Organizations exist because they are able to deliver value consistently and efficiently. They are able to achieve this through the explicit or implicit establishment of routines. Such routines are embedded in the day to day operations and even if workers don´t realize it as they come and go, the organizational inertia will continue, allowing for some improvement or incremental innovations.
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However, when a completely new product or services emerge in an industry, it follows the following lifecycle:
Wikimedia Commons
At the very beginning, only a small fraction of people, so called "innovators" are willing to try out the service and bear with the shortcomings of the early product´s defects or difficulties. During this stage, there has to be a great deal of feedback from the early customers so that the company may be able to adjust and build a better market fit. Only after enough early adopters begin to adopt the new product or service we can be sure that it "cross the chasm" and will become mainstream and attractive for corporations to profit from this new thing.
Before crossing the chasm, this innovations emerge in very tiny niche markets that do no seem as attractive or as a threat for corporations, but it does look quite attractive to entrepreneurs starting from zero.
Besides the fact that since startups don´t have well-established routines, the are more flexible and able to adapt to the customer needs and build a product or service that better serves the market. This is known as "Product Market Fit" and to get here the product or service needs to go through several feedback loops and the product might have to "pivot" (be adjusted or even completely shifted to something else entirely).
Since both corporations and startups are focused on growth, new products that emerge as niche markets are not as attractive for corporations as they are for entrepreneurs. This is why is the role of startups and entrepreneurs is to introduce innovations to the world. They have the flexibility, capability, and the need to explore new business opportunities.
So what does it take for a corporation to Innovate?
Some corporations however have been able to shift or pivot to completely new industries. An organization capable of exploiting its current business and exploring emerging opportunities is called an Ambidextrous Organization.
Harvard Business Review
The proposed way of organization for innovation suggests the creation of structurally independent units, each having its own processes, structures and cultures that are integrated into the existing management hierarchy.
The key idea of having an ambidextrous structure is that a team can operate independently with their own culture, procedures, and flexibility required to act as a startup within the company, but with the "intrapreneurs" under the existing management structure.
The main issue with this approach is that a hole other company is being created, funded with the resources of the side of the organization that will have no future. The most recent research in innovation management suggest the proliferation of innovation across all areas and subjects, without limiting innovation to products and services, but extending it to organizational structures, processes, business models, production and management system.
This approach could be taken working with innovation horizons and a governance model that allows the hole organization to devote a percentage of their time to work on innovation in different levels, both incremental and radical.
Novus Concepta
Proper governance needs to be in place to allow such portfolio of innovation result in the right balance of exploitation of current business and exploring emerging future opportunities.
Innovation360
Ultimately each organization needs to create their own Innovation Management System.