Tug of war team working hard

Innovating in a big company

by John Pettigrew

Sometimes it seems like small companies have all the advantages when it comes to innovation – no committees, little inertia, fast response times. But large companies have one huge countervailing advantage – the resources that enable experiments to be actually done. So why is it so painful to innovate within a large company?

Innovation has been a big topic for years now within publishing, with effects on our traditional markets of new technologies, new product types and new sales channels. I spent several years at a large-ish publisher working on “innovative” products, trying to get things moving. And it was truly the hardest thing I’ve done professionally. Much harder, in many ways, than starting up and running my own business.

Large companies talk a lot about the need to innovate but rarely actually deliver anything truly innovative. And it’s not (in my experience) the people ‘on the ground’ who are the problem – most are well aware that things are changing and at least tolerate the need to try new things. It’s actually management who are the problem. And, again, it’s not (usually) lack of willingness to consider change.

So why is it so hard to innovate in large companies? After all, they have huge resources – lots of money, lots of people, lots of content, lots of customers.

The Innovator’s Dilemma

There have been many, many articles and books about this question, and I don’t intend to rehash them here. If you want to find out more, you could do a lot worse than to read Clayton Christenson’s classic The Innovator’s Dilemma (print / EPUB).

Christenson’s central point is that companies start off by being small and nimble. But as companies become successful, they grow. And with growth comes stability – the security that comes from a regular revenue stream. Large companies are extremely good at tweaking their products to meet customer expectations. But, because they’re focused on a large existing customer base, they’re not well suited to building radical products that will create whole new markets.

Unfortunately, these smart new product types are less efficient than the existing products, and usually have smaller markets to start with. So, for a large company to focus on innovation means accepting lower growth, or even a shrinkage in the short term before the new products pay off. And because change is a gamble (the new products might not work, after all), it’s easier for them to stay with what works.

Right up to the point where it stops working, of course. Then the large company crashes and the smaller, innovative companies rise to prominence in its stead.

The publisher’s dilemma

We’re faced with a lot of change in publishing, much of it technology-driven and most of the rest culture-driven. The printed book remains a popular object with many customers, but sales are slowly declining overall (quickly in some areas, actually increasing in others). So, publishers are strongly focused on defending their existing revenue streams. Many are also trying to find new revenue streams – not by innovating, generally, but by copying innovations made by others. (A very sensible thing to do!)

What this means is that the senior management often talk a great talk about the need for innovation and experimentation. But on the ground, where actual products get made, teams are judged based on their revenues, which still come in very large part from print. Effort put into experiments is effort not put into known, dependable products that will probably produce revenue. Unless the company establishes clear, deliberate ways to incentivise people for trying risky new things (and follows through on them!), people will generally stick with what’s safest.

People will always behave in their own best interest – so if you reward people for making the safe call and punish them when experiments don’t pay off, don’t be surprised when people play it safe!

I’ve faced this myself, as I mentioned above. We had a very successful print programme but almost nothing in the ebook area. Our competitors had been doing ebook-like products for years and so were a long way ahead. My proposal was to do a few small, cheap projects to get real product into customer’s hands, so that we could learn what they actually needed. Once we knew that, we could develop new products at scale based on that knowledge, which would hopefully let us leapfrog the competition (who were saddled with legacy issues and their own “innovator’s dilemma”).

Unfortunately, what happened was predictable. Because senior management wanted big new digital successes, my proposed little experiments became vastly inflated, with specifications calling for hundreds of thousands of users in the first year and costs proportionate with that. Forgetting, of course, that we lacked the knowledge really to commit to a platform on that scale! So, the project got cancelled because it was ‘too expensive’. And, in the process, we lost six months in which we could (and should) have been learning more about what products were needed.

I tell this tale because it’s a common pattern. Senior management have their imperative to earn large amounts of revenue as quickly as possible, and latch onto ‘innovative’ projects as the answer. But experiments are exactly that – experiments, not final products. The only way to run them properly is to release small teams from the drive to earn revenue immediately. Give them a small budget and some lofty goals about experimentation and user numbers and brand leadership. Then get out of the way!

The alternative is too depressing to contemplate. In the case of my ebook project, the alternative was a “me too” platform licensed from a third party that did no more than match what the competition had been doing for years. Sometimes, the alternative is literally doing nothing at all. And that way (as Clayton Christenson showed) lies certain failure.

About the author

Hat wearer, recovering editor and now CEO & Founder of We Are Futureproofs, John Pettigrew has over 15 years of experience in educational, illustrated and academic publishing, and a history of successful print and digital product development.

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Comments

 Daniele – June 24, 2015

Yep, the drive to immediately make revenue is a big issue. But for the organisations who do take the plunge, by now there is also the big issue of playing catch-up. Sticking with the area of educational support resources we both know and love – there is already a lot of really nice stuff out there that has, to a large extent, been produced by small, nimble, specialist organisations who have worked hard and well to make a particular idea work. Many larger organisations have now also jumped on those bandwagons. If you’re one of the latecomers, what are the options?
You’ve already covered three very unattractive ones: doing nothing (and ultimately die), throw a load of money at something grand (that might not work, and end up bankrupting you), or jump onto someone else’s platform (and fail to make gains because you’re not offering anything over an above what is already out there).
The fourth option – to start in a small way and develop in the directions that seem to work – is, I agree, better. But there is a huge risk of putting those small experiments out there and end up alienating your existing customer base because you’re offering something far inferior to what the competition has. This process has to be managed very carefully, with early adopters possibly carefully selected, and certainly made aware that this is a developing product that they can help to shape. Launching experiments without commentary (and even worse, with an attempt to monetise even in a small way) can work out very badly.

     John Pettigrew – June 27, 2015

    Thanks for the comment, Daniele. And, yes, it’s crucial to manage experiments properly. Releasing an experiment to your mainstream customers may not go well! Selecting suitable early-adopter customers is crucial – but it’s not that hard if you are actually already talking to your customers. Which we all should be doing!

    Thanks!

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