Debunking the Startup vs. Corporate Myth: A Closer Look at Innovation Culture

In today's rollercoaster business environment, a thriving innovation culture is critical for any organisation that wants to stay competitive, let alone ahead of the game.

I know the idea of innovation culture is associated with startups, but I want to protest the notion that large corporations can't also be incredibly innovative .

First of all though I should say thank you for reading this article; it's the first in my new newsletter Culture for Lunch which focuses on Innovation Culture. If you're eating lunch alone today, allow me to assume that you're also hungry for fresh perspectives. (Don't hesitate to subscribe if you're a person who's regularly hungry.)

In this article, we'll explore some common misconceptions about innovation culture. Let's see why it's not automatically done better at a startup compared to a large organisation.

1. The Portfolio Effect

Large organisations are often compared to clumsy dinosaurs.

But they have the advantage of being able to run a portfolio of innovation projects that can balance risk and reward. By diversifying your innovation efforts, you can minimise the impact of individual failures and maximise the impact of successful projects. Teams who were staffed on a 'failed' project can quickly start afresh on a new project. Assuming team members don't get penalised for unsuccessful outcomes, this can form the basis of a sustainable innovation culture.

Startups, on the other hand, usually have limited resources. They have to focus their efforts on a single project or idea. This lack of diversification can make you more vulnerable to failure, because you're more likely to double down on a bad idea until your funds have run dry. Rolling off a failed startup and straight onto a new one is rarely an option for founders outside of Silicon Valley, so you can easily become 'wedded' to your idea. Psychologically, it becomes tempting to ignore negative feedback from customers and silence objections from employees. This can kill your startup's ability to create a healthy innovation culture.

Main takeaway #1

?? The ability to manage a portfolio of ideas gives larger organisations an edge over smaller companies - which has the power to reinforce a healthy innovation culture ??

2. Solving the Greater Problems

Big companies get mocked for their lofty, platitudinal mission statements. Yet large organisations have a unique ability to drive innovation at a broader societal level, as they have scale and reach that startups don't. By virtue of their size and resources, they're better positioned than your brother's startup to tackle large-scale challenges. If we want innovation to make a significant impact on society (and we do!) large corporations have the resources to make it happen. Take the example of Google X , who focus on tackling major global challenges like the energy transition, healthcare, and climate change. Google and other huge companies have an unparalleled ability to deploy the sums needed to invest in global, long-term innovation initiatives.

Assuming these investments do indeed take place, it can be tremendously motivating for innovation professionals to be involved in such projects, feeling they are making a positive impact at large scale. It can also motivate managers to become more responsible and professional about innovation, knowing that the societal stakes of the their work are so high.

On the other hand, startups tend to be more focused on narrow niches, simply because they lack the resources or scale to tackle larger societal challenges. For example, even in a "positive impact" sector like renewable energy sector, your brother's startup might decide to focus on developing solar panel optimisation tools for residential homes in Bavaria. While such innovations are important, they can rarely have the same scale or impact as larger organisations and are rarely able to drive systemic change (unless they engage in significant collaboration with larger organisations).

Only a minority of startups unfortunately are working on lofty goals like renewable energy. If I decided to launch an astrology-based meal delivery app, or a platform for booking private hot tubs, or an odd-sock subscription service, or a virtual reality platform for birdwatchers who don't like forests, or a smartwatch that reminds you to walk your dog, I know I would struggle to attract the kind of talent who want to make a real impact. In turn, lukewarm enthusiasm for the mission would hardly drive me to strive for excellence as a Founder/CEO. Mostly likely our startup would settle on a service that creates negligible value for society and we would care more about raising funds or getting acquired. Our company culture would suffer as a result.

Since innovation culture works like a feedback loop, projects with the ambition and budget to drive meaningful change in the world tend to stimulate the right behaviours and attract more serious people. These behaviours and capabilities in turn make it more likely the projects will be successful, thus reinforcing the company's culture.

Main takeaway #2

?? Large organisations are uniquely able to pursue meaningful innovation at a broader societal level. Startups can still play a crucial role in specific niches, but they are at a disadvantage when it comes to projects with global impact. ??

3. Leadership is what Drives Innovation

The nature of a thriving innovation culture is not dependent on the size of the organisation. Innovation is driven by a combination of interconnected factors such as leadership, culture, strategic planning, and execution. A large organisation with the right leadership and culture can be just as innovative as a startup, if not more so. Satya Nadella's spectacular turnaround of Microsoft in recent years is a fantastic example of how a cultural transformation based around a growth mindset translated into outstanding commercial performance - to the delight of employees and investors alike.

It's worth noting that even with the most talented and driven founder, a startup can falter in terms of innovation if the he or she lacks the right attitude. Having a founder who insists on keeping an iron grip on all aspects of the company at all times is going to sink morale pretty quickly. They will also prove to be ineffective, ultimately. Likewise, refusing to use any technology that the founder doesn't personally understand will create a culture that rejects new ways of doing things (not to mention outdated software and systems). And I would argue from my experience that a cultural trait like positive toxicity is more likely to be present in a startup than in a large corporation. (Yes, this is a dig at all those hubristic founders who refuse to acknowledge any negative feedback or criticism, insisting that the company is always "crushing it".)

Conversely, a large corporation with strong leadership and a culture of innovation can thrive and evolve in spite of its size and complexity. It all comes down to the approach to innovation and the willingness to embrace change and new ideas.

Main takeaway #3

?? The health of an organisation's innovation culture is driven less by company size than by the commitment of its leadership, so large corporates are at no inherent disadvantage vs startups ??

In conclusion

A thriving innovation culture is critical for the success of any organisation, and I think we all recognise that both startups and large organisations have their strengths and weaknesses when it comes to innovation. The key to creating a thriving innovation culture is to have committed leadership, a culture that encourages experimentation and risk-taking, and a willingness to embrace new ideas.

So let's celebrate innovation in all its forms, and continue to push the boundaries of what's possible by building and reinforcing a healthy innovation culture within our organisations, whatever their size.