The theme of these two examples are people who are in touch with their consumers and know what they are capable of making and marketing. Neither is looking for the next great thing, just a good product to add to their lineup. I don’t think this is a natural outcome of being too big or too small – I think it comes back to smart people making a smart decision.

Big companies have trouble innovating. They are so hidebound and unaccepting of risk or failure. That’s why there is always room for entrepreneurs to enter the picture with new products and services. Many of the companies that exhibited at the Fancy Food Show won’t be there next year, but there will always be others with new ideas ready to take their place.

Entrepreneurs and small companies are likely to create over 90% of what are truly innovative new brands and products. The larger mega-corporations usually do not have the agility to make true innovation happen. Unfortunately, for a few reasons, below, many of the most fantastic new innovations never make it to the retail shelves, or they fail once they do: 1. Entrepreneurs and small companies tend to know their own products and innovations forward, backwards, and sideways, but they do not often get the help they need from retail industry experts to launch the products properly and effectively — at retail. 2. Funding is often an issue. Plus, entrepreneurs usually have no clue what type of funding it really takes to put a product on the market and retailers are seldom willing to give them an innovative discount on entry fees! 3. Retailers are often short sighted about innovation. They have a tendency to not want to take risks, and especially now with SKU rationalization, they tend to evaluate success through only their rear view mirrors.… Read more »

Having worked in new product development in both environments, I’m going with smaller companies as more likely to develop true innovation for one simple reason. Large companies tend to look for new iterations of their existing technologies and expertise. It is only natural to want to leverage existing assets, be they technology, capacity, brand recognition or other expertise. So the directive to new product development is all too often “go find a new way to sell what we make.” This is aided and abetted by two other characteristics of large companies. The first being the ability to fund super-sophisticated consumer research that can identify a “white space” in a black blanket. No niche is too small to hide from today’s market researcher. The second is the political push new product marketers get for “finding something”. Few new product marketers get recognized or promoted for simply killing all the bad ideas. The reason smaller companies tend to kick out more true innovation is that they don’t already make anything, or at least not much. So they… Read more »

The skill set to run big brands is different from the skill set to innovate. It is the rare person who is capable of doing both. At many Fortune 500 companies, an MBA brand manager is rotated into a new products position and everyone hopes they come up with something great. Usually (there are exceptions) it is a line extension idea or a flanker product, not a game-changer.

Real innovation usually happens at smaller companies where there is a passion for something (say, natural products) as well as a more relaxed culture (that does not punish experimentation or learning).

So, to me it is no surprise that many big companies simply take a business strategy of buying up innovators. Case in point: Estee Lauder. Great company. Buys innovators like Bobbi Brown and MAC. Estee also innovates nicely, but they acknowledge that they can’t be everywhere at once and their business model reflects that.

Real innovation is killed in big companies. Even great ideas get bogged down in bureaucracy. Smart big companies form development teams or councils and then isolate them from the mess of the big company.

Small companies answer their phones and talk to their customers and consumers. They are nimble and can adapt. Small companies also attract the free thinkers who are tired with the structured ways of a big company. These thinkers become doers when they have some freedom and can create and deliver some great products.

Large corporations are resource advantaged, but move much more slowly in developing and testing new products as compared to smaller startups. Which is best? There is no clean answer, and it largely depends on how mature the market segment is and the window of opportunity for the new product evolution.

In technology, by and large, smaller firms will win out because the environment is changing too rapidly for large firms to coordinate around a narrow window of opportunity.

However, in CPG, many product categories are mature and in practice, most innovation comes through brand extension and cross-branding (i.e. let’s mash-up this product and brand with that product and brand, which is easy enough when they’re often both under the same parent company). In this environment, large corporations have a significant advantage in both being able to introduce new products and in being able to ensure the continued competitive success of the best of those products.