Small Business Solutions: Does Smaller Always Mean More Innovative?

Working for an e-commerce startup in the late ‘90s, I quickly learned what it means to be on the bleeding-edge of 
innovation. It was an exhilarating experience.

My small team, from a skeleton crew that numbered 45 when I started, worked at a breakneck pace to develop, test and launch fresh content for the company’s website.

Because we knew the work we were doing was unlike any that had been done before, in a retail arena that was in a very early stage of defining itself, not one of us griped about the insane hours we put in or the speed at which we were expected to perform. We knew risk-taking was encouraged, mistakes were allowed, and we all felt deeply invested in ensuring our contributions helped the company succeed.

True, we were innovative because, as an Internet startup with venture capitalists breathing down our CEO’s neck to take the company public, we had to be. But we also were innovative because everybody knew, without question, that we all were in it together. When you combine such conviction with a team of highly capable, demanding, progressive-minded individuals, you have an environment that fosters innovation.

But despite the fact that it always was a small business, with only 200 or so employees at its height, those of us who had been around a while became increasingly frustrated with the bureaucracy that took hold in line with the rapidly growing headcount. No longer were we able to take risks for the sake of improving upon the innovations that got us where we were in the first place. As the company’s hierarchy took on more middle managers and additional layers of oversight, the environment became oppressive, innovation stalled, and the company never went public. It folded altogether in 2002.

This isn’t intended to be a dogmatic statement that bigger equals less innovative, or vice versa. There are many examples of large businesses, such as Google, Facebook, Apple and Amazon, to name a few, that obviously buck any such notion.

But it’s my own experience that the larger a business becomes, the more drag on innovation increases. Unless, of course, the company’s growth is guided by leadership that demands continued emphasis on innovation, and structures and staffs the company in a way that perpetuates it.

For more on this topic, I encourage you to read smartplanet’s article, “Innovation boot camps: big business looks to the little guy.” It’s a brief-yet-informative piece that sets the stage for a Wall Street Journal article about big corporations, including PepsiCo, that are sending employees to work at startups with whom they have a limited partnership. Such arrangements, according the smartplanet piece, “are designed to immerse employees in the work, sort of like an innovation boot camp.”

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