Why Do Small Companies Spearhead Innovation?

Increasingly, experts can agree that small companies spearhead innovation.  Of course, this isn’t to state that large companies don’t innovate at all.  But the simple fact is that usually the size and internal bureaucracy of large companies is such that innovation comes at a much, much slower pace.  Since small companies are at the heart of innovation, they often draw the attention of larger companies who need the new products and services being created by smaller companies in order to maintain a competitive advantage.

According to Fortune Magazine, big companies rarely innovate.  Fortune points out that this is unfortunate as innovation is necessary to “gain propriety advantage and stay profitable.”  It is important to note that innovation itself is not a rare commodity.

Innovation is taking place everywhere and in every industry; it’s just that innovation is rare within large companies.  Thus there is the need for larger companies to acquire smaller, more agile and more innovative ones.  A business that wants to remain profitable should be innovating internally while also seeking out sensible acquisition targets.  In other words, large corporations should be looking for all-important innovation both from within and from outside.

There are many reasons that innovation is hard within larger companies.  Bureaucracy and groupthink are two factors that occur, but perhaps more importantly is that innovative people tend to prefer to work for smaller companies and organizations.  They feel more comfortable in the small business environment.  Innovative thinkers can find it frustrating when even a smaller company adopts a large-company management style and approach.

Many feel that in the end the problem with large companies isn’t that they never try to accomplish large and ambitious projects, but instead that they fail to attempt the smaller and more controversial ones.  Growth and new ideas is often about being at the cutting-edge and thinking outside the box, which are inherently risky.

Large organizations tend to be risk adverse, and here lies the paradox.  How do large, typically risk adverse organizations foster an environment where innovative thinkers can thrive?  Employees will need to successfully work on smaller and even controversial ideas in an unorthodox manner within the confines and framework of a large company.

Large corporations, dedicated to preserving their existing place in the market, often find themselves threatened by new ideas whether they are generated internally or externally.  As a result, large companies are typically hostile and very resistant towards innovative thinkers.  Most the of the time the innovative thinkers know this.