The Biggest Obstacles to Innovation in Large Companies

Is your company hitting a roadblock on the path to innovation? Here's how to overcome five major obstacles that could be holding you back.

The word “innovation” is often treated as a magical incantation that, once spoken, renders companies more inventive, creative and entrepreneurial. But in today’s world there are many cultural, strategic, political and budget issues that must be confronted if leaders want to ensure that their organizations are hospitable to new ideas.

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Change-makers trying to conduct experiments are rarely greeted with open arms.

In a survey fielded earlier this year for Innovation Leader, we asked 270 corporate leaders about the most common obstacles to innovation in large companies. The responses were illuminating.

The top five obstacles they cited were:

Politics, turf wars and a lack of alignment 

Some business units or functions believe they’re already doing innovation on their own, and that any sort of new initiative is edging into their terrain — and potentially competing for resources. Some may be hoping that the CEO’s “favorite child” of the moment, a new chief innovation officer or chief digital officer, will go away if ignored.

Senior leaders may not be able to squash every political squabble, but they can be clear about what the innovation or new ventures group is expected to do, and how others are expected to support it.

Cultural issues

The culture at large companies is typically built on a foundation of operational excellence and predictable growth. Change-makers trying to conduct experiments are rarely greeted with open arms. But creating new places where people can gather to work on projects can be constructive.

So can designing new kinds of incentives, recognizing and rewarding the behaviors you want to encourage, and bringing in new, more diverse viewpoints and types of talent to the company.

Inability to act on signals crucial to the future of the business 

How well a company picks up on signals of change and acts on them is also important. When your “forward scouts” see something important, what mechanisms exist to set up collaborations with outside vendors or startups, or run a quick pilot test with a function or business unit?

Too many companies wait for the annual strategic off-site to roll around before they address the changing dynamics of their market.

Lack of budget

Nearly 40 percent of the respondents to our survey said their innovation efforts had an annual budget of under $5 million, and 23 percent were below the $1 million mark.

In most cases, that budget level can only produce a small innovation team that may be doing some concept development work, trend scouting or training employees on innovation methodologies — but isn’t having a broad impact on the company.

Lack of the right strategy or vision

Are employees clear on what kind of innovation they’re supposed to be doing? Are they looking for ideas to streamline operations and serve customers better or developing new business models around existing products? Without a coherent strategy and clear vision for what the company aims to achieve, innovation efforts wind up feeling scattershot and isolated.

What can help companies embrace innovation? A clear understanding of why innovation is necessary, appropriate recognition and incentives for people, regular communication and bridge-building between teams, as well as long-term commitment, are essential.

When CEOs and other leaders talk about innovation, they need to make it clear it will be more like a daily exercise regimen than a magical incantation that delivers instant results.

This article originally appeared on Harvard Business Review and was republished with permission.

Scott Kirsner is the editor of Innovation Leader and a business columnist for the Boston Globe.

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