Large companies prefer to deal with large companies. There's an underlying assumption that big is beautiful and that's a major blocker to the uptake of innovation from small companies.
However innovative they may be they are too often perceived as hassle, a tedious management overhead, a risk and at best career neutral, but potentially career limiting.
The more impact an innovation is likely to have, the more that barrier comes into play.
The barrier's not because big company people are better technically - they're usually not: many technical innovators in small companies have held seriously important roles in large ones.
The barrier's not the technology - even if proof points demonstrate an innovation is faster, better and cheaper, that doesn't guarantee uptake.
The barrier's not lack of agility - far from it, small companies can knock the socks off large ones when it comes to flexibility, availability and adaptability.
The Underlying Blockers
The real blockers relate to factors such as personal risk appetites, interdepartmental politics, unbending internal processes, short termism and lack of intrapreneurship. It won't be expressed like that but will be the sort of thing that underlies capricious delays, prolonged procurement process or business due diligence piling up proof point after proof point project (at your expense).
Small innovative companies don’t always do themselves any favours. There are still, as ever, too many whizzo solutions looking for problems with too little appreciation of the real priority pain points an organisation, and the dynamics that drive their decision making. They still too often don't speak the same language or identify enough with the corporate mindsets.
Finance Sector Challenge
Take the finance sector, for example. Small companies are regarded warily as a risk, especially for anything important. “We would be reluctant to deploy a piece of niche technology from niche players in critical aspects of our organisation,” F&C Asset Management’s James Whyte told me at a recent Jericho Forum security event. His front of mind perspective is the £105bn of assets his organisation is managing in a heavily regulated and restricted environment.
He explained that in talking to his peers the organisation does identify bits of emerging technology, and reviews it but deploys it cautiously in a fairly low risk part of the organisation.
The real expectation is for an innovative technology to be bought out or procured by a large organisation, such as McAfee. “What we see is innovative technology absorbed by the large organisations and integrated into their offering that from the risk perspective allows more of that technology to be taken on across the board.”
Public Sector Challenge
Or take the central government. Although the public sector is coming under political pressure to use more small companies that’s not a signal for innovators to drop their guard. “It’s a huge amount of bother to deal with smaller organisations,” confided one senior public official.
The danger is that small companies will be plucked out for project window dressing and then quietly discarded. Prime contractors, not government, are the gatekeepers for innovation deployment, so there will be no incentive for take-up for real if an innovation threatens status-quo dependent revenue streams.
Case Study: Breaking Through
Speaking at a BCS forum for entrepreneurs this May, David White, CEO of software company Kusiri.com, illustrated how he had to overcome some of the generic barriers to breaking the “big is beautiful” barrier in the finance sector.
He had distinct advantages. He had been Director of Technology Innovation for RBS so he understood the mindsets intimately. He has first hand long-standing experience of the real pain points, and their priorities. So he could focus on a particular pressing gap that needed to be filled.
Another advantage was a wide range of contacts in the finance sector from his many years in the corporate environment. He knew them and they knew him.
Another important advantage was that he had capital from his savings to fund himself.
Even with those advantages, he admits to succumbing to a common temptation with his first blue chip customer (not RBS) by providing a 70% ready system, with the other 30% “smoke and mirrors”. He got taken to the cleaners.
However, he recovered from that and is now deployed in several large organisations. His former experience has also helped ensure that he has largely avoided another common pitfall for innovative small companies, getting stuck in an R&D backwater.
In his case it was 15 years experience actively looking for innovation with a large bank that enabled him to see and exploit an opportunity to break through the "big is beautiful" barrier.
* Searching for success: I'm always looking for practical case examples showing how innovative companies have successfully broken through generic barriers into large enterprises or government. Please point me to good examples you know! Thanks!