We know that innovation drives prosperity and wellbeing. It is the key ingredient for sustainable business success, which is why government policymakers and smart business leaders obsess over its cultivation.

Many of our brightest people become entrepreneurs. But as their new businesses grow, they encounter ever more roadblocks to innovation.

Larger organisations, including big businesses, universities, governments and even cities, are acutely susceptible.

The drive towards efficiency that has defined big business for decades epitomises this hidden set of risks. In an age of mergers and acquisitions, ruthless cost-cutting and the prioritisation of short-term shareholder value, corporate giants may be sleepwalking to failure.

It is often from the margins and playful spaces that innovative ideas emerge, time and again finding unexpected applications. This happened with microwaves, post-it notes and even Viagra, originally developed to treat high blood pressure. But it is an organisation’s leadership that truly nurtures or stifles innovation – even when it brings new risks.

Organisations need the capacity to adapt, and leaders should be barbarians at their own gates.

How Kodak quashed its brightest idea

Kodak had a long history of cultivating and embracing risky innovations. George Eastman, the company’s founder, recognised this when he pivoted Kodak’s core business from dry-plates to film, and from black and white to colour, despite hitting profitable product lines in the short-term.

Decades later, Kodak blew its chance to lead the digital photography revolution. They got things half-right. Kodak engineer Steve Sasson actually invented the digital camera in the company’s R&D labs in the 1970s.

Blue skies research matters
Image: flickr/Ian Britton

His leap forward was a product of Kodak’s willingness to invest in blue skies research. But having the space and capital for innovation is not enough. A business’s leadership – and the culture they create – must then be willing and agile enough to embrace innovations.

The reactionary antibodies within Kodak’s leadership rejected the digital camera, fearing it would cannibalise existing business. As Sasson later told the New York Times, “it was filmless photography, so management’s reaction was, ‘that’s cute — but don’t tell anyone about it.’”

Kodak’s management also focused on the flaws of early digital cameras, with their great weight, slow processing times and low resolutions. They could not see the utility to millions of potential consumers of “good enough” digital camera technology.

Kodak’s rivals seized the opportunity, leaving the incumbent flailing in pursuit of patent royalties. Sasson’s Kodak digital camera patent expired in 2007. Kodak filed for bankruptcy in 2012.

Xiaomi, the Chinese mobile phone company learning from history

Xiaomi, the rapidly growing Chinese mobile phone company, is determined not to repeat Kodak’s mistakes. The leadership appears humble enough to accept that disruptive innovations can come from anywhere.

Xiaomi co-develops new products with its user base, which has become more of a fan base. This fiercely loyal community, known as Mi fans, jump at the chance to try new software updates or products, and to play a part in developing the company’s high-spec, low-cost phones.

Mi fans are not just tolerant of imperfection, many of them devote large amounts of time to fixing product flaws.

Customers are participants in, rather than passive subjects of, the innovation process. Xiaomi credits its user base for about a third of the new features that have been added to the phone’s operating system in recent years.

And Xiaomi is willing to expand its product line in radical new directions: from water purifiers and rice cookers to drones and exercise kit. History tells us that innovative firms can overreach and fail; it is too soon to tell whether Xiaomi will successfully navigate the roadblocks and chicanes that will challenge its ability to innovate in the future.

Embedding a culture of constant renewal is difficult. Institutional conservatism, timidity and short-termism are tempting pulls for leaders. Yet there are counter-examples, like IBM’s bold decision to sell its PC business to Lenovo. A decade on, this tough call looks like one of the wisest moves in the company’s 105-year history.

Radical ideas, rooted in deep science

It is hard to renew and revive, especially when a big business appears to be winning. Enduring success requires a constant fight for innovative spaces.

Working with other research partners such as universities and through joint ventures can help secure these spaces for longer-term innovative thinking.

For example, Imperial Tech Foresight allows major corporates like BT, Shell and Syngenta to partner with some of the world’s top academics as they try to predict how technology will change their industries over the next two decades.

How often do business executives get to think deeply and seriously about how cognitive social marketing, nanorobots or the blockchain will impact on their businesses? Carving out that space, and finding the right partners to do so, is how major businesses can sustain their competitive edge.

Within universities we find that some of the most radical – and high impact – ideas are rooted in deep science. But academics alone cannot push them forward. We have the patience, but we often lack the early user engagement, the capital and market-dynamism of corporate partners.

Such collaborative innovation may be the most powerful way to navigate the chicanes.