The answers are: Yes! And…Yes!

In Harvard Business School’s Working Knowledge newsletter, Jim Heskett writes about a new book by Matthew S. Olson and Derek van Bever, Stall Points. Their book uses a large database of companies to examine failure of 50 companies in the Fortune 100, since 1955, and 90 non-US companies, that ‘stalled’ — i.e. their revenues that grew, then dropped precipitously in a single year and did not recover for a long time, if at all. Fewer than half the companies were able to return to pre-stall growth rates within a decade. 

Why? What causes the stall?

It is not the case that all large organizations are devoid of innovation. Three examples of innovative elephants are Apple, Virgin and Tata, the Indian conglomerate. Apple’s innovation engine appears to be the fertile brain of its founder Steve Jobs, who returned to rescue Apple and appears to have a knack for serial innovation. Virgin, similarly, is driven by the questing mind of Richard Branson, who has made innovation and intrapreneurship part of Virgin’s DNA. And Tata? Its founder Jamsetji Tata imbued Tata, from its first day, with an unceasing energy for developing new products and new businesses, without fear of taking on industry leaders. The latest example is Tata’s $2,000 car.

The key lessons seems to be that large-company innovation needs a senior champion, at the CEO level or close to it.  That leadership, combined with the organization’s muscle and resources, generates winning innovation. Without that leadership, the large organization ends up “doing the [same] things right”, as Peter Drucker noted, instead of “doing the right things”.

M.S.Olson, Derek van Bever, STALL POINTS: Most Companies Stop Growing – Yours Doesn’t Have To. Yale Univ. Press: New Haven, CO 2008.