Editorial: Scale and innovation Deloitte Review Issue 15

There are great advantages in scale. It can often determine whether an organization can set the terms of competition, or react to them. But when it comes to pursuing innovation, scale can be a hindrance.

Even when large organizations genuinely want innovation, they can find it difficult to reward or pursue ideas that could disrupt the core of the business. Large organizations are vested in existing markets, products, and services. With size comes hierarchy—ideas need to be vetted and tested before they get a green light.  And failure is not treated lightly—it can hamper or ruin the careers of those involved.

In the end, the most compelling argument against innovation in a large organization is that it might change the status quo. For those who feel responsible for keeping the trains running—for maintaining the status quo—innovation is a mortal threat.

It’s no wonder that when we think of innovative companies, we think of small companies launched in a garage or small lab. There is a sense that the best ideas come from people with nothing to lose.

Yet many large organizations are able to innovate successfully, and with the benefits of having the scale to deploy innovative solutions across a broader market. To capture this benefit, they must understand and plan for resistance to major change.

Many do exactly this. The most innovative large organizations employ approaches I think can be adopted by any organization, large and small.

First, they champion innovation at every level. The most innovative organizations may designate a few executives to lead innovation efforts, but they do not leave “new thinking” in a single division or business unit. They set an expectation among everyone to innovate. While that does mean that, occasionally, an established business unit is forced to rethink how it does things, it gives people at every level the permission to question, explore, and, yes, be a little pushy.

Second, they see that innovation—whether in product mix or internal processes—is often the surest way to grow the top line. That is a compelling argument for innovation efforts, because growth is harder to achieve once you’ve maximized your position in a particular market. The answer is often to make the market bigger by innovating. Examples of this are legion—drug companies entering consumer packaged goods, manufacturers entering technology, big accounting firms entering management consulting. These leaps into new and adjacent markets occurred because a large organization saw a way to move decisively with a new approach or product.

Third, large organizations can take advantage of their resources to experiment more. Innovation should never be a make-or-break proposition for a large company. Done right, it’s an ongoing process with some successes and plenty of disappointments. A big organization has a large base of revenue and resources. It can experiment with an idea in a faraway market before bringing it home. It can give an idea more time to find a target audience before pulling it back.

True, there are plenty of companies where such patience is in short supply. But having the patience to let an idea breathe is proof that a business has finally achieved the greatest advantage of scale.