We analyzed 20 of the most innovative companies, some 100 of their enterprise size competitors, and the theoretic potential for enterprises to compete. As a result, we found three key reasons why enterprises fail:

CONSERVATISM

Most enterprises completely underestimate the investments necessary to fund innovation. When we look at one of the most recent innovative companies with just one product like Tesla, Cisco, Google, Facebook and so forth, they needed funding of about $1 Billion before they went public and became self sufficient. All of these companies had only two risks: 1) to fail and shut down, 2) to not return the funding to investors. An established enterprise, when disrupting themselves has three more risk: 1) loosing a billion$ enterprise, 2) risking tens or hundreds of thousands of jobs, and 3) risking that general investors loose their investment entirely, which is different for average joe versus a venture capitalist. However – going forward those risks also persist when the FAIL to be innovative and get disrupted by others.

MANAGEABILITY

Enterprises with more than 10,000 employees have a size that almost forbids to be innovative. Innovation is not only expensive but resource intensive. Employees need to be at a healthy utilization rate in order for the company to be profitable and stay in business as well as sustain all kinds of downs and difficult times. How could a company inspire their teams to be more innovative while keeping their current performance. If the teams have time for innovation, they have not been fully utilized and the company must focus on getting back on track and not derail. And if the team is fully utilized, there is no time to relax, meditate, get inspired and think of new and industry shaping ideas. Innovation needs to be managed as well and it needs resources. Hoping for a lucky punch is a really bad idea. And dreaming to get a free lunch… you know. Why does innovation work in a startup? Well, at least so far it only worked in the initiation phase. What Intel, Cisco, Google , SAP did was ground braking. But today 30 – 50 years later…? They ran into the same challenge. Like everybody else, they try fiercely to innovation – but we still wait for the outcome. And there is a chance they get disrupted from a startup that may have been already founded.

CUSTOMER EXPERIENCE

Enterprises with millions of consumers (BsB or B2C) are essentially out of touch with their target audience. They know only through questionable research what those users or consumers really want or need. The c-level of a global enterprise does not know what their customers painpoits really are and what their dreams may be. The hierarchies, reporting structures, value definitions have no path for innovation to be happening. The experiences of top level managers and the experiences of their customers are almost fundamentally different. The experiences of startup founders and the ones of their future customers however, are well aligned or at least perfectly understood – until they grow to an enterprise level. Microsoft executives get their laptop configured by their team. That way they save the day it cost to get everything in order after buying a new machine. And on top of all that, the “customer experience thinking” is still seen as an esoteric luxury by most top managers as it is too hard to report on and getting it into the annual report in a way that it wows the investors.

In the past 4 years exploring the entire “Innovations Paradigm” based on our own experience building startups to billion dollar companies and working with other startups that became billion $ companies we finally developed methods and tools that harness the innovation power of an enterprise by bringing new ways of thinking and new working models and cultural elements to selected teams.

Innovation based enterprises

Most of the big enterprises of this world started as innovative startups. Whether it was Alfred Esher, founder of Credit Suisse with a – back then – innovative banking system that laid the ground for the Swiss Banking System, or Carl Benz with a radical idea of building a machine driven carriage they have been major disruptors. Or Henry Ford, Ferdinand Porsche, Robert Bosch and so forth, all created global enterprises with their ideas that have been at best – crazy. What happened in the past 50 years? There have been continuous innovations from Silicon Valley including Intel, Apple, Oracle, Cisco, Google, Facebook, AirBnB, and Tesla which made it to global leadership. The last ground braking innovation from Europe was SAP, 50 years ago. We have seen less popular, yet ground braking “inventions” in laboratories from all over the world. But non of them made it to a ground braking “innovation”.

From invention to innovation

The automobile evolved from INVENTION to INNOVATION. The disk breaks moved from INVENTION to IMPROVEMENT. The first electric BMW made it from INVENTION to an EXPERIMENT, while Tesla made it to an innovation much later then BMW. A self driving Mercedes S-Class made a 1,000 mile journey from Munich to Copenhagen and back! It was already using computer vision and computers to react in real time. The robot achieved speeds exceeding 109 miles per hour (175 km/h) on the German Autobahn with nearly no human intervention for 95% of the distance. It drove in traffic, executing manoeuvres to pass other cars. Despite being a research system without emphasis on long distance reliability, it drove up to 98 miles (158 km) without human intervention. Also here it did NOT go from INVENTION to INNOVATION but to DRAWER.

Invention vs. Innovation

In most enterprises we may find hundreds if not thousands of geniuses with amazing ideas but no way to go. There is this massive difference between INVENTION, the act of having and documenting an idea, maybe building a prototype and INNOVATION, the full cycle of invention, prototyping, market validation, product-market-fit, funding, marketing, testing, producing, launching, more funding, branding, selling, customer engagement, servicing, business model optimization, more funding, going international all the way to being a global player in that segment.

Failing of the enterprises

The single biggest mistakes enterprises can make is 1) never developed a comprehensive plan to identify the brilliant ideas, which their teams already have, 2) seeing the brainspark of an invention already as innovation and wonder why it is not successful in this highly competitive global economy, and 3) completely ignore the fact that innovative businesses require a lot of funding to become that innovative business everybody is dreaming about. Running innovation on the side and hoping for the magical growth and market disruption is simply childish.

What to do

  1. Seeing the act of invention as an ignition point from the process of innovation is a very helpful starting point.
  2. Developing trust in the Innovation Potential of a company’s employees is far better than looking into startups and hope that somebody thinks more like a startup. If they would,they would be gone.
  3. Rationalize that any major innovation is also a major investment and there is no difference between a startup and a global enterprise.
  4. Stop hoping that employees think like startup entrepreneurs. If they would they would be long gone and if they don’t they can much better contribute to an enterprise level innovation process.

In the past 4 years exploring the entire “Innovations Paradigm” based on our own experience building startups to billion dollar companies and working with other startups that became billion $ companies we finally developed methods and tools that harness the innovation power of an enterprise by bringing new ways of thinking and new working models and cultural elements to selected teams.