Company Size, Innovation and Design Thinking

In his discussion of the month → Do Innovation and Entrepreneurship Have to Be Incompatible with Organization Size?, Jim Heskett from Harvard Business School collects several opinions about the question if there is a relation between innovation, entrepreneurship and company size.

What the panel thinks

Interestingly, almost half of the respondents think, the larger and mature an organization grows, the more difficulties it has to drive innovation and entrepreneurship.

In the following, I list just a few opinions of respondents, who think that large companies face diminishing innovativeness:

1. Disruption usually comes from smaller firms, as large firms concentrate on the more profitable market segments, and tend to eliminate unprofitable, though innovative or disruptive ideas,
2. Mature companies turn to be risk adverse, and see innovation as a thread to the status quo,
3. While in the startup phase management is heavily involved into innovation, management’s capability to personally drive innovation diminishes with company size, as they take over other tasks,
4. Large companies tend to use cumbersome, complicated processes, which negatively affect innovativeness and flexibility of its employees.

Design thinking

In the → Harvard Business Review, Tim Brown has written an article about the → Design Thinking method. He starts it with a description of the term genius. He states that innovation is hard work. Innovative ideas are seldom born fully formed and readily defined in one brilliant mind, but need to be elaborated, tested, refined, and so so on.

In his understanding design thinking includes all innovation activities, which use a human-centered design ethos. The approach uses the sensibility and methods of a designer to match people’s needs with what is technically feasible.

As he shows in a good overview flowchart, design thinking consists of several phases, and starts with a deep understanding of customers, while it takes a human approach. In particular important are extreme users, such as lead users.

Diverse teams work together, which prototype and test all over again, until they have found a solution to the given problem. These teams in particular look for possibilities to co-create ideas together with their customers.

Company Size, Design Thinking and Innovativeness

In my experience, it is helpful to see both, article and discussion together to judge whether large companies tend to be less innovative. I have often seen in large mature organizations that it is difficult to keep the contact with the customer.

In small companies, each employee has customer contact, and works in different areas; hence, has a broad understanding about customers. Here it is easy to maintain sufficient customer intimacy, and to have the information to follow a human design approach.

The larger an organization grows, the more it specializes and distributes work to several employees. As of a certain size, each company needs a specialized product management as an interface to the customer.

Not all enterprises readily implement product management ideas, and thus start to lack this intimacy, or might even start to neglect innovation. Other mid-sized companies take an engineering approach, that is they design products without any customer involvement, as they think, they have sufficient customer knowledge.

A very large and mature organization might have product management organizations implemented, and is thus prepared to deliver on innovation. However, in these organizations, we frequently see problems emerge from the growing size. For example, have large international companies difficulties to maintain the same customer intimacy in each of their target markets, as they are active in many more countries, as a smaller company. These companies often trend to concentrate on the demands from certain key markets, and thus might neglect B, or C markets.

In large companies it is also not an easy task to rollin the different customer demands. While in small companies, everybody has customer contact, and no rollin is needed, a large company needs dedicated processes, with several participants. Helpful rollin processes are expensive, and complex, and thus might require an organizational ability, which is not available.

Summary

In summary, I think that a growing company size makes it more complicated to keep up the same momentum in terms of innovation. If the company itself is innovative, or not, depends on additional factors. From my perspective, Design Thinking can be a helpful approach in that. Maybe Apple is a good example in both, a large innovative firm, which very much uses Design Thinking, in its development processes.

Weiterführende Informationen

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This entry was posted on Dienstag, Juni 2nd, 2009 at 7:03 pm. It is filed under Innovation, Thema des Tages and tagged with Consumer-Strategies, Design Thinking, English Content, Management, Rolle des PM. You can follow any responses to this entry through the RSS 2.0 feed.