Big is bad? A response to Erik Keller.

Erik Keller is a bright chap, masses of experience, ex-Gartner analyst and so on. He posted the other day about big enterprise software companies not being able to innovate because they are, well, big. Dennis has called me out to comment, and I will rise, trout-like to the lure. Sometimes Dennis ties a good Mrs Simpson. And I will take an enterprisey nibble, be hooked and thrash around for a while. 

To be frank, this isn’t one of Erik’s better posts.   I’m sceptical of sentences that begin “by definition” but then don’t offer any definition.

By definition, innovation comes from small, early-adopter efforts for a given company or industry

My take. (obviously biased as I work in one of those “innovation-free” big enterprise software companies !-) )

1.  Where is the proof?  Please show me the statistics that show innovation is “by definition” a small company thing. 3M, GE, Philips, Intel, Siemens, Nokia, DARPA,IKEA, Sun, BASF, IBM, Stanford and MIT are all biggish organisations that do a great job at innovation.   Irving Wladawsky-Berger from IBM  has been at the forefront of innovation at IBM for ages. His blog is a gem, and his take on IBM’s history is fascinating read.

2. How are you defining and measuring innovation?  I’m confused.

3. I buy the point about crowdsourcing and I’m a big fan of Von Hippel’s customer led innovation.  But start ups without customers can’t really do customer led innovation. (I know, I started one)

4. Big companies do have bureaucracy and sales inertia, fair point, but often they have the space and the cash to hire and nurture innovative people. Not every innovator is an entrepreneur, and big companies, when run well provide a great environment for people to innovate. Small teams are not the sole preserve of small companies.  Smart big companies recognise the serendipity effect of putting lots of clever folks together, and work hard to manage the challenge of disruption. Believer though I am of the cluetrain and customer-led innovation, often really earth-shattering mindblowing stuff is happening in a government funded or large enterprise lab, and we have absolutely no idea what it will lead to. (see a previous rant)

 

5. Erik goes on to comment.

Today’s most innovative large companies, including DuPont and Proctor & Gamble, are not attempting to do everything themselves, but rather reach out to customers and independents.

Procter & Gamble, (to spell it correctly) have clearly innovated through acquisition, they are kings of consolidation. Their ability to acquire brands and nurture them is to be marveled. The Gillette merger makes Oracle PSFT merger seem like very small beer.

In the SAP context, a basic premise of Netweaver is all about enabling ISVs and customers to drive their own innovation, and it is by working closely with the P&G’s and Du Pont’s of this world that we develop the applications that they want. I’d suggest SAP’s SDN is a pretty good  example of “social networking, crowdsourcing and supplier collaboration”

Also, to argue that 

The concept of one-stop shopping for the technology industry is akin to the model espoused by Henry Ford in the early 1900s, which culminated with the creation of the River Rouge plant, where Ford did everything from the smelting of iron ore to final fabrication of automobile

Would be valid if Oracle acquired Intel, Sun,and Accenture, but I don’t see even Larry doing that. 

 6. M&A is the most dominant trend at some software companies, and it is the one that journos and analysts love to write about, but even Oracle’s M&A spend is dwarfed by that in of players  in Pharma, Insurance, FMCG, Retail, Banking….

7. Lumping all big software companies in the same box is as absurd as dissing Toyota because of what Ford do. Not all big companies are the same.  Some big companies innovate, others don’t. Small companies that innovate consistently quickly become big companies.  Big companies that stop innovating  shrink.  Some Austrian chap wrote about this some time ago, but instead of quoting him I’ll rely on IBM’s Irving to provide more sound guidance on how to sustain innovation in times of challenge.

There is no truer test of the ability of a business to innovate than to see it successfully reinvent itself and keep going year after year after year. 

It isn’t really a question of big or small at all.

4 thoughts on “Big is bad? A response to Erik Keller.

  1. Thomas: Thanks for your thoughtful and interesting comments. A couple of things.

    First, I think your example of SAP’s SDN is one of the few examples of a large software company being innovative. SDN has done a great job for SAP customers and partners in creating a strong and mutually benefitial community. Also it has most likely lowered the overall cost of support for SAP thus making it a good operational decision.

