I was catching up on my Facebook posts and read IDC analyst Michael Fauscette’s latest blog post where he wonders whether the emergence of the tech mega-vendor driven economy mean the end of innovation?  Mike makes some excellent points in the article, discussing the roles of continous and discontinous innovation, but there were a few things that I think I’d like to amplify and some that he missed out on that I’d like to add.

1. I agree that many large companies struggle with developing innovations and that most companies focus on feature/function improvements that are just a function of corporate inertia.  But I also think that this discounts a very important problem: many software companies don’t have a good innovation management process. This is the probably the single biggest reason for failure to deliver impactful innovations and the most underrated aspects from an organizational perspective. If you don’t have a working funnel to evaluate new ideas and winnow them down to the few that get prototyped and implemented, you are left with a situation where you are hoping that the best ideas (or any ideas of merit) actually make it to your customers.  Worse yet, you lose the ability to track value of ideas generated and implemented, calculate an iROI (Innovation Return on Investment) are build institutional knowledge of what works and what doesn’t to inform future investment decisions. BTW, at Symphony Services we have another way of evaluating the return on innovations from a revenue perspective called the Vitality Index, as opposed to looking at cost driven evaluations like R&D  as a % of sales, # of patents, etc..
2. I also think we need to explicitly recognize that while start ups are usually the source of many of the discontinous innovations, many start ups are founded by employees who worked at bigger companies, and came up with good ideas that were not acted upon by the big companies in which they worked. So they leave, create their own company and try to bring them to market.  Even some of the most progressive companies like Google, who promote the fact that they want their employees to spend 20% of their work time on coming up with new ideas, leave thousands of “inventions” (it’s not an innovation unless it generates revenue or reduces expenses) on the table each year (sometimes for good reason) and people still leave to develop their own ideas.  This is actually a very beneficial thing in my view and keep a healthy innovation ecosystem alive and well.
3. Michael also points out that due to the premise of delivering better, more predictable returns for their shareholders, the big mega-vendors don’t make the investments in R&D to generate these new innovations.  I don’t think that’s actually true.  Microsoft spends billions, but seems to get very little in return.  Many times I guess they’re just spending on the wrong things.   For the large companies, I think it’s generally cheaper — and easier — to let others invest in new ideas and then just acquire the companies that are successful.