The Innovation Paradox: Why Good Businesses Kill Breakthroughs and How They Can Change

For more than twenty years, major innovations-the kind that transform industries and even societies-seem to have come almost exclusively from startups. Established companies still dominate most markets, but despite massive efforts and millions of dollars, they can't seem to achieve the same kinds of foundational breakthroughs.The problem, say Tony Davila and Marc Epstein, is that the very processes and structures responsible for established companies' enduring success prevent them from developing breakthroughs. This is the innovation paradox.Most established companies succeed through incremental innovation-taking a product they're known for and adding a feature here, cutting a cost there. It's a solid recipe for growth, but major breakthroughs are hard to achieve when everything about the way your organization is built and run is designed to reward making what already works work a little better. But incremental innovation can coexist with breakthrough thinking.Using examples from both scrappy startups and long-term innovators such as IBM, 3M, Apple, and Google, Davila and Epstein explain how corporate culture, leadership style, strategy, incentives, and management systems can be structured to encourage breakthroughs. Then they bring it all together in a new model called the Startup Corporation, which combines the philosophy of the startup with the experience, resources, and network of an established company. Startup corporations encourage visionary thinking at all levels-instead of depending on a single Steve Jobs, they have dozens, even thousands of them.Breakthrough innovation no longer has to be the nearly exclusive province of the new kids on the block. With Davila and Epstein's assistance, any company can develop paradigm-shifting products and services and maximize the ROI on its R&D.

“"Original and thoroughly researched, but pragmatic and accessible, this book will be a vital resource for executives, scholars, and even startups looking to keep the breakthrough ideas coming." --Soumitra Dutta, Dean, Johnson Graduate School of Management, Cornell University "Davila and Epstein have crushed the prevailing mindset that business units, operational excellence, and traditional approaches to innovation can deliver sustained growth. The Innovation Paradox makes it abundantly clear that every company needs to capture and operationalize a startup''s entrepreneurial zeal and clock speed to successfully drive growth through innovation. Building and balancing the traditional and startup operating models is the top item for every company''s growth agenda." --Robert Shelton, coauthor of Making Innovation Work and designated an Innovation Champion by the World Economic Forum "Davila and Epstein solve the perennial mystery that has puzzled many corporate leaders: what are the forces inside large companies that prevent them from developing breakthrough innovations? This book provides an insightful framework for diagnosing those forces and tools for overcoming organizational inertia to implement processes that result in breakthroughs." --Steven C. Currall, Dean and Professor of Management, Graduate School of Management, University of California, Davis, and coauthor of Organized Innovation "The Innovation Paradox sheds light on how large corporations can successfully innovate while creating shareholder value. The authors wisely differentiate between breakthrough innovation and incremental innovation. The book informs the reader on how different corporate cultures and management styles play a key role in being successful at different points of the innovation spectrum. The authors draw from their years of experience and vast knowledge to show that their Startup Corporation model is the way to deal with the innovation paradox." --Laizer Kornwasser, Company Group Chairman, Valeant Pharmaceuticals "Many organizations are structurally committed to the status quo. Davila and Epstein offer practical ideas to overcome this challenge while preserving existing success." --Srikant Datar, Arthur Lowes Dickinson Professor, Harvard Business School "In boardrooms, one of the most critical discussions centers around innovation and how to leverage creativity in the marketplace--faster and better than in the past. The Innovation Paradox demonstrates how to overcome obstacles and create breakthrough innovation." --Blythe McGarvie, member of the board of directors of Accenture, Viacom, LKQ Corporation, and Sonoco "Davila and Epstein have done it again. After their very successful first book (coauthored with Rob Shelton), Making Innovation Work, they introduce the insightful concept of the Startup Corporation, which combines two seemingly contradictory mindsets and skillsets: the ability of startups to create new business opportunities and the disciplined execution of large corporations to achieve profitable growth. This combination is required if the corporation is to develop the capability for continuously generating innovations. Davila and Epstein take the reader through a framework for creating the Startup Corporation that addresses both tangible factors such as strategy, systems, and incentives and intangible ones such as organizational culture and leadership style. The book is practical and engaging and provides numerous tools for creating an innovative organization." --S. Ramakrishna Velamuri, Professor of Entrepreneurship and Department Chair (Strategy and Entrepreneurship), China Europe International Business School "Written by world-class authorities on innovation, product development, and startup life cycles, this book is a must-read for any entrepreneur. As CEO of a venture-backed startup, I''ve learned an immense amount from it." --Sunil Rajaraman, CEO, Scripted.com "Breakthrough innovation is no longer a mystery--Davila and Epstein have broken the code. Now even the most established organization can come up with disruptive products and services." --Klaus Peter M”

“Original and thoroughly researched, but pragmatic and accessible, this book will be a vital resource for executives, scholars, and even startups looking to keep the breakthrough ideas coming.”
—Soumitra Dutta, Dean, Johnson Graduate School of Management, Cornell University

