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Barriers to Corporate Innovation

Posted on Aug 16, 2016

Even though the traditional corporate structure is critical to the success of large organizations, it can create numerous problems, especially when the organization tries to do something that it has never done before. Understanding the weaknesses as well as the strengths of a corporate hierarchy, and learning how to work with them, can help foster innovation and ensure the success of the organization.

Decision Making, Trust, and Speed

Decision making in national or global corporations can often feel complex and frustrating. The people at the top of the organization carry the weight of responsibility for success but do not always feel confidence in their large body of employees. So they tend to implement rigid structures and processes to control every decision the employees make. They do this for valid reasons: quality, budget control, and streamlined decision making. All of which works well in well-understood situations where consistent quality and accountability are required.

The downside of this whole process is that local General Managers or Managing Directors— people who are actually the captain of the ship—are required to go through a long, tedious approval process when making decisions. The approval comes through layers of superiors or board members who often don’t have a clear understanding of real local needs. Decisions that should be simple and quick are suddenly drawn out and made into a hassle.

When issues like this build up, it can affect innovation and even stall the success of the entire company. In many cases, far-away senior signatories are no better equipped to make these types of decisions than the local managers, and there is often no reason to have to wait weeks, or even months, for approval.

In some cases, waiting time can result in the failure of a company. The world changes quickly, and businesses have to remain dynamic and flexible to keep up with these changes. Let’s remember Kodak. They were hugely successful in the photography industry for a century, and could have continued to be leaders, but they failed to keep up with the digital camera market and fell behind their competitors. They had all the right engineers, the money, and the resources to keep producing top-of-the-line film, but they failed to bring their different departments together to roll out new, innovative products in a timely manner. Although they have recovered from bankruptcy, Kodak is only a fraction of what it used to be.

Time can be CRUCIAL to the success of an innovative idea, product or service. The impact of delay is even greater when it comes to strategic or business decisions, specifically around partnership or collaborative innovation, where shared equity is involved. By the time a budget for a new initiative, entrepreneurial idea, team or even new venture gets approved, the market has moved on, a new digital platform has been created—killing the initial (and now outdated) idea. Innovation is about speed. We have seen it many times: Kodak, Nokia, BlackBerry, and Motorola. They all failed to act in time and innovate. As a result, their competitors managed to overtake them. The world of business has no time to lose when it comes to innovation – this should be a constant and on-going process and priority!

These all-too-common challenges are being faced by senior executives worldwide and, steadily, answers are emerging.

Written by: Anna C Mallon

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