I worked for a large software company for twenty years. In that time, I saw the difference between a small company and it growing into a massive enterprise. It was a great ride and I gained many insights into what happens with regards to innovation.
First of all, much of the talk regarding innovation is largely hype. Managers think they need more of it and start programs to encourage it. Unfortunately, managers and executives have no idea of what it really takes to create an environment that encourages innovation.
The result is largely a waste of time. The truth is that innovation comes from freedom. If the worker is given authority and time, amazing things can happen. It is a matter of trust and respect. Innovation cannot be dictated.
When a company is smaller, it has much less to lose. It can take bigger chances. It has more brain power than resources. It has no vested interests. In fact, it probably does not even have architects or managers that have the time to focus on innovation. Both managers and architects are more concerned with organisation and structure. They are more likely to be focused on existing methods. By definition, innovation is something new. You need someone else instead. You need a visionary and you also need a collection of skilled workers that are willing to try different things. Most importantly, you need people that see trends and the ability to project into the future with possible solutions.
A large company has much to lose. An innovative product might actually disrupt an existing product. Managers are measured on real results. Anything that is considered more risky is also going to be classified as risky to their careers. It is easier to talk about innovation than to actually do something different. Without a visionary and