One of the big problems for a large company is maintaining innovation. It is surprisingly hard to get new innovative ideas on much of anything to emerge into something real.
This is because the larger a firm gets, the more compliance overrules everything else. The focus is on keeping things simple for managers and policy after policy is created to ensure that nothing bad and, unfortunately, nothing new happens.
The problem is worse for companies that practice forced ranking because folks learn that to get ahead it is often more effective to torpedo creative coworkers in order to prevent them from getting that raise or promotion.
There are ways around this such as setting up a lab, skunk works or buying innovative companies (and often killing them). Dell, which is actually pretty good at buying innovative companies successfully (which in and of itself is rare), showcased another path this week with its Innovation Day for Healthcare.
Let's talk about restoring innovation.
Acquisition is currently the most common way to solve the problem, but without special care the innovation the firm thinks it is buying never emerges because the buying company's internal process kills it.
Now if you stand back this should be obvious. If you are having trouble innovating then buying an innovative company and then driving it to comply with the same policies that are clearly preventing innovation in your firm will just as effectively kill their innovation. Yet the most common practice is to integrate the acquired company, effectively killing off the very thing you paid to get. Every year I watch massive amounts of money basically being spent to create innovation using a practice that virtually always kills it.
The proper way to handle this process was created at IBM not Dell, but Michael Dell, to his credit, saw the value and brought it to Dell. Dell is currently, in my opinion, doing the best job of getting value out of its acquisitions. And it is a relatively simple process: Identify what is of value inside the firm (what you paid to get) and protect it. Layer on resources that enhance the firm and don't ram the successful small firm into the bigger entity. This practice has resulted in a significant return on most every (I'm hedging because I don't know of one that failed) acquisition Dell has made since implementing the practice.
You don't see this much anymore, but this is basically where a firm creates a separate entity and then fills it with out-of-the-box thinkers and removes much of the compliance structure. The closest thing to this in the market I know of (and these efforts tend to be very secret) is EMC's Pivotal software effort.
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