Innovation in large versus small organisations

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Innovation in large versus small organisations
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Managing Innovation 3 Propositions

• Innovation tends to occur more easily in small
  organisations
• However, most large organisations do not innovate
  with the same degree of ease
• Those which do, manage it by aping the
  culture/processes of their smaller counterparts

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Reasons For Small Organisations Capacity for
Innovation

• Founded by obsessed individuals with
  irrational expectations
• Low initial costs
• Little bureaucracy
• Proximity to customer
• Desire for recognition
• Availability of capital (?)

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Perceived (Vs. Real) Reasons

• Failures go unrecorded
• Multiple approaches

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Reasons For Large Companies Lack of Innovation

• NPD via NPV
• Short time horizons
• Institutionalised risk aversion
• Tendency to conform
• Excessive bureaucracy
• Distance of top management

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KFS For Innovative Large Organisations

• Top management commitment
• Challenging goals
• Flat organisations
• Market orientation
• Multiple approaches
• Tolerance of failure
• Skunkworks
• Multifunctional teams
• Learning individual and institutional

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Top Management CommitmentHealthy
Unhealthy

• Sets strategic direction
• Indicates broad goals
• Sets challenging final goals
• Allows freedom
• Provides moral (and financial) support

• Formulates product concept
• Develops work plan
• Sets minor hurdles
• Interferes frequently
• Disinterested except on official basis

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Challenging Goals Examples
Company/Product Goal Comment/Result
Canon AE-1 camera
To develop a high quality automatic exposure
camera that is - compact - lightweight - easy to
use - priced 30 below other single lens cameras
It was a struggle because we had to deny our
traditional way of thinking But the team
achieved - 30-40 reduction in parts -
modularised production
Honda City car project
To develop a car for the youth market - fuel
efficient - high quality at low price
Instead of opting for a scaled down version of an
existing car, they developed a new concept, i.e.
short and tall not long and low
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Innovation/Creativity
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Hondas Method Of Generating Creativity
Its like putting the team members on the second
floor, removing the ladder and telling them to
jump or else. I believe creativity is born by
pushing people against the wall and pressuring
them almost to the extreme
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Flat Organisations
- Project teams kept small (often 6-7 people) -
Operating divisions and total technical units
kept small (lt400 people)
Since it takes a chain of yesses and only one no
to kill a project, jeopardy multiplies as
management layers increase James Brian Quinn -
Dartmore College
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Market Orientation
- Focus on customer - Interaction between
technical and marketing departments
Example At Sony when technical people are hired,
the company runs them through weeks of retail
selling.
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Multiple Approaches
- Reduces development time - Improves probability
of success BUT -
Can create climate of winners and losers -
Creates problems in reintegrating losing teams
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Tolerance of Failure

Company Quote
Honda
A 1 success rate is supported by mistakes made
99 of the time I believe we learn more from
mistakes than from successes. Thats not to say
we should make mistakes easily. But if we do
make mistakes, we ought to make them
creatively Doing something, even if it fails,
is better than doing nothing. A strike-out at
Sony is OK, but you must not just stand there.
You must swing at the best as best you can
3M
Sony
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Tolerance of Failure Example of GM

• An inventor is simply a person who doesnt take
  his education too seriously. You see, from the
  time a person is 6 years old until he graduates
  from college, he has to take 3 or 4 exams a year.
  If he flunks once hes out.
• But an inventor is almost always failing. He
  tries and fails maybe a thousand times. If he
  succeeds once then hes in. These two things are
  diametrically opposite. We often say that the
  biggest job we have is to teach a newly hired
  employee how to fail intelligently. We have to
  train him to experiment over and over and to keep
  on trying and failing until he learns what will
  work.
• Charles Kettering of General Motors

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Skunkworks
Description Examples
Apple development of Apple Mac IBM
development of PC Honda development of
several car models
Small teams of engineers, technicians, designers
put into one room without any bureaucracy or
physical barriers
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Multifunctional Teams
Axes of Differentiation Examples
Function
RD, Manufacturing, Marketing, Sales Extrovert,
Withdrawn, Philosophical Scientific,
Arty Young and enthusiastic mixing with
veterans
Personalities
Training
Age
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Encouragement of Individual Learning
Organisation Example
3M
Encourages engineers to devote 15 of their
company time to pursuing their dream
A separate new venture division established where
entrepreneurs can take leave from their regular
job to work on their ventures
3M
Toyota
Claims that its employees submit 2 million ideas
annually (i.e. 35 suggestions/employee) and over
85 are implemented
Kodak
Monetary awards and recognition given to
employees who submit the best ideas during the
year
UCL
Allows 1 day/week to scientists to work on their
own projects. Helps commercialise potentially
successful new products
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Institutionalised Learning
Method Example
New experience part of the team
Honda City team, when at a dead end, was sent to
Europe to find ideas. These were incorporated
in their design and thus became part of company
knowledge
Returning to department from a multidisciplinary
team
Individuals return to departments, disseminating
new-found knowledge from other disciplines
Being moved onto a new project from a
multidisciplinary team
Individuals imbue the new projects with their
new-found knowledge, leading to a virtuous circle
Debriefing on project teams
Formally capturing new methods and approaches
(e.g. creating a database)
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Downside of Institutionalised Learning
Institutionalisation
Formalisation of practices Reverence for old
methods
Creativity