Do you need a spin off? How innovation and entrepreneurship prevail

Is there such thing as too big in business?  Can a company become too big and therefore too bureaucratic, thus limiting its ability to innovative entirely?   To address this question, the easy answer is to just point you to reading The Innovator’s Dilemma. It answers this question thoroughly. But for the sake of this blog post, I’ll tell you, it depends.

The book will tell you it depends on whether or not what you are creating is a disruptive technology or a sustaining technology.  The best way I can describe the difference in the two is that sustaining technologies improve upon something already accepted in the market.  Disruptive technologies are just that, disruptive, in other words, they rock the market – and quite often the companies that play in that market’s- world.

Sustaining technologies prevail precisely because of good management practices (that big and bureaucratic at times can help foster) revolving around listening to customers and therefore allocating resources to pursue the best bets. However, the process of creating disruptive technologies can suffer from good management.  As the author Clayton Christensen says, “The very decision-making and resource-allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies.”

Those companies that succeeded in disruptive technologies, “created different ways of working within an organization whose values and cost structure turned to the disruptive task at hand.”

With the fast-paced nature of most marketplaces now, its imperative for companies to be in the business of disruption.   Many companies are realizing the need for different structures to create different outcomes, having both the structure that fosters good decision making for sustaining and the structure for disruption.

If you’re thinking your organization needs room for disruptive technologies to emerge in order to stay in the game, here are some ideas for you from the least to most drastic:

1. Create reward systems for those to innovate within your structure. I wrote about last week how one best place to work and leader in innovation asks people to bring up ideas/designs that help meet a customer need they have identified.  If the idea is patented and goes to market, the employee gets a share of the royalties.
2. Create an internal incubator. A good post on this can be found here: Worried About Your Best Employees Starting Their Own Businesses? Trap Them With An Internal Incubator… This also goes to show that the best way to innovation is to have innovative people.  Reward and create structures that keep your innovators in-house.
3. Spin off a whole new division/company. Google recently reorganized under the name “Alphabet” in an effort to “separate it’s money making businesses from its moonshot ones.”  I imagine the author of The Innovator’s Dilemma when heard about this one. One separated company is GoogleX, which has been around for a while, but acts somewhat like an internal incubator focusing on those “moonshots” like driverless cars. “The change is an effort to keep Google innovative,” says the New York Times article announcing the change.

HR can and should help companies understand what organizational structures best support the goals at hand.  If disruptive innovation is your target, you may need a new game plan.

Do you need a spin-off to stay competitive?