Saturday
Jan142012

Innovation at Scale: Roll Over, Schumpeter

We usually assume that big companies have a harder time innovating than smaller, entrepreneurial startups. But a new white paper by Michael Mandel argues that large companies may actually be better suited than small firms to creating disruptive products and solutions.  It's a debate that goes back to the seminal work of economist Joseph Schumpeter (of "creative destruction" fame) and has engaged other leading business thinkers including Clayten Christensen.

Mandel argues that large firms may be better able to innovate in today's economy because of (1) their ability to create an ecosystem around their products (think Apple and apps), (2) the size needed to compete in flat-world, global economy, and (3) the complexity of industries that need reform such as energy and health care.  In these cases, Mandel argues:  "Only large firms have the staying power and the scale to potentially implement systemic innovations..."  

While this may be correct about implementation, Mandel glosses over the key question of whether a big corporation is the best environment in which to foster invention and creativity in the first place - in terms of organizational culture, incentives, and more.  The embrace of open innovation by large firms would seem to be proof that they themselves realize that the best new ideas may come from outside sources such as startups or universities.

The most pressing and interesting challenge, I think, is: How can entrepreneurs and large enterprises cooperate to scale-up critically needed innovations and to accelerate their broad deployment?  What do you think?

Andrew Shapiro