Research has shown that the size of a corporate R&D budget doesn't necessarily correspond to the level of innovation at a company. In fact, powerful innovations often come from smaller companies or individual entrepreneurs. For example, in analyzing the cardiology device industry over a 10-year period, Harvard Business School Professor Clayton Christensen found that not a single major innovation was created from internal corporate R&D efforts. Rather, independent inventors created all the decade's leading cardiology products.
So what are the critical differences between corporations and entrepreneurs that might account for these results? My thoughts:
Revenue expectations and goals: Major corporations usually have multi-million dollar expectations for new lines. In addition, they demand that new lines deliver results very fast. Entrepreneurs, on the other hand, aim lower on the revenue side and (if not pressured by anxious VCs) give products time to emerge, keeping in mind potential growth and profitability.
Fit with strategy and business: Corporations assess innovations for strategic and business fit. Does the innovation fall in line with other R&D initiatives and can it be developed by the existing organization? Entrepreneurs are primarily interested in maximizing value and market potential. They devise the strategy, business, and team to best exploit the innovation. Instead of the business driving the innovation, the innovation drives the business.
Sustaining vs. disruptive--and corresponding risks: Because corporations often seek innovations that fit their existing structure and goals, they select concepts that are less radical. Brand extensions funneled through the same distribution channels, addressing the same customer base, are the rule. These sustaining or incremental innovations are also favored by employees, who fear the big risk/big failure outcome. Entrepreneurs by their very nature are more open to the riskier disruptive innovations, which have a significant impact on a market, product category, and the major players. Compared to sustaining innovations, disruptive products and services are aimed at nonconsumers and might go outside traditional distribution channels.
Speed, resources, and focus: Corporations have complex evaluation/approval procedures and full R&D pipelines; therefore, they're slower to bring innovations to market. Even once an innovation is greenlighted, it competes with others for development attention and resources. Entrepreneurs are focused on quickly realizing one innovation and dedicate their energies and resources to that goal.
Outcome: While a few corporations are experimenting with monetization models, most work along the same scenario: Sell it ourselves and expand as market results warrant. Entrepreneurs play with a number of monetization scenarios: expand, partner, sell, license, etc. This openness allows entrepreneurs the freedom to choose the outcome that will best maximize value.
Beyond all these measurements, the key difference between corporations and entrepreneurs might boil down to one word: passion. As an entrepreneur and someone in the business of meeting with like-minded individuals, I can testify that the single-minded, driving commitment of entrepreneurs is an incomparable advantage.
Think innovation. Think BIG.
Mike Collins |
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Big Idea Group was created by Michael Collins. Mr. Collins is an inventor and serial entrepreneur. Mr. Collins has an undergraduate degree in engineering from Dartmouth and an MBA from Harvard Business School. He founded Kid Galaxy, a specialty toy company and producer of the award-winning Bendos line. Mr. Collins is a frequent speaker on the business of innovation, appearing at industry conventions, university forums, and inventor groups. He can be contacted at