    As to your response, it was interesting that you mostly chose not to give examples (save SDN and IBM) of how you and your large peers are being innovative but rather of nearly every other industry. Big companies like Apple, GE, Toyota are rather innovative in all kinds of ways; unfortunately many of their software counterparts are not.

    And as you agree with my point of the sales force and organization challenge, I also suspect that you would agree with the point that it is through these lenses that nearly all of your customers see you and your peers. In all big software organizations there are very innovative folks, yet they are rarely seen or their impact felt by the average customer.

    It is not big is bad. It is, in enterprise software, big is commodity and part of the large entitlement budget that our buddy Vinnie so passionately writes about and tries to decrease for his clients. There is nothing wrong with that but it is not particularly innovative.

    I think your quote from IBM’s Irving at the end of your post is spot on.

    There is no truer test of the ability of a business to innovate than to see it successfully reinvent itself and keep going year after year after year.

    However, when I apply this standard to most large enterprise software companies, it is hard for me to see how it broadly and deeply applies.

  2. Erik,
    Thanks for commenting. The concern I had with your post was really two words. “by definition” I saw you pointing a finger at all big companies, that’s why I didn’t just try and blow SAPtrumpet as I’m wont to do.

    There is masses of innovation and invention going on in SAP, Microsoft and IBM. Where we all fail is in communicating this to the market well. It is, I fundamentally believe, about building conversation, and this is lost in
    cacophony that is modern marketing.

    When I look through the presentations from the HR insider conference this week, I’m thrilled to see the innovation that customers achieve with our software. After all, software is only innovative when it is used. That is the real test. Huge global HR systems going in a year, when 10 years ago these would have been 5 year affairs.

    One place where I see new innovations here at SAP is in how we develop product. Agile and six sigma, managing a global development workforce, etc. The next wave of innovation must be in how we market and sell.

    I read today on ZDNET of the huge productivity gains that software has made, and at least a portion of this could be apportioned to ERP etc.

    The market will continue to judge innovation. It wont be comentators like you, Vinnie or I that arbitrate over what is innovative or not. If SAP is growing and strong in 5-10 years then I’m right, if not then you are.

  3. Thomas:
    I am on your side on this one. Clearly, a lot of innovation does come from small companies. Every time they make a widget that can send an SMS message to a website, or simultaenously rotate and crop a photo – it is considered innovation, and the founders/execs/marketing heads start talking to press, bloggers and analysts about it. If a company like Oracle sent out a press release everytime we had a beta release with 5 new features, it would create a deluge of press releases. But that’s exactly what the small innovative companies do, and for good reason- they need the publicity to get money and get big.

    It brings up the issue of what is innovation in the context of a consumer app vs an enterprise app. The innovation in enterprise applications includes improvements in UI but that is not all that the customer is asking for. Very often they are asking for scalability, high availability, manageability and a story on how a supply chain application scaled seamlessly at a manufacturer of cement in Mexico, or a semincoductor manufacturer in Taiwan does not come across as a ‘breakthrough’. After all how many cover stories get written on ‘Big Global Company runs 7 by 24, processes orders, claims, multiple currency transactions while dealing with network outages, hardware crashes without missing a beat- in large part due to software from big enterprise software companies like Oracle & SAP’.

    If you have to be a mostly SaaS or Web2.0 company to be considered an innovator, then yes many large enterprise software companies of today are not ‘innovators’. By definition.

  4. Anshu, Thomas – use my MAGIC innovation framework below and show me examples where SAP or Oracle (or Microsoft or IBM) have delivered what your customers – not your marketing folks- would call innovation

    http://dealarchitect.typepad.com/deal_architect/2006/08/cio_view_of_inn.html

    Most large SW companies either copy what others are innovating and make it “bullet proof” or they acquire innovative companies. And then they typically violate the “constraints” clause in the MAGIC framework.

    Innovation is when your customers go Wow – not Gulp….showcase the Wows…cause there are way too many Gulps out there

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