7 comments on “The Decline of Innovation and the Resurgence of Incrementalism

  1. In most large companies, there is little gain for the individual for disruptive innovation. If it works, everyone claims it is theirs. If it is tried and fails, it is obviously someone eases fault. You are also asking people to change and that is something that most of us do only begrudgingly. In big companies there is a huge investment, both financially and emotionally, in the status quo. Disruptive innovation is the turf of the small. When the investment is in a new idea, supporting it is rather simple. We forget that Amazon and Google started as minor operations. Microsoft has not done disruptive innovation for years. They recognize disruptive innovation by small companies and them purchase them. Big organizations will never be innovative except in the way that they talk about it. .

  2. Dear Dennis:
    I totally agree with your statements, but there is a reality: almost all big companies have seen a decrease in their sales volumes and market share in the last semester 2013. Last year their earnings were below the expected ones, and a lot of people has been fired all over the world. The emerging markets behaved in a very strange way with ups and downs in their economies which means a lost in purchasing power by consumers. Nevertheless big companies continue with innovation in their centers of excellence, although they are not launched because of reduced marketing budgets. We are tempted to admire startups, but I have not seen how many were started, and how many are still alived.
    Best regards – Hector

  3. Innovation comes from people taking risks – and in pharma, those risks are “calculated”. Many leaders have risen because they have taken risks and made them work; most industry employees are at risk for their jobs – lost due to pipelines disappearing, revenues declining, and available cash being lost. Innovation also lost because of internal structures, processes, governance, oversight, rules, SOPs, and a host of other things. many of the innovative ideas are presented to these larger companies and they are lost because internal staff thinks that they can “do it” – they have people and budget, and time. Sadly, as was demonstrated in 2002-03 when many larger companies were convinced by IT folks that they can build an EDC system – today, not one home-grown system exists, they lean on commercial systems. last is the CRO – revenues and profits driven by their ability to perform work, and becoming a stronger piece of mid to larger company developments. As such, should innovation lead to compressed timelines, reduced costs, it will impact both the backlog and revenue growth of the CRO – thus, a question exists if they can truly be partners in developing drug products and moving them quickly through the pipe to go/no go, or if they prefer to have trials run longer and need to expand the number of sites because of the increase in revenues? This was an interesting comment presented by 4 sponsor representatives and certainly something to consider.

  4. Dennis,

    This is a terrific article. Explains a lot. As an engineer, I’d phrase this observation in terms of finding a local optima (short-term growth and cost goals) and not the global optimum (best long-term strategy for return on stockholder equity). The problem is not noticed when markets are strong and growing. But especially when a once-successful industry is not meeting sales goals, or when ongoing operations are viewed as having low or negative returns, local optima do not allow you to make significant improvements in sales, margins, pricing power, and all those good things. The very point you need disruptive innovation is the point where its most strongly opposed!

    There is a larger danger when this happens in market sectors that think of themselves as innovators. For such industries, one is encouraged to “do what we’ve been doing, even harder, because that’s what has worked in the past”. This results in what Christensen describes as The Innovator’s Dilemma. I suspect that a lot of middle-management incendization evolves to oppose innovation as well. I’m thinking pharmaceutical R&D. In pharma research an example might be goals that are quantity-based, and not quality-based. “This quarter, you get a bonus if you complete our standard assay for 100 novel compounds that have drug potential”. A method that would identify losing compounds earlier and obviate the need for, say, 50 of those assays might save the company millions. But that would mean only 50 assays, and a lost bonus! The innovation is viewed as a threat, not an advance.

  5. Innovation is always associated with risk and there is no doubt about it. The risks are much less in an incremental innovation and much higher in Disruptive innovation. In either of them, people do not work on all fronts of the process. If you develop a new product through innovation, it all also needs an equal effort to produce it economically and also sell it in a different way. Both these also need some innovation if the product has to become a successful one. Unfortunately, it is here that most companies fail. he cost of failure in disruptive innovation is seen as a bigger animal than the returns on a successful innovation and hence most companies do not want to invest there. The money spent on innovation cannot be directly measured on yearly basis and horizon for it to be at least 3-5 years before you can conclude on the outcome of the innovation. Under the present circumstances, most companies do not have the vision nor the patience to wait for that long or invest in such activities. Another important factor in this is the people who occupy the decision making positions in the company. Most of these people are from the finance background and they can only understand the numbers, and cannot see the same vision as the innovator and hence he will never be able to take a decision in favor of innovation. Till companies start giving freedom to innovators and closely working with them to guide them and ear marking certain percentage of their revenue to innovation, things will not improve.

  6. I’m of the opinion that large companies are for the most part 1) unable to sustain an innovation mindset (for the reasons you have given) and 2) may have no business doing real innovation in the first place.

    Big businesses are like big trees. They have a strong structure that is only a tiny bit flexible. That is good. Stability, security, strength. But entrepreneurs doing the disruptive innovation would never shine in that climate.

    My conclusion is that big companies should wait to is something works and then buy it. It is far safer and you know what you are getting for your money.

    This doesn’t mean that big companies shouldn’t support skunkworks or outside startups. But that is really the practice of buying them later.

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