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Why big companies can’t innovate

Feb. 4, 2014
Innovation and the lack of it are getting a lot of press these days. Commentators seem particularly perplexed that large companies can't seem to innovate well. One typically finds only vague explanations from a Google search focused on the subject. But the real reason many big companies aren't known for creative genius may be pretty simple: Their quality programs have been too successful.
Innovation and the lack of it are getting a lot of press these days. Commentators seem particularly perplexed that large companies can’t seem to innovate well. One typically finds only vague explanations from a Google search focused on the subject.

But the real reason many big companies aren’t known for creative genius may be pretty simple: Their quality programs have been too successful.

At least that is one of the insights of Eric Ries, an entrepreneur who could be viewed as an expert in starting companies. He has been involved in three start-ups, one successful, two not. He is also the founder of something called the Lean Startup movement. One of his basic principles for getting innovative products into the marketplace quickly is something called a minimum viable product, or MVP. The problem many big companies face is that delivering a “low-quality” MVP seems counterintuitive to them. It contradicts the quality principles preached by W. Edwards Deming.

When companies have Six Sigma quality cultures, they often balk at fielding an MVP that barely works. The typical MVP is glitchy to the point where some of its features may not function at all. It is simply viewed as something that can be given to potential consumers, quickly, to show developers whether they are on the right track.

“Most modern business and engineering philosophies focus on producing high-quality experiences for customers as a primary principle,” Ries points out. “These discussions of quality presuppose that the company already knows what attributes of the product the customer will perceive as worthwhile. In a start-up, this is a risky assumption to make.”

The MVP concept sprang from one of Ries’ own lessons learned: After spending weeks developing a complicated chunk of computer code, his start-up firm handed the program to potential customers for the first time. It turned out those potential buyers couldn’t have cared less about the portion of code that had consumed so many person-hours but were enthralled with another part that had been simple to devise.

One reason big companies resist the idea of MVPs is that they fear what will happen when they deliver a half-baked product to customers. “Teams steeped in traditional product-development methods are trained to make go/kill decision on a regular basis,” he says. “If an MVP fails, teams are liable to give up hope and abandon the project altogether.” Wrong reaction, he claims. Serious innovators typically iterate their product many times. It is only after several tries that they change course.

But companies with quality programs have a leg up on innovation in one important area: Deming’s quality principles really start coming into play once you’ve figured out what features customers really want. As Ries explains, “Having a low-quality product can inhibit learning when the defects prevent customers from experiencing (and giving feedback on) the product’s benefits.”

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