Two following questions fascinate me and became the focus of my work:

1. Why do mature organizations struggle to innovate?

2. How could they become more innovative again?

Let’s start with the “why”:

From Discovery to Delivery

There is a pattern that plagues large, mature organizations: When you look back to the beginning, when a company starts, the founder’s mindset and focus is on discovering something new that customers will pay for.

With success comes growth yet scaling up the company requires a different mindset, skill and people, since you have to deliver the product reliably at a specified quality level. Over time, the management team will comprise delivery specialists, who are good at incrementally improving product and processes but who never discovered and started a company themselves.

Shifting Management

When the market or business landscape shifts, as we observe so dramatically in healthcare currently, different leadership thinking is needed that can discover “the next thing” again and bring it to life. This may require abandoning previous products or establish new business models to differentiate the company from its competitors while opening new revenue streams.

This is where large organizations often get stuck: they have the wrong people to take a leap! With a focus long set on incremental improvements and stability, fresh ideas and agility are perceived as inconvenience that disrupts the well-oiled delivery machinery.

Organizational Topology

Size does matter. Maturing organizations encounter three predictable obstacles to innovation:

1. With growth of the organization, jobs become ‘small’ and more specialized. Departments form and functional silos emerge. Managers often get incentivized to optimize their department’s performance. This usually comes at a cost: silos lead to misalignment across the organization because it parts are no longer pulling in the same direction.

2. Size leads to increasing complexity in organizational hierarchy to keep the organization manageable. Various levels of hierarchy separate the employee grassroots from the executive suite on the top of the pyramid. Ideas from the bottom don’t get communicated to the top where they could be supported by the decision makers and brought to life.

3. There is a lot of talk about what other innovative organizations do but don’t lead to action. Good ideas exist in every organization but these ideas don’t get implemented. Group think, paralysis-by-analysis, the belief that “our

problems are unique” and –finally- resignation contribute to an “organizational immune system” that rejects fresh ideas quickly and thoroughly.

For more details on the obstacles please also refer to:

Jumping the hurdles

My second question was how to overcome these three obstacles. How do you foster disruptive ideas to grow and find ways towards their implementation?

The goal is cutting vertically to connect the top and bottom of the organization again, cut horizontally to effectively bridge the established silos and to overcome the inertia of red-tape and bureaucracy that stands in the way of agility and experimentation for break-through innovations.

Stay posted for the next posts of this “mini-series” on CURE where we discuss tried-and-true successful approaches from a FORTUNE Global 500 including “Intrapreneuring: Building an innovation eco-system” and “Angel Investing: Applying corporate venturing within a company”.

By Stephan Klaschka