Product Marty Cagan

Innovating in Large Companies

In the last article, we discussed techniques for getting stuff done in a large company. Now I’d like to talk about the related problem of innovating in a large company.

There is a lot of cynicism out there about whether or not you can really innovate in a big company. Some believe that nearly all true innovation happens in the startup environment, and that the best a large company can do is either copy those innovations or acquire the successful startups. While I agree that it is certainly much easier to innovate in a startup, innovation most definitely can happen in larger companies as well.

Unless you’ve worked at one of these large companies, you might be surprised to hear that innovation is even a problem. After all, we hear so much about it, and see the success of large technology companies, so we naturally assume that innovation is powering all this growth. But as we explained in the last issue, as organizations get larger, they invariably become more conservative, and less willing to take risks. Again, this is because large companies have much more to lose than smaller companies, so they get good at protecting what they have. But there are also substantial advantages to shipping product from a large company, and despite their risk-averse nature, your company does need you to innovate.

The two biggest factors influencing your ability to innovate in a large company are your corporate culture and your manager. In my experience, there is much that the typical large company could do to improve the ability of their employees to innovate. What I want to discuss here is what you can do even if you find yourself in a team and an organization where innovation seems difficult. So here are several techniques for coming up with the innovations your product is looking for:

– Innovation via the 20% Rule.

Many of you have heard that at Google, the engineers get to spend 20% of their time on the projects of their choice. More than 20 years ago, this was also the policy for our team at HP Labs, and we borrowed the idea from Xerox PARC. It worked then and it still works now. At HP Labs, our job was to come up with innovative technologies that the product divisions could then incorporate into commercial products. In the group I was in, we took five new products to market, and only one of them was for a technology that came from above (and that product was the one that actually failed badly in the market). The other four innovations were fruits of the 20% rule.

As much as we might like to think that the great product ideas are the result of great strategic planning, and come down from the executive team, in many cases, the best ideas come from the bottom up. What’s great about the 20% rule is that so many ideas can be tried out. And when you inject the feeling of ownership that comes with coming up with the ideas yourselves, the ideas are pursued with more passion and creativity.

If your company does have the 20% rule, make sure it applies to product managers and product designers as well as engineers. Unfortunately, most companies don’t have the 20% rule. That’s a shame, and I hope you forward this note around and that management decides to give it a try. But if not, that’s why skunk works was invented…

– Innovation via Skunk Works.

Skunk Works is a very old industry term that originally referred to secret military projects, but today refers to chasing ideas under the radar, unhampered by bureaucracy, on your own time if necessary. Skunk works projects have saved countless large companies.

In large organizations, it’s hard to get permission to officially explore ideas. However, once you have proven an idea, it’s remarkably easy to get the project funded. So long as you continue to carry out your official job responsibilities, I have always found that management is supportive – many times they’ll even pitch in and help.

Just remember that your company likely owns the intellectual property of anything you come up with, so I’m not suggesting that this is how you pursue your new startup idea. Although, if you do chase a skunk works idea, and the result looks good but your company doesn’t want to pursue for whatever reason, you might want to discuss an arrangement where you pursue the idea on your own. Those of you that know your Silicon Valley history may recognize this situation as the birth of Apple Computer when Steve Wozniak’s employer HP wasn’t ready to enter the personal computer market.

– Innovation via Observation.

One of the easiest ways I know of to innovate is to just watch (and listen) as actual users attempt to use your current product or a competitor’s product. Watch a few of these sessions and you start to see patterns of frustration and expectations. Watch some more and you’ll start to get ideas as to how to better meet the needs. Bring in an engineer that is familiar with the available technologies, and together you will start to come up with better ways of solving the problem.

The key is to get the product in front of actual target users, not early adopters, and certainly not anyone from your company (including you). You don’t need formal usability testing labs either. You can do this informally, and you can often take the software out to the users (ideally in their native habitat – their office, their home, the mall).

And you don’t just care about whether the software is usable or not. You care about whether or not the software is meeting their needs. Even if it’s usable, do they care? What problem do they really need solved?

Remember that innovation is rarely about solving an entirely new problem. More often it is solving an existing problem in a new way. So watching people struggle with their existing solutions is a great way to highlight innovation opportunities.

– Innovation via User Experience Design.

Another good source of innovation is to step back, relax your technical constraints for the moment, and consider what the ideal user experience would be for your product. Not just more efficient implementation of tasks, but eliminating tasks altogether. What is really essential, and what is there because it’s a side effect of the way the product is designed and built?

Every system has an implementation model that is the basis for how the product was built. But the user doesn’t think this way. He has a conceptual model in mind for how he wants to think about this problem and what he expects the system to present. Frustration happens when the user is presented not with something that reflects his conceptual model but instead reflects the implementation model.

When you spot these incongruencies, you have identified an opportunity for innovation (or at the least, an opportunity for significant product improvements).

– Innovation via Acquisition.

Finally, we do need to talk about innovation via acquisition. Many product managers view an acquisition as a failure on their part. But in truth, acquisition can be an excellent technique for innovation, especially in areas where the risks are high. Essentially the company lets dozens of startups test the waters, try out their ideas, and the few that work out may be good candidates for acquisition. Not only does this sort of acquisition bring in new innovative technologies, but they also come with new blood with new ideas that you can then leverage.

I encourage product managers at large companies to reach out and establish relationships with interesting related startups. You can often help, and learn from, each other, and the nurturing you do might just save your company millions. There are many cases out there where the company that was acquired did not just choose the highest bid, but the company that also had the people they wanted to work with.

It is important that the acquisitions are handled well, as we all know most aren’t, but realize that innovation via acquisition is a powerful tool for large companies to keep expanding their offering and maintaining leadership.

So I hope you’ll try out some of these techniques. Your company truly does need you to innovate. Peter Drucker said “Every organization needs one core competence: innovation.” Innovation can absolutely happen in large companies. If you’re still not convinced, just take a look at