Interesting question. Over my career I have worked at big companies but have had consulting clients ranging from very small startups to Fortune 50 companies. The answer to the innovation question is “it depends.” There is no question that small, focused startups are really innovative. There are advantages of being small, fast, and if something doesn’t work out, it is easy to move one to another idea. There is little organizational inertia.
So how do big companies innovate? They act like small companies. How do big companies fail at innovation? They act like big companies. Think silos, fiefdoms, quarterly earnings, wrong incentives, politics, risk aversion, the list goes on. So let’s look at how a big company can be innovative.
I was fortunate to be in the electronics industry all of my career and as you know the industry moves very quickly. Think of how fast the mobile phone industry has grown in the last 5 years. Or the rapid advancement of computing technology. To compete in this industry, you must be fast. There are two types of companies in the electronics industry, the fast and the dead. Many of the major players are big companies, so how do they do it?
- Organize for speed (cross-functional business teams)
- Access to advanced technology (taking the long view)
- Develop strong customer relationships (gain insights into the rapidly changing market landscape)
Let’s take a minute and look at the first bullet item. Big companies that innovate understand the need to work like a small company so they use multi-functional business teams with R&D, Applications Engineering, Marketing, Manufacturing, Quality, etc. on an integrated business team. They can be organized by market segment, technology segment, or other customer focused entity and should be able to operate as a “mini-business.” Ideally, the team should be co-located, but I have seen business teams work very effectively when team members are in Asia or Europe with close connections to key customers.
The multifunctional team structure breaks down functional silos (at least it should) and facilitates rapid decision making. The teams are incentivized to produce solid financial returns and develop their business for the long term. The team leader position is a great talent development opportunity for potential business leaders (from any discipline). I have observed successful team leaders come from R&D, Marketing, or Program managers. Within the team, decisions can be made quickly regarding product enhancements, new product development, and long term platform development. The best team leaders build their business around a portfolio of new products:
- product “tweaks”
- product line extensions
- new products
- breakthrough new products (potential game changers)
The biggest advantage of these types of integrated business teams is the speed at which they can operate. They are in essence a small company inside a larger company. An added advantage is they have access to significant resources like applied research groups (acquire advanced technology) or marketing functions that are hard to come by in very small companies. The biggest challenge is to have a senior management team that is comfortable with “letting go” and trusting the teams to deliver.
Does your company have an organization built for speed?
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