There doesn’t seem to be an organisation on the planet these days that doesn’t claim to foster internal innovation. CEOs love to talk about developing an innovation culture. And yet, it’s worth noting that many of the innovations we take for granted today were in fact invented in large organisations which never bothered to produce the things they invented. 

The companies of which this is true are honestly too numerous to name, but here are a few of the more axiomatic examples. Example number one is Sony. Joint founder Masaru Ibuka — partner to the later, more famous, Akio Morita — negotiated a licence from US electronics company Bell Labs for transistor technology.

This transistor technology was used to create the first pocket-sized radio, which was a big contrast to the vacuum tube radios popular at the time. Vacuum tube radios were typically bulky and heavy, but were a prized possession of the post-World War 2 generation. 

The quality of the sound from the first pocket-sized radios was terrible and so the makers of vacuum tube radios, mainly RCA and Zenith, decided against investing in this technological innovation — a rather big mistake, as it turned out.

Sony did have one big advantage — its radios were cheap. For RCA and Zenith, the incentive to forgo their existing rich buyers in favour of the youth of the ’60s wasn’t there, but for Sony, this was an undiscovered market. Sony kept on improving its transistor radios and it gradually became the huge global octopus it is today.

Sony Betamax

Among its good ideas, Sony had some shockers — hello Betamax. But Sony also invented the floppy disk and the Sony Walkman, the tape recorder that mimicked its success with transistor radios. Before we laud Sony too much, though, the company was, of course, undermined in a similar way that Bell Labs was all those years ago, when it had to relinquish its pole position to Apple on the advent of the iPod. Ironic. History is circular, after all.

The other most obvious innovation that never happened was the Xerox corporation’s invention of the personal computer with a graphical user interface — or what we would call today, a mouse. The corporation not only didn’t develop the product, but would only allow people within the corporation to use it. Showing the design to a young computer maker named Steve Jobs would very comprehensively solve that problem.

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And of course, the maker of huge computer mainframes, IBM, would offer the right to sell its Disk Operating System software to another young computer nerd, Bill Gates, who also went on to do rather well for himself.

There are many such examples. But the question is, why are these large companies so unable to monetise their own inventions the way outsiders can and do?

It’s easy to criticise them for not doing so, but in fact, these organisations — at that particular moment — are making entirely rational decisions. Why should RCA have given up its existing, very lucrative market for big fancy radios that typically reside proudly in the centre of the living room for the gamble that pocket radios might take over the world?

The problem is that these companies simply point-blank refused to fail. So ungracious of them.

We are gradually becoming more aware of the dynamics of internal innovation, and perhaps the high point of this trend is the Indian company, Tata.

Best failed idea award

Ratan Tata, long-time CEO of the Tata group, and really one of the world’s most remarkable businessmen, came up with the idea to give an award every year to the best failed idea.  

“Failure is a goldmine for a great company,” Tata said at the time.

And then went on to prove it: the company decided to produce the Tata Nano, a compact city car which would be sold for less than 100,000 rupees, or $1,300, which was less than a third of the price of the cheapest car available at the time. Fabulous idea. Failed, of course.

When the idea of the car was first initiated in 2008, the projection was that it would sell about 250,000 units a year. It sold about 70,000 in 2012 when it launched, but by 2017 it was selling only 7,500 units a year.

Some blew up. I mean, literally. They caught fire, giving rise to what we might delicately call the “perception” that some safety measures might have been jettisoned to keep the price down. The project was dumped in 2018. Too bad. Tata might have given the organisation the Best Failed Idea award.

But the history of this car is not over yet. An entry-level electric Nano car is being investigated. And more importantly, the company didn’t hand over the technological innovation process to outsiders.

The company failed in its effort, but importantly, the failure was theirs — not somebody else’s. BM/DM