For more than twenty years, major innovations—the kind that transform industries
and even societies—seem to have come almost exclusively from startups. Established
companies still dominate most markets, but despite massive efforts and millions of
dollars, they can’t seem to achieve the same kinds of foundational breakthroughs.
The problem, say Tony Davila and Marc Epstein, is that the very processes and
structures responsible for established companies’ enduring success prevent them
from developing breakthroughs. This is the innovation paradox.
Most established companies succeed through incremental innovation—taking a
product they’re known for and adding a feature here, cutting a cost there. It’s a solid
recipe for growth, but major breakthroughs are hard to achieve when everything
about the way your organization is built and run is designed to reward making what
already works work a little better. But incremental innovation can coexist with
breakthrough thinking.
Using examples from both scrappy startups and long-term innovators such as IBM,
3M, Apple, and Google, Davila and Epstein explain how corporate culture, leadership
style, strategy, incentives, and management systems can be structured to encourage
breakthroughs. Then they bring it all together in a new model called the Startup
Corporation, which combines the philosophy of the startup with the experience,
resources, and network of an established company. Startup corporations encourage
visionary thinking at all levels—instead of depending on a single Steve Jobs, they have dozens, even thousands of them.
Breakthrough innovation no longer has to be the nearly exclusive province of the new kids on the block. With Davila and Epstein’s
assistance, any company can develop paradigm-shifting products and services and maximize the ROI on its R&D.
About The Author:
Tony Davila heads the Entrepreneurship and Innovation Center as well as the entrepreneurship department at IESE Business School
in Barcelona, where he also is a professor in the accounting and control department. His work has been published in diverse
journals, including Harvard Business Review, California Management Review, Journal of Business Venturing, and Research Policy. He
has received IESE’s research award three times, and his dissertation was distinguished by the American Accounting Association. He
was also a finalist for the McKinsey Best Paper Award from the Strategic Management Society. The Spanish government awarded
him the Ramón y Cajal scholarship for his work. Dr. Davila is the coauthor of Making Innovation Work: How to Manage It, Measure
It, and Profit from It (2006, 2013) and Performance Measurement and Management Control Systems to Implement Strategy (2000).
Marc J. Epstein, MBA, PhD, is Distinguished Research Professor of Management at Jones Graduate School of Business at Rice
University in Houston, Texas. Dr. Epstein is considered one of the global luminaries in the areas of sustainability, governance,
performance measurement, and accountability in both corporations and nonprofit organizations. His 20 authored or co-authored
books and over 100 professional articles include many award winners, including Making Innovation Work: How to Manage It,
Measure It, and Profit from It (2006) and Making Sustainability Work: Best Practices in Managing and Measuring Corporate Social,
Environmental, and Economic Impacts (2008). Dr. Epstein is also currently working extensively in developing countries in Africa, Asia,
and South America on microfinance, entrepreneurship, education, and the commercialization and dissemination of low-cost health
technologies.
