Innovation and Large Companies

I had a few conversations lately about the difficulties of producing innovation in large companies (telco operators, in the specific, but that equally applies to many other businesses).

That reminded an excellent article Robert Scoble wrote a couple of months ago, Why Google can't build Instagram; that is, the main reasons why big companies can't innovate are

• they can't afford to release early (minimal) versions of the product and iterate; people expects finished, quality products from big established companies

• their products need to scale from day 1; while a startup normally have a few hundred users in its early days, a new product launched (even in beta or labs) by Google immediately has millions of users. Therefore more people or entire teams need to be involved to make sure the new service will properly scale

• in big companies there's no complete freedom, even when it comes to technical choices. You are supposed to use one of the approved technologies, for instance; and you aren't suppose to use or integrate with competing services

So what's the solution? Are a vast majority of big companies doomed to fail within ten years for lack of innovation?

Robert proposes three ideas: innovate by acquisition, work on open source projects and keep teams small. I agree with the first proposal, but I think there is actually a better method large corporates can use to innovate.

YCombinator, TechStars, CapitalFactory and other similar programs have demonstrated in the past five years that there's a systematic and repeatable model to create innovation. The rules are simple (but correct execution is, as usual, the most important thing)

• select the best aspiring entrepreneurs worldwide

• constant mentorship

• provide minimal funding to entrepreneurs to create their startups (not to work on your company and your ideas)

• help entrepreneurs to manage company financials, funding and growth (but without interfering too much with their business)

What's the budget to create such a program? Less than the money spent in any mid-sized project in any big corporate. You can probably go a long way with 1 million $ (or euros) per year, and roll out a great program for less than two.