“Davila and Epstein have crushed the prevailing mindset that business units, operational excellence, and traditional approaches to innovation can deliver sustained growth. Building and balancing the traditional and startup operating models is the top item for every company’s growth agenda.”
—Robert Shelton, coauthor of Making Innovation Work and a World Economic Forum Innovation Champion

“Davila and Epstein solve the perennial mystery that has puzzled many corporate leaders: what are the forces inside large companies that prevent them from developing breakthrough innovations? This book provides an insightful framework for diagnosing those forces and tools for overcoming organizational inertia to implement processes that result in breakthroughs.”
—Steven C. Currall, Dean and Professor of Management, Graduate School of Management, University of California, Davis, and coauthor of Organized Innovation

“The Innovation Paradox sheds light on how large corporations can successfully innovate while creating shareholder value. It informs the reader on how different corporate cultures and management styles play a key role in being successful at different points of the innovation spectrum.”
—Laizer Kornwasser, Company Group Chairman, Valeant Pharmaceuticals

“Many organizations are structurally committed to the status quo. Davila and Epstein offer practical ideas to overcome this challenge while preserving existing success.”
—Srikant Datar, Arthur Lowes Dickinson Professor, Harvard Business School

“In boardrooms, one of the most critical discussions centers around innovation and how to leverage creativity in the marketplace—faster and better than in the past. The Innovation Paradox demonstrates how to overcome obstacles and create breakthrough innovation.”
—Blythe McGarvie, member of the board of directors of Accenture, Viacom, LKQ Corporation, and Sonoco

“Davila and Epstein have done it again. After their very successful first book (coauthored with Rob Shelton), Making Innovation Work, they introduce the insightful concept of the Startup Corporation, which combines two seemingly contradictory mindsets and skillsets: the ability of startups to create new business opportunities and the disciplined execution of large corporations to achieve profitable growth. This combination is required if the corporation is to develop the capability for continuously generating innovations. Davila and Epstein take the reader through a framework for creating the Startup Corporation that addresses both tangible factors such as strategy, systems, and incentives and intangible ones such as organizational culture and leadership style. The book is practical and engaging and provides numerous tools for creating an innovative organization.”
—S. Ramakrishna Velamuri, Professor of Entrepreneurship and Department Chair (Strategy and Entrepreneurship), China Europe International Business School

“Written by world-class authorities on innovation, product development, and startup life cycles, this book is a must-read for any entrepreneur. As CEO of a venture-backed startup, I’ve learned an immense amount from it.”
—Sunil Rajaraman, CEO, Scripted.com

“Breakthrough innovation is no longer a mystery—Davila and Epstein have broken the code. Now even the most established organization can come up with disruptive products and services.” 
—Klaus Peter Müller, Principal, Roland Berger Strategy Consultants GmbH, Germany

“Davila and Epstein have done impressive research to uncover the hidden impediments to innovation present in most established organizations. Their recommendations for overcoming those impediments while preserving existing success are well thought out and very practical.”
—Gloria Perrier-Châtelain, Senior Global Director, Digital Marketing Strategy, and Partner, SAP, France

“For the first time, Davila and Epstein offer a solution to the ‘startup envy’ experienced by so many organizations. They show that, with the right adjustments, innovations can flow from high-rises as well as from garages.”
—Bence Andras, Partner, Proventus AG, Switzerland

Tony Davila heads the Entrepreneurship Department and the Entrepreneurship and Innovation Center at IESE Business School in Barcelona. He was previously on the faculty of the Graduate School of Business at Stanford University and a visiting professor at the Harvard Business School. He has a doctorate from Harvard Business School.Marc J. Epstein is a distinguished research professor of management at Jones Graduate School of Business at Rice University. He has been a professor at the Stanford Graduate School of Business, Harvard Business School, and INSEAD. He has written or cowritten nearly twenty books and more than two hundred papers and has worked extensively with leading global companies on innovation.

For more than twenty years, major innovations--the kind that transform industries and even societies--seem to have come almost exclusively from startups, despite massive efforts and millions of dollars spent by established companies. Tony Davila and Marc Epstein, authors of the bestselling Making Innovation Work, say the problem is that the very processes and structures responsible for established companies' enduring success prevent them from developing breakthroughs. This is the innovation paradox. Most established companies succeed through incremental innovation--taking a product they're known for and adding a feature here, cutting a cost there. Major breakthroughs are hard to achieve when everything about the way your organization is built and run is designed to reward making what already works work a little better. But incremental innovation can coexist with breakthrough thinking.Using examples from both scrappy startups and long-term innovators such as IBM, 3M, Apple, and Google, Davila and Epstein explain how corporate culture, leadership style, strategy, incentives, and management systems can be structured to encourage breakthroughs. Then they bring it all together in a new model called the Startup Corporation, which combines the philosophy of the startup with the experience, resources, and network of an established company. Breakthrough innovation no longer has to be the nearly exclusive province of the new kids on the block. With Davila and Epstein's assistance, any company can develop paradigm-shifting products and services and maximize the ROI on its R&D.

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