with existing capabilities. Start-ups simply don’t have the same options.

“It’s early days still, but the evidence is compelling that we are entering a new era of innovation,” Anthony says, “in which entrepreneurial individuals, or ‘catalysts’, within big companies are using those companies’ resources, scale, and growing agility to develop solutions to global challenges in ways that few others can.”

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