Here is an excerpt from an article written by Maxwell Wessel for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.
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Big companies are really bad at innovation because they’re designed to be bad at innovation.
Take a story plucked from the pages of Gerber’s history. In 1974, the company’s growth potential was waning. In order to grow profitability and fight margin pressure, Gerber executives turned towards a market they hadn’t successfully penetrated for decades: adult food.
Luckily for a company adept in sourcing and processing vegetables and fruits, tens of millions of busy Americans were spending more time at work and fewer hours in front of the stove. Gerber’s team knew if they could develop a quick, healthy meal for adults, they had an avenue into meaningful growth.
When Gerber launched its product targeted towards this opportunity, it flopped disastrously. It’s no surprise: Instead of developing a novel line of food suited to the needs of busy Americans with distinct branding and its own distribution strategy, Gerber slapped a new label — excitingly named “Gerber Singles” — on existing pureed products and shipped them out for placement in a different aisle.
Needless to say, working Americans weren’t busting down the doors at Safeway to pick up the latest, greatest flavor of Gerber Singles carrots. In three months, the product was pulled from all grocers and returned to the company.
For those who would admonish Gerber for their approach to transformational innovation, it might be wise to consider that the company did exactly what it was designed to do: create operational efficiency. This deeply-rooted tendency goes all the way back to a corporation’s typical life cycle. In it’s infancy, it’s designed to bring innovation to the market. A start-up’s success is not gauged by earnings or quarterly reports; it’s measured by how well it identifies a problem in the market and matches it to a solution. If venture capitalists think entrepreneurs have identified a big problem with an interesting solution, they’ll fund the start-up. If those entrepreneurs match and improve this solution, they’ll see growth in revenues and, ultimately, profitability.
But that’s not what life is like within a mature organization. When corporations reach maturity, the measure of success is very different: it’s profit.
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To read the complete article, please click here.
Maxwell Wessel is a member of the Forum for Growth and Innovation, a Harvard Business School think tank developing and refining theory around disruptive innovation. Follow him on Twitter at @maxwellelliot. To read his other HBR articles, please click here.