Why large organisations struggle with innovation

In the 1960s and 1970s Polaroid Corporation was one of the world’s most fashionable technology brands, employing 21,000 people at its peak and selling millions of instant cameras each year. Pioneering creatives like Andy Warhol carried Polaroid cameras around with them wherever they went.

But this success could not be sustained and in the following decades the original Polaroid Corporation declined to such an extent that in 2001 it filed for federal bankruptcy protection.

Along with Kodak, who suffered a similar decline, Polaroid’s fall from its market-leading position is often used as a case study to show how failing to respond to technological innovation can damage incumbent companies.

However, it is too simplistic to say that imaging companies like Kodak and Polaroid failed to appreciate that digital would change the film and imaging industries.

In the 1970s and 1980s Kodak and Polaroid were leaders in the emerging field of digital photography.  The first digital camera was created by a Kodak engineer in 1975. In the late 1980s, over 40 per cent of Polaroid’s research and development budget was invested in digital imaging. By the late 1990s Polaroid was a top seller of digital cameras.

Kodak and Polaroid’s decline was due, not to a lack of technological awareness or investment in R&D, but a failure to achieve sustainable business model innovation.

Why ‘good’ management can hinder innovation in large organisations

Steven J. Sasson, who developed the first prototype digital camera at Kodak, recalls management responding to his innovation by saying “that’s cute — but don’t tell anyone about it.” Getting his idea accepted was hard work, particularly when it threatened the company’s main business in film.

Sasson found that many managers understandably follow the popular maxim "kill not the goose that lays the golden egg". They are unwilling to divert their focus from products and services which are selling well at a good margin, let alone agree to invest in developing products which could eventually undermine their current core business.

This is one of many examples of how structures and management behaviours that organisations have encouraged can hinder the innovation process.

As I explored in a research paper with colleagues in the USA and France, large organisations may have a culture of sharing information on a need-to-know basis to stop trade secrets escaping the organisation. This can stifle the flow of innovative ideas and reduce returns on investment in particular from outsourced R&D.

Emotional attachment to products can also be a powerful barrier to change.

Intel is known today as a leading microprocessor manufacturer, but back in the 1980s their main product was computer memory. Robert A. Burgelman wrote a great paper on Intel’s strategic shift from memory to microprocessors. He describes managers at Intel delaying over a decision to exit the memory market in spite of good evidence to support the move. He quotes a manager likening this move to "Ford deciding to get out of cars". There was a great emotional attachment to the product that had made Intel and this created inertia which hindered the innovation process.

Developing an innovation mindset

Kodak and Polaroid were challenged to adapt their business models for a digital era. Today, companies across sectors face analogous challenges caused by the disruptive potential of technologies like artificial intelligence, quantum computing, and blockchain.

We developed Imperial’s executive education open programme From Idea to Innovation: Inspiring Intrapreneurship to help executives in large organisations change their mindset, overcome barriers to innovation, and thrive in this rapidly changing world.

Anu Wadhwa is an Associate Professor of Strategy and Entrepreneurship in the Department of Innovation and Entrepreneurship at Imperial College London and the Programme Lead for the executive education open programme From Idea to Innovation: Inspiring Intrapreneurship.