Bounded Innovation – the limitations of organisational reality

Guest blogger:

Fiona Beukes Fiona Beukes, The Open University MBA, UK Marketing specialist, BNY Mellon

Innovation in some respects is like the Holy Grail of business – How do you do it: disruptive or continuous? How do you foster it in your organisation: Incentives? Creative downtime? Hire the right talent? Although these are obviously worthy avenues to explore, they do take time to implement.

man with bulb head
Is your organisation agile enough to foster innovation?

I think many organisations are hampered by their internal environment which prevents a dynamic, agile response to market change. There is definitely a tension, in my view, between Grant’s internal resource perspective and Porter’s economic view of the workings of the external business environment.

From a practical perspective, I also think many companies find it hard to innovate through disruptive change. In my view, the larger and larger an organisation becomes the more bounded I feel it is to its BAU (Business as Usual) and the day-to-day constraints that just “getting things done” place on its internal environment.

The leaner, younger, more nimble upstart is likely to steal a larger company’s thunder and swiftly re-engineer the external environment. Think of Apple launching the iPod – a lower quality sound compared to compact discs so Sony engineers believed at the time – a product that rapidly caught the attention of a mass market interested in synching their PC to a portable, lighter device. In the end, a good quality product (CDs) lost out to unperceived customers’ needs and wants (iPods).

I think it is this disconnection from the customer which fosters continuous improvement in an organisation rather than disruptive market change. As a product or service exists already and a level of stakeholder engagement is in play – internally and externally – it becomes safer to adapt and improve a product or service rather than launch new ones. Why ruin a good thing?

It is also seems safer to improve the operational side of an organisation by being leaner and more cost-effective rather than radically altering the product or service and risk a customer backlash: something Coca-Cola experienced when they launched new coke in the 1980s. Why risk upsetting the apple cart, and more importantly, an organisation’s shareholders by changing the status quo?

There are certainly many barriers to innovation in organisations – people, culture, shareholders to name a few – and varying ways in which to be innovative. In my mind, how an organisation chooses to innovate is contingent on a range of external and internal factors. And also its strategic, longer-term vision of what the future holds.

To read more of Fiona’s articles, visit her blog.

6 thoughts on “Bounded Innovation – the limitations of organisational reality

  1. Great post Fiona, I particularly identify with the ‘disconnection from the customer’ motif.

    Even tho Peters & Waterman emphasised ‘close to the customer’ all the way back in ‘In Search of Excellence’, big organisations can so easily slip into doing stuff for *their own* convenience rather than doing it for the customer’s benefit, and then that consumes an awful lot of resource to no great result.

    I have a theory here; think of the organisation as a solid body; the volume goes up as the cube of its radius, but the surface area only goes up as the square. Hence as the size of the organisation grows, the proportion near to the surface (= close to the customer) reduces; in a small company you can’t help but meet these crucial people, but in a big organisation, there are whole departments who never get to meet a real customer.

    PS totally agree about disruptive innovation being riskier, but the skill is in recognising when incremental improvement is on diminishing returns. If you never upset the apple cart, then the fruit eventually spoils, no matter how many times you polished it:-)

  2. Hi David, thanks for taking the time to comment.

    An article that always resonated with me during my B822 studies was Anthony & Christensen’s “How you can benefit from predicting change.” Their premise was that industry leaders took too long to act on market changes,and when they did, it was usually too late. Personally, I feel this situation stems from not being close enough to the customer/end-user to understand their changing needs.

    Also, some industries like financial services have relied on business-to-business distribution models to push their products to the end-user which can make the definition of customer a little confusing. However, the retail distribution review that comes into force in December is likely to change this situation somewhat and probably adds another layer of complexity to the mix 🙂

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