4 reasons why innovation needs separation from large companies structures.

 In The Innovator Blog

What does kill large companies chance to discover new revenue through innovative effort?

According to the PwC Innovation Benchmark report, managers in large organizations expect from innovative projects mostly impact on sales (source: https://www.pwc.com/us/en/advisory-services/business-innovation/assets/2017-innovation- benchmark-findings.pdf).

It can therefore be assumed that the desire to increase sales KPIs is the primary motivation in launching innovative projects. If so, what are the main blockers to bring those results? What does not allow innovations to hatch and bring fruit in the form of more sales, new customers or more attractive margins?

The answer is – a silo, more precisely the four effects that silo guarantees in large organizations innovative effort.

  1. Killing the initiative early, in small teams. Mostly this is a situation where group of people, who think alike, work together for a long period of time evaluates an idea for an innovative change. They don’t ask for different opinions, but inside their group, they quickly decide if something has a chance to bring results or not. Thus, the concept does not appear in a broader discussion in the broader forum. The chances of an objective evaluation are thereby reduced. Silo builds a trap in which objectivity can’t perform.
  2. Evaluating the concept or / and developing it in the building, among peers, without customer centric focus. If this happens, managers think more or less in this way “We will evaluate ourselves internally if this concept makes sense, the client can not see it now because it is too early. We know better whether a given innovation, concept or idea will be valuable for our client”.
  3. Keeping ROI in the budget of one department is another practice that consolidates and concrete silo. When there is an innovative idea and the chance to take a risk appears, there happens a guard – a budget of the department, meaning the budget of the silo. Generally speaking, any budget consists of a list of items that the budget can cover and specific amount from which specific items can be settled. If the innovation requires financing a feature or a process that is not covered by the budget, financing is not possible. In this situation people who are trapped inside a silo, reduce or modify the functionalities (if not kill the idea), matching it to a large organization requirements. As the effect, innovative concept moves away from the market and customers.
  4. Incomplete team creates the innovative change. Let’s say we are a marketing team and our innovation requires support from the supply chain. We either include someone in the team from supply chain (we will break the silo or at least make a breach in it) or arbitrarily make the decision to adapt the innovation to the team that is currently available. A silo prevents or seriously hampers the acquisition of talents, doesn’t allow to involve competences and powers that are required in the development of an innovative project.

The four reasons mentioned above, do not allow innovations to hatch successfully. Thus, new sources of income that large organizations could start to build, are rarely discovered.

The reason is the silo – invisible, concrete fortification by which an innovative concept can not crawl (or run). As a result, innovation becomes a caricature, distortion that adapts to the internal conditions of the organization and not to the market, customers and their expectations.

Arek is a co-founder of K2 Digital Ventures which helps large companies build innovative products and services thanks to cooperation with global innovators. Arek works with senior executives on designing, incubating and scaling innovative initiatives. Clients we have helped: Danone, Shell, Discovery Networks, P&G, LaGardere, Roche, IKEA & more. Follow him on TwitterFacebook and LinkedIn. Invite him to speak at your next event.

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