The Truth About Innovation Resistant Companies

2/16/10Follow @b_frei

The bigger the company, the tougher it is to innovate. There are two main pillars to this “innovation resistance” that seem common in large, profitable organizations.

1. Fear that innovative products will cannibalize existing revenue streams. The bigger the product line revenue, the more resistant that product group is to innovation that would threaten its growth.

Consider the post by former Microsoft exec Dick Brass in the New York Times Op-ed section, titled Microsoft’s Creative Destruction:

“At Microsoft, it has created a dysfunctional corporate culture in which the big established groups are allowed to prey upon emerging teams, belittle their efforts, compete unfairly against them for resources, and over time hector them out of existence. It’s not an accident that almost all the executives in charge of Microsoft’s music, e-books, phone, online, search and tablet efforts over the past decade have left.”

There’s a lot going on in this Microsoft example, but the undesirable effect of cannibalizing existing revenue streams is a substantial contributor to resisting innovation. As an example, e-mail built into a social networking app could threaten Exchange revenue, so naturally the Exchange team might lobby to restrict that feature on behalf of revenue protection. (Note: there is an increasing percentage of people that leverage Facebook’s messaging capability as their primary e-mail service.)

2. Product re-invention means throwing away deep feature lists. Market-leading products measure their dominance by revenue and feature depth. Feature depth broadens their relevance to a wider array of customers. So, adding functionality and features to a product trumps re-invention.

Clayton Christensen’s explanation of the impact of “disruptive technology” is a straightforward summary on why this is so common. One part of Christensen’s theory states:

“Low-end disruption” occurs when the rate at which products improve exceeds the rate at which customers can adopt the new performance. Therefore, at some point the performance of the product overshoots the needs of certain customer segments. At this point, a disruptive technology may enter the market and provide a product which has lower performance than the incumbent but … Next Page »

Brent Frei is the co-founder and executive chairman of Bellevue, WA-based Smartsheet.com, an online work management software company. Follow @b_frei

Single Page Currently on Page: 1 2

By posting a comment, you agree to our terms and conditions.