Most large U.S. corporations are run like the Soviet Union economy…with their emphasis on central plans…a remarkably effective way of killing creativity and entrepreneurship.

- The Mind of the Strategist, by K. Ohmae (McGraw-Hill 1982)

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Your comments remind me of my favorite article written by Gary Hamel in 2002, “Innovation Now!”: http://www.fastcompany.com/online/65/innovation.html

Excerpts I find profound and often quote:

Most companies are organized like the old Soviet Union: There’s a hierarchy that is cleverly disguised as a perfectly sensible “resource allocation” process. An idea fights its way up through various levels of skepticism until someone near the top decides whether or not to invest in it. In most companies, the only person who can buy an idea is your boss or your boss’s boss. And the typical criterion that they use for judging an idea is that it must have a 90% chance of being profitable in the next year or so. The problem is, how many new ideas — including those with enormous upsides — start out as a 90%-sure thing?

A systemic belief that creates hostility toward innovation is the notion that change starts at the top. I often ask CEOs, “Who in your company is responsible for fundamental shifts in strategic direction?” Nine times out of 10, the answer comes back, “It’s me” or “It’s the board.” But in my experience, the bottleneck that throttles innovation is almost always located at the top of the bottle.

Big companies want things to go according to plan. These days, you hear a lot of C-level executives talk about the virtues of alignment. Of course, we need alignment: We need to know what our strategy is and how we’re measuring it and how we deliver value. But perfect alignment is death. Variety is the key to evolution. Mutation and sexual recombination allow a species to thrive in an unpredictable world. So it goes with innovation, which requires experimentation, trial and error, doing new things, and breaking old rules. An unhealthy adherence to conformity and alignment will drive out innovation — and innovative people.

Most people who succeed at radical innovation inside large companies will tell you that they did it despite the system. What I find remarkable and disturbing is that so few senior executives seem to find that state of affairs to be remarkable and disturbing. Apparently, they’re willing to accept the fact that their organizations are built for perpetuation rather for than innovation. I’m not. Now, there’s nothing wrong with perpetuation. Control, hierarchy, diligence, efficiency, replication, quality — we inherited those virtues from the industrial age, and virtues they will always be. But in a discontinuous world, we need to turn down the dial a bit on perpetuation and turn up the dial a bit on innovation.

In too many companies, real business innovation is an exception. Innovation lives in a ghetto, safely corralled in R&D or new-product development, where it can’t infect the rest of the organization. And yet we know that to lock up innovation in a corner of the company is to limit that group’s potential to create the future. The most important business issue of our time is finding a way to build companies where innovation is both radical and systemic.

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