Lee Teschler
Executive Editor
@DW_LeeTeschler
That’s not how we do things around here.
As with many young engineers, I used to hear that phrase a lot when I was first starting out. Though often meant as well-intentioned advice, it was like fingernails on a chalk board for somebody who had what today is called an out-of-the-box idea.
Out-of-the-box ideas are a bit like the holy grail of product development. But would-be 
innovators often still find themselves having to deal with not-invented-here-type put-downs, particularly if they work for big, established companies. Academics who study how innovative products gestate say the result is often a big waste of research dollars. And that’s particularly true for research in big companies that yields developments that could be termed disruptive.
As you might suspect, there has been a lot of navel gazing about why big companies get out-innovated by smaller competitors with fewer resources. Insights into the causes come from researchers Rebecca Henderson of M.I.T. Sloan School of Management and Sarah Kaplan of the University of Pennsylvania. Surprisingly, they found that the explanation has little to do with technical issues. It more generally involves biases set by how managers are rewarded.
Specifically, the two researchers found that senior managers often want to look at the economics of new technologies according to values they’ve internalized after years and years of working in industry. The trap is that senior managers generally have received a long string of promotions “on the basis of what should be done.” Worse, they may reject as unimportant information alerting them to radical shifts in the environment. Thus to entrenched managers, going against these learned behaviors just seems intuitively wrong.
Of course, the economics and market tactics that make disruptive technologies successful are far different than that of the industries they disrupt. Sometimes savvy top managers recognize this and isolate the cutting-edge stuff in a skunk works. The most visible example is the IBM personal computer introduced back in the 1980s. It was initially run out of Boca Raton, Fla., far from IBM’s headquarters in Armonk, N.Y.
The problem with those kinds of schemes, say the researchers, is that the skunk works managers tend to eventually get politically out-maneuvered and reabsorbed back into the business’s main stream. The reason is that as organizational frames of reference become more deeply embedded in the organization, they become harder to argue against.
Ditto for incentives. A sure way to undermine support for a new company division is to provide enticements perceived as unfair by employees close to HQ. A remotely located skunk works can mask the incentive structure, but it also isolates the operation from company assets that could make the venture a success.
Consequently, Henderson and Kaplan figure it may be harder for companies to learn how to evaluate and reward people working in new technologies than to do the technical work.
You’d be correct to say this all sounds discouraging from the standpoint of large companies. It often proves impossible for large companies to manage both a disruptive technology and an established business within the same organization, the researchers say.
That’s a discouraging thought for people with big ideas, but it’s also something to keep in mind when fuddy-duddy managers follow their instincts and shoot down your latest brain child.
Filed Under: Commentary • expert insight, Design World articles
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