5 Barriers To Enterprise Innovation

Megan Holstein

Business people meeting in conference roomIn today’s economy, your company is either the disruptor or the disrupted. Companies are either leading their industry with products like the iPhone, or they’re getting left behind.

Enterprise innovation is a tough nut to crack, but you don’t have to overhaul your company to make progress. There are simple things you can do to make a difference. Small adjustments to current innovation processes, or even mindset changes in key individuals, can make all the difference.

1. There is too much pressure on short-term results

Focusing on short term results compromises long-term company health.

Most large organizations favor pursuing short-term goals over long-term goals. Short term goals, like increased profits or margins, translate into promotions. Ten-year plans, on the other hand, are better for the organization, but less likely to get any individual promoted. A survey done by Harris Interactive found that a 64% of executives believe their organization has “Too much focus pressure to achieve short-term goals/quick results.”

This rings true with industry expertise. In Start with Why, Simon Sinek argues that this pressure to achieve short-term profits doesn’t just cost an industry in long-term innovation. Pressure to achieve short-term profits can drive a company into bankruptcy. Organizations that truly want to be successful should first identify why they do what they do. Once they know their purpose, they can pursue goals that best serve that – short or long term.

2. Ideas aren’t thought out thoroughly before funding decisions are made

Management is accustomed to being able to throw money at problems.

Large organizations are used to an overabundance of research money. Even in lean times, the amount of R&D dollars available to an enterprise far outstrip any startup’s. Managers might not think twice before allocating hundreds of thousands of dollars to developing an idea. Especially when the same project 10 years ago might have cost millions.

Validating an idea without spending money is easier than ever today. Because of the Internet, people all over the world can connect for instant global communication for little to no cost. This makes it easy to reach out to customers and validate whether or not they’d buy this product – no more having to put prototypes right in front of them.

3. Too much funding is allocated to an idea early on

Decision makers don’t know how to bootstrap like startups.

Too much money can be given to an idea, especially in the beginning of its life. This mistake stems from managers and executives remaining in the paradigm of decades past, where it took 10x or 100x more money to test an idea. The idea may be well thought out, but then the organization vastly overestimates the amount of money it will take to validate.

Learning lean startup principles and applying them to enterprise innovation can make validation efficient. These principles are most clearly outlined in The Lean Startup, by Eric Ries.

4. Getting into “Innovation Theater,” not real innovation

People make decisions based on what seems cool, not based on what works.

There’s real innovation, and then there’s innovation designed to make your company look good. Real innovation focuses on getting a return on your investment and developing new cash-cow product lines. Innovation theater, instead, focuses on innovation as a marketing tool for your corporation. Investment is expected to turn a profit in the form of better employees and company goodwill, not direct profits.

The first step here is for the organization to be honest with itself. Do you want real innovation, or do you just want to look good to the corporate community? No matter what your goal, you’ll have a much easier time achieving it if you’re honest about what it is.

5. Ideas aren’t chosen because they fit the business strategy

Desperation to innovate leads companies to make products that don’t make any sense given what they do.

There are a lot of great ideas in the world, but very few are the right type of idea for your organization. Ideas must not only be good, they must align with your enterprise strategic objectives. They must work with your organization’s current systems.

Smart companies pursue new ideas that can open up markets and lines of revenue without trying to leapfrog haphazardly into a new space. Any new directions should be part of a predefined strategic plan.

Manufacturers are no longer just selling things; now they’re selling innovative ideas. Learn more in A New Industrial Revolution: The Innovation Economy and Manufacturing.

About Megan Holstein

Megan Holstein is a junior at the Ohio State University, twenty years old, the president of Pufferfish Software, and author of Idea to App. Megan Holstein is the 2013 winner of the EO’s Global HS Student Entrepreneur of the Year award, and is published regularly in political and business publications. She is a business analyst for Taivara, an innovation consulting company in Columbus, Ohio.