Innovation Theater: Lots of Motion, No Company

Beanbags, sticky notes, twelve pitches to the board. Innovation day at corporate headquarters, with a hackathon and photos for the intranet. Three ideas win prizes. A year later someone asks what became of the three ideas. Nobody knows exactly. The teams are back in their departments, the lab has a new name.

There was motion, budget and enthusiasm. There was no company.

The gap: priority without results

Few topics rank as high in boardrooms as innovation. And few deliver so little. In 2024 the Boston Consulting Group surveyed more than a thousand innovation executives. 83 percent say innovation is among their company's top three priorities. Only 3 percent are, by BCG's measure, ready to turn that into results. In 2022 it was still 20 percent.

A gap of 80 percentage points, from the same survey, in the same year.

BCG describes the phenomenon quite bluntly: "zombie" innovation organisations going through the motions in an endless loop. Innovation headcount and activity have stayed constant. Results haven't. McKinsey reaches the same picture from another direction: fewer than ten percent of executives are satisfied with their organisation's innovation performance.

Lots of motion, no company

That's exactly what innovation theater means. Steve Blank coined the term: as organisations grow, they start putting process before product. Labs, programmes, incubators and challenges appear. It all looks like innovation. It just rarely becomes a company.

The numbers are sobering. In McKinsey's 2021 study on business building, the overwhelming majority of new businesses started by incumbents had not reached $50 million in annual revenue four years after launch. At least 80 percent. More than half were below one million or had been shut down.

For the famous innovation labs, one number has been travelling through slide decks for years: 80 to 90 percent supposedly fail. To be honest, you have to say where it comes from. A 2015 Capgemini report quotes a single seasoned innovation expert with that estimate. It's one person's view, not a measurement. More interesting is what the same report recommends: involve the business units closely so the lab doesn't work in isolation. The labs that worked were tied to the business.

Where it really tears: at the seam

The problem rarely sits at one end. It sits at the seam between strategy and execution.

In 2013 the Economist Intelligence Unit surveyed almost 600 senior executives. 61 percent say their companies often struggle to bridge the gap between strategy formulation and day-to-day implementation. Only 17 percent say implementation is even seen as strategic in their company. For most, it's operational business, in other words someone else's problem.

In 2021 McKinsey examined where value is lost in transformations. 55 percent of the value loss occurs during and after implementation. Fewer than a third of respondents say their transformation improved performance and sustained the improvement.

Take an ordinary strategy project, done properly. A renowned consultancy delivers an excellent analysis after twelve weeks: market, opportunity, business case, 120 pages. The board is convinced. The consultants leave. Now a business unit is supposed to implement it, alongside its actual business and with the people it has. Eighteen months later the initiative is "on hold".

And this, in my view, is the core of the theater: the handover. One side defines the opportunity and leaves. The other side is supposed to build, but has neither the mandate nor the people nor the freedom to do so. In between, responsibility evaporates. Nobody failed. Nobody was in charge.

The concession: often the strategy isn't buildable either

It would be convenient to say: the strategy is good, only execution fails. That isn't quite true.

In BCG's survey, the biggest hurdle to innovation is an unclear or overly broad strategy. 52 percent name exactly that. Only around 12 percent have a strong link between strategy and innovation that actually delivers impact.

That doesn't weaken the thesis. It sharpens it. The seam tears from both sides. The strategy is often too vague to build on. And the build often has no owner. The two are connected: whoever has to build forces the strategy to become concrete. Whoever only recommends never has to.

A guardrail: careful with the favourite numbers

Anyone talking about failed innovation quickly lands on "70 percent of all transformations fail". That number has never been properly evidenced. In 2011 Mark Hughes examined the five most-cited sources and found no reliable empirical basis. What exists are self-reports like McKinsey's: fewer than a third sustainably successful.

The result is hardly better. But it's more honest. And anyone accusing others of theater shouldn't take their own numbers from the props department.

What works instead

The good news: it can be done differently, and that's measured too. According to McKinsey, experienced venture builders inside incumbents have twice the success rate of novices. Companies with five or more support mechanisms for new businesses report a 2.4 times higher success rate than those with none.

And one number puts expectations straight. According to McKinsey, investors accept a success rate of around 30 percent for new businesses. So more than two in three new businesses never become big, and that's considered normal. Failure is part of the game. Theater isn't. The difference is whether someone carries responsibility for the outcome and carries on or stops according to clear criteria.

The zoom-out: the obstacles are inside

Bain asked executives what keeps their companies from growing profitably. 85 percent name internal obstacles, not external ones. At companies with more than $5 billion in revenue it's 94 percent.

That's the real punchline. Europe's established companies have technology, customers, data and market access. What they lack is rarely the idea and rarely the money. It's the structure in which an idea is allowed to become a company.

The principle: one team from strategy to company

What would a system look like that replaces theater with companies? It would have four properties.

First: no handover. Strategy and execution sit in one team, not one after the other. Whoever defines the opportunity also builds it.

Second: a strategy that can be built. A concrete opportunity with a target market, willingness to pay and clear criteria for when to stop. Not a vision that allows everything and decides nothing.

Third: an owner outside the core structure. The new business gets its own responsibility, its own people and its own freedom. Not as a side job for a business unit whose targets depend on the existing business.

Fourth: capital follows evidence. Every phase ends with a real go/no-go decision. That makes failure cheap and early, and gives success the money it needs.

Coming full circle

The innovation day was well meant. The strategy project was even well done. Both lacked the same thing: someone who answers for the result from day one until the business is running.

Innovation rarely fails because of the idea. It fails where nobody is in charge any more.

Theater ends with applause. A company only starts there.

Sources

• Boston Consulting Group, "Most Innovative Companies 2024: Innovation Systems Need a Reboot" (2024, n > 1,000): 83% top-three priority, 3% ready, "zombie" innovation organisations, 52% cite unclear strategy — bcg.com
• McKinsey & Company, "What Is Innovation?" (2022): fewer than 10% satisfied with innovation performance — mckinsey.com
• McKinsey & Company, "2021 Global Report: The State of New-Business Building" (2021, n = 1,178): at least 80% of new businesses below $50M revenue after four years — mckinsey.com
• McKinsey & Company, "Losing from Day One: Why Even Successful Transformations Fall Short" (2021, n = 1,034): fewer than a third sustainably successful, 55% of value loss during and after implementation — mckinsey.com
• McKinsey & Company, "CEOs' Choice for Growth: Building New Businesses" (2023): investors accept around 30% success, 2.4 times the success rate with support mechanisms — mckinsey.com
• McKinsey & Company, "How CEOs Are Turning Corporate Venture Building into Outsize Growth" (2024): experienced venture builders with twice the success rate — mckinsey.com
• Economist Intelligence Unit / PMI, "Why Good Strategies Fail: Lessons for the C-Suite" (2013, n = 587): 61% struggle to bridge strategy and implementation, 17% see implementation as strategic — pmi.org
• Steve Blank, "Why Companies Do 'Innovation Theater' Instead of Actual Innovation", Harvard Business Review (2019) — hbr.org
• Capgemini Consulting / Altimeter, "The Innovation Game: Why and How Businesses Are Investing in Innovation Centers" (2015): one expert's estimate that 80–90% of innovation centres fail; recommendation to involve business units — capgemini.com
• Bain & Company (Zook, Allen), "Barriers and Pathways to Sustainable Growth: Harnessing the Power of the Founder's Mentality" (2016): 85% name internal obstacles — bain.com
• Hughes, "Do 70 per Cent of All Organizational Change Initiatives Really Fail?", Journal of Change Management 11(4) (2011) — doi.org