The Innovation Paradox: Why Good Businesses Kill Breakthroughs and How They Can Change

It’s a paradox: as big companies get better at achieving operational excellence, actual breakthroughs seem to decrease. It’s the scrappy little startups, with comparatively tiny budgets, that continue to be founts of innovation. Why is it that as industry leaders get better at what they do, they get worse at innovation?

By conducting deep research within companies as diverse as Apple, Google, Pfizer, General Motors, Nike, and Sony, the authors have found the answer: the very pursuit of operational excellence - that is, making one’s existing business as efficient as it can be - blinds managers to the kinds of disruptive business model changes vital for innovation. These changes could threaten all that hard work. It’s why Nokia famously killed its smart phone - the company was too invested in “dumb phones.” Nothing less than a complete redesign and rethinking of the corporation - down to how accountants capture innovation costs and overhead - is necessary to get companies moving again. The authors’ new model, "the startup corporation,” marries the strengths of corporate scale to the nimbleness of entrepreneurs.

For a model of the new startup corporation, the authors return again and again to Apple, which doesn’t have the usual corporate structure and accounting systems. Not every company can be an Apple, but all companies can learn to break the bonds of operational thinking if they’ll take the authors’ lessons to heart.