Why Corporate Innovation (very often) Fails: The Complete Picture.

The most common question I am asked in every leadership discussion on corporate innovation is ‘Why companies fail to innovate?’ This is a complicated topic as there are multiple different factors impacting a company’s ability to innovate - technological, cultural, methodological and more.

Ironically, most modern companies operate under ideal conditions for innovation: they have access to talent, sufficient resources, ambitious innovation programs, modern methodologies, advanced systems and unprecedented access to knowledge. Yet, according to various reports and industry insights, a significant percentage of innovation executives admit their organizations struggle to produce real innovation outcomes.

There are clear patterns and certain deficits that often explain well corporate innovation failure. Based on 25 years of working with 20+ companies across multiple industries and markets and the extensive research I’ve done for my innovation books, I’ve classified more than 30 failure factors into the following system of ‘deficits’ that eventually lead to corporate innovation failure.

Here is the the system of six fundamental ‘deficits’ that very frequently kill corporate innovation:

1. Leadership Deficit. While innovation success often results from collaborative efforts across an organization, corporate innovation failure always reflects leadership's limitations or poor decisions. Senior leaders may fail innovation in several distinct ways: some don't engage with innovation due to complacency; others are willing to drive innovation but lack expertise in innovation leadership, making critical mistakes or omissions; and some have the willingness and knowledge but lack the necessary means or support from the C-suite. In all such cases, companies suffer from innovation blind spots, especially at the executive level. Even those leaders who genuinely believe in innovation and advocate for change may struggle to drive meaningful innovation if they don’t have the C-suite’s support and lack essential capabilities and resources. When this happens, innovators experience ‘empty’ innovation promises, a lack of action, and no measurable outcomes.

2. Organizational Design Deficit. The structure of a company significantly influences its ability to innovate systematically, at scale, and speed. A good organizational design for innovation includes specialized teams dedicated to supporting specific aspects of the innovation function, along with processes that encourage cross-team collaboration and effective knowledge exchange. The organizational design deficit occurs when the necessary elements are missing from the company structure, or worse, when existing features actively block innovation. Organizational design issues include fragmentation, excessive hierarchical layers, vague accountability models, and poor knowledge transfer mechanisms.

3. Innovation Capabilities Deficit. Even when a company is determined to innovate, it may be blocked by the lack of essential capabilities, processes, and systems required to drive innovation outcomes. Moreover, legacy technical infrastructure often prevents the adoption of modern product innovation practices, for example, when companies struggle to adopt patterns of frequent releases and in-product experimentation. When a strong innovation culture is present, but the technology and systems to enable innovation at scale are not, corporations may experience occasional enthusiasm followed by frustration. Teams face execution difficulties related to the lack of tools, techniques, and systems, preventing innovators from delivering on their innovation objectives.

4. Real-World Connection Deficit. The real-world connection deficit occurs when a company lacks the means and practices to stay closely connected with its ecosystem – its customers, market, and technology landscape. This deficit appears as an inability to systematically scan the market, engage with customers, process user feedback, conduct business experimentation, and generally 'listen' to the world outside corporate walls. Without these critical connections to reality, even well-resourced innovation efforts can fail.

5. Talent and Cultural Deficit. Corporate innovation requires specialized skills that differ significantly from traditional business functions. However, companies often fail to recognize that innovation expertise doesn't simply exist or develop naturally and that it requires strategic talent development, upskilling, external recruitment, and planning. When this happens, companies face gaps in innovation competencies, such as product design, rapid prototyping, product innovation, user re-search, and business experimentation.

This talent deficit is closely linked to cultural challenges—the shared values, mindset, and behaviors that enable innovation to grow organically. Organizations often struggle on both fronts: they lack specialized skill sets and a cultural framework for innovation to thrive.

6. Venture Building Deficit. A company’s ability to innovate depends on multiple factors, including structural barriers, funding, resource allocation, leadership support, talent, and more. However, what ultimately defines success is the ability to build, launch, and grow products or services – to reach the market, achieve commercialization, and gain customer adoption quickly.

The above are analyzed extensively in the "Innovation Mode 2.0," were I explain the factors, the dynamic and the evolving situations that eventually block corporate innovation. This deep understanding and unique framing of the root causes of innovation failure is then used throughout the book to present solutions, strategies and effective mechanisms that help smart companies to establish powerful innovation engines that produce meaningful, measurable innovation - at scale.

Your reality check: Which of these six deficits resonates most with your organization's innovation challenges?

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