Innovation in Corporate
Show me the incentive, I'll show you the outcome — Charlie Munger
It is no accident that innovation rarely happens inside large corporations. Employees gain recognition and climb the corporate ladder by serving management first, and the business second.
Incentive structure
The entire incentive system is designed around meeting the needs of the management; an abstractions of complex situations by providing:
- Sense of understanding by having a simplified narrative
- Sense of control by having an outlet to disperse instructions
- Sense of progress by having simplified measurable outcome
The C-suite serves the Board of Directors, the VPs serve the C-suite and so on, mastering on the very specific corporate skills above as they progress through the organization.
This often leaves the expert and implementers—masters of their work, but not the corporate skills—that actually deals with the day-to-day complexities, without the motivation or support to nurture innovative ideas.
Where does innovation comes from?
Simply put, the management does not trust its own employees to generate groundbreaking ideas. Instead, they turn to large consulting firms to “show the way.” Unsurprisingly, consulting firms with their cookie-cutter models rarely leads to meaningful change or lasting success.
Structural constraints
Corporate structure itself works against innovation:
- Management sets direction and decisions
- Middle management translates executional complexities into the three “needs” above
- Executors carry out the tasks
There’s no formal role for the thinker—the space where innovation should live.
Some will do it anyway
I'm just deluded enough to think that maybe this time things can be different.