The Key Reason Why Startups Are Better Innovators Than Corporations

The further the level of disconnect between leaders and workers, the worse the issue is


When people consider the most innovative minds in the world, they often think of the big company leaders throwing out their ideas and a mass of loyal followers doing their bidding. The Elon Musks, Jeff Bezoses, and Meg Whitmans of the world are indeed innovative, but the reality is that the real innovations, especially when it comes to company processes and new products, cannot be dictated by them. Instead, these innovations need to happen at an individual team level in order to work effectively.

This is not to say that innovations cannot come from the top of the pyramid, on the contrary, when you look back at how Steve Jobs ran Apple, this was very much how they operated. However, the individual elements that made up the overall innovation ideas came from teams that worked towards this goal, with each creating their own workflows, setting their own realistic deadlines and communicating achievable results.

It may sound obvious, but it is something that is often overlooked in larger companies. It is one of the key reasons why startups are ‘more innovative’ than larger established companies - not because they are necessarily less innovative or think in a different way, but simply because when innovations are dictated from the top of large companies they have less connection to the people actually doing the work and the realities of achieving a particular outcome. In a startup the leaders in the company are considerably more likely to be in direct communications with those undertaking the work, making it considerably easier for leaders to make informed decisions to create the best possible product. Essentially, for every level of disconnect from those either impacted by the idea or who are tasked with carrying out the work to make it work, there is a decrease in empathy.

The theory behind this comes from an experiment conducted by Stanley Milgram in 1963 which saw volunteer ‘teachers’ asking questions to other volunteer ‘students’ (that were actually scientists) who would receive an increasingly powerful electric shock for every answer they got wrong. The electric shocks moved up in intervals of 15v from 15 to 450, with anything above 300v having the capacity to kill somebody. These intervals were labelled, with the top being XXX, clearly showing that this would do major damage. The initial variant of the experiment saw the volunteers having to place the hand of the ‘student’ on a shock plate, the second variant saw them administer the shock in the same room but not touching them, the third variant placed them away from the room but still able to hear the ’student’, the final variant saw the students in a different room where the teacher couldn’t see or hear them.

In the first variant 30% of people agreed to administer potentially fatal electric shocks. When they were in the same room but not touching the student, the number jumped to 40%. When they weren’t in the same room the number jumped to 65%.

So the more removed you are from a subject, the less you think about the consequences of your actions on those it has the biggest impact on. The experiment also goes further, showing that people will continue down a negative path when pushed to do so by authority figures. Practically every person administering the electric shocks protested, but continued when told by the person in charge of the experiment.

This experiment shows firstly that innovations are less likely to be effective if they are dictated down through multiple managers and secondly that middle managers are more likely to do something they believe to be damaging if told to do so by their leader. It is easy to imagine a situation where this could take place too. Imagine a large company building a new website, the CEO says to a VP ‘I need the site to be finished in 1 week’. The VP then tells the manager of the development team that they need to have it done in one week, who then tells the individual developers. When these developers say that it’s not possible to do it properly in that time, this message is then passed back upwards. The CEO then passes back down ‘I don’t care how you do it, just get it done’.

In this situation the website being created is not going to be as good as it should be, corners will be cut to achieve the goal the developers have said is unachievable, and will do huge damage to the relationship of the developers to the company and to their team leader who is meant to speak for them, but it appears they aren’t. This is not conducive to effective innovation or product creation.

In startups there aren’t as many levels of bureaucracy, so there isn’t a disconnect between CEO and those with boots on the ground, so if a developer in the same situation said ‘we need longer to do it better’, the chances are better that they would be given it and would ultimately create a better product.

So with this connection based innovation process in mind, is it really any surprise that startups are more innovative?

Inno balls small

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