Q: I am an executive at a large company and in our
industry we are seeing a trend wherein smaller companies are
gaining market share at an alarming rate. Our CEO believes
the reason for this is that smaller companies are more prone
to innovation and more entrepreneurial than larger companies.
He has instructed me to form a committee to study this trend
and make recommendations on how we should deal with it. I’m
an executive, not an entrepreneur. Any advice would be very
much appreciated. -- Name withheld by request
A: Your question reminds me of the time my teenage
daughter tricked me into doing a chemistry project for her
under the pretense of asking for my advice. “But, daddy,
you’re just so smart…” The result was that
her/my experiment got a C instead of an A and almost started
a fire in the chemistry lab. Reckon daddy wasn’t so smart
after all: at least that was the opinion of the principal,
her teacher, the fire marshal, and ultimately, my manipulative,
yet adoring daughter.
However, you’re in luck, Mr. X, because I know considerably
more about innovation and entrepreneurship than mixing combustible
chemicals.
Judging by your use of the buzzwords “innovation”
and “entrepreneurial” I’d bet your CEO’s
opinion (which I believe is dead-on, by the way) may have
come from the Conference Board's CEO Challenge 2004, which
reported that 87% of the 540 global businesses surveyed cited innovation and enabling entrepreneur-
ship as priorities for their companies. Furthermore, 31% of
companies surveyed considered these issues to be of the "greatest
concern.”
FYI, the Conference Board is an 88 year-old, not-for-profit,
global, independent membership organization that “conducts
research, convenes conferences, makes forecasts, assesses
trends, publishes information and analysis, and brings
executives together to learn from one another. “
What many Conference Board members are learning is that they
are getting their big corporate behinds kicked by smaller,
more innovative, entrepreneurial companies that are not burdened
by the need to have a meeting once an hour or to bury every
great idea under a mound of red tape. You said it yourself:
your CEO told you to set up a committee to study the trend.
You might as well paint a big black hole on the wall and have
everyone take turns trying to run through it. Committees and
superfluous meetings are the biggest wasters of time and money
in the corporate world and rarely produce anything even remotely
resembling results and they are indicative of why smaller
companies are gaining ground on their larger brethren.
The fact that innovation and entrepreneurship run rampant
in smaller companies, but is often suppressed in larger companies
is nothing new. Management guru Peter Drucker first addressed
the issue in his 1985 book, Innovation and Entrepreneurship.
Drucker wrote that one of the most often-asked questions in many a 1985 boardroom was, “How can we overcome the resistance
to innovation that plagues most organizations?”
The question they should have been asking in 1985 and the
question that you should be asking today is not only how can
you overcome the resistance to innovation and entrepreneurship
within your own organization, but how can you make your organization
more receptive to innovation and more open to entrepreneurial
practices?
Therein lies the key to your recommendation. To compete with
the small boys, the big boys must create an environment in
which innovation and entrepreneurship run rampant. Everyone
in the organization, from the CEO to the executives to the
managers to each and every employee must become innovation generators and entrepreneurial thinkers. You must create an
environment where shooting for the stars is the norm instead
of the shooting down of ideas.
To put it simply, you must turn your lumbering giant Goliath
into a raging horde of Davids. Now I don’t mean that
you should arm your employees with slings and rocks and turn
them loose on upper management, although that could be really
fun to watch. What I’m talking about is turning your
organization into an innovative, entrepreneurial machine where
everyone from the CEO to the janitor works to make the company
more competitive and profitable.
One reason that large organizations are resistant to innovation
is that everyone is so busy just keeping the wheels in motion
and putting out fires and dealing with the day-to-day drama
of big business that no one has the time to even think about
innovation. And Heaven forbid they have to think like entrepreneurs.
No one has time to even consider the opportunities that innovation
and entrepreneurial thinking might bring. They are too busy
to see that their product is becoming dated and their market
share is becoming smaller. They are too busy to see the smaller,
more innovative companies speeding up in their rear view mirrors.
Competitors in your rearview mirror are larger than they appear…
So, here’s how you begin. First off, you should develop
an innovation plan that outlines how the process of innovation
will work within your entire organization. If someone has
an idea for a new product, for example, the innovation plan
would explain the process by which their idea should be brought
to the attention of management and how it can be shared with
others throughout the organization. The plan should also detail
how entrepreneurial employees will be rewarded if their idea
is accepted and further rewarded if their idea brings future
profits to the company. Here is where most big companies drop
the ball. They take a great idea, brush aside the person who
thought of it, then hand the idea off to upper management
so it can be buried under a mound of red tape, never to be
heard from again.
This is a key point: to make innovation work you must
reward the innovators monetarily or by letting them take a
key role in bringing their idea to fruition. It’s my
opinion that you should do both: pay them and promote them.
Secondly, innovation and entrepreneurship must be promoted
within your organization as the norm, not the exception. There
must be a clear understanding that the best way to preserve
and perpetuate the organization is through innovation and
entrepreneurial thinking. If you can get everyone in the organization
thinking like entrepreneurs, innovation will soon run rampant.
This is how you create the raging horde of Davids.
Next week we’ll talk more about how large companies can
become more innovative and entrepreneurial so they can compete
with those pesky little guys.
