Why big organizations are systems that cannot innovate

In the 90s I surfed the internet and began to wonder:

“Am I still in a western country or am I in the Wild West”.

The longer I browsed, the more the latter seemed true. The Wild West was wild, because there was no central authority or law enforcement (outside the ‘Sheriff’). This gave people opportunities and freedom, but it could also be tough and dangerous. The internet of the nineties.

Google on ‘90s internet’ and you find the image above

Who am I?

I wasn’t in no men’s land. I was sitting in my own room in a country where everything goes by the rules. It seemed only that these rules didn’t apply online. This meant you can say whatever you like, start a rogue business or share all kind of illegal music and movies.

I didn’t get it. I am in my room, just 16 years old and see this anarchy happening before my eyes. Where is the government? Where are the powerful politicians? And where are the hundred of thousands civil servants?

I thought: Am I missing something? I am just a kid. What do I know about it? For me, growing up as a digital native, it was all obvious. But it wasn’t that obvious. Here an example of the prime minister at the time:

The Prime Minister had been a union leader, a minister of finance and was a great statesman. He was very competent on financial and legal matters. It didn’t mean he also had knowledge about exponential technologies. And this was also true for the government as a whole.

Big organizations

Over the years I learned that it takes big organizations a lot of time to get fit for purpose. When the world is changing, the organizations are like machines still doing the same thing.

Every part of the organization, say a specific team are a wheel in the whole. Maybe individuals see that the machines are losing their purpose, but this doesn’t mean this message will reach the head of the machine. As an individual, you will be held responsible for just a small specific part of the system. Your opinion that something needs to change may matter, but is often of little consequence.

Though these organizations' main purpose is to serve citizens or customers, the employees that are working on parts of the machine can become very disconnected from this goal. So an individual or a team within a system may see opportunities to modify the machine, reassemble itself or build a new one. The rest of the machine say “just do your job as always!!!”.

This is also the reason why big companies have a hard time to innovate. Innovation is done by small team of scientists, startups or spin-offs. But a big organization can innovate too.

It can be done

In the beginning of the 90s the IT market was dominated by IBM, Microsoft and Oracle. They had big market shares, resources, smart people and well funded R&D departments. As tech companies it was my expectation that they soon also would dominate the internet.

We all know this didn’t happen. They all stuck to older technologies. When I visited the Microsoft website at the age of 16, I wondered “how can they build such a bad website?”. Often I needed to go to Wikipedia to get real information. Microsoft also had strange plans to create its ‘own’ internet and used its market dominance on the browser market.

Microsoft failed with the internet, Microsoft failed then again with smartphones. And when the cloud came… they just nailed it. Azure has become one the leading cloud providers. Well three times is a charm.

Why can’t I watch television through the internet?

What was different this time? Why could Microsoft innovate and reinvent itself? One of the most important things was that the head of the machine changed its mind. Satey Nadella made Azure very successful and rolled out a cloud -first strategy throughout the company. Almost all parts of the company were modified for this.

For traditional companies there is often a pressure needed from the outside to change. A pressure driven by consumers or disruptors. Like Tesla and Dieselgate changed Volkswagen. Under the direction of Herbert Diess created a whole new EV platform for all EV cars.

There are more stories like Volkswagen with EV’s and Microsoft with the cloud. But these are more the exception to the rule. Most of the time management fails to read time. They have no clear strategy, rely (even to a certain laziness) on current revenue streams. On the system. The field of opportunities remains wide open.

I often had questions like “Why can’t I watch television through the internet?”, “Why isn’t there a taxi app?”. Wasn’t there one television network who could figure out a good business model, wasn’t there one taxi company who want to create a platform? No, this was left to more innovative newcomers.

The newcomers

Surely every company says something about digital transformation, about innovation, about customer experience, but mostly at the end they are risk aware and afraid of failure. Only the new companies disrupt:

Traditional television → Streaming (Netflix)
Traditional retailers → E-Commerce (Amazon)
Traditional carmakers → Electric cars (Tesla)
Traditional taxi services → Taxi platform (Uber)
Traditional telecom companies → Messaging (WhatsApp)
Traditional Search companies → Algorithms (Google)

Every time the pattern is the same. Big organization can’t redeem opportunities. Then new startups fill the gap. It wasn’t that the traditional companies were fully replaced as you can still send an SMS, watch cable and go to a shop, but the real innovation and digitalization came from elsewhere.

Currently, Netflix, Amazon, Tesla, Uber and Facebook are the dominating companies, but one day they will be established. And they will be traditional. This is a message to the young generation. Don’t think, these companies will surely dominate the market forever. That they will take over new fields like IOT, AI and blockchain.

A message to young people

As a young person you often hear “You are the future”. This is very true, but as this blog shows there are many more lessons to learn.

  • You are the future
  • The future is in your hands
  • The future is now
  • The future is a Wild West
  • People innovate not companies
  • Don’t be afraid to fail, be afraid not to try
  • Just do it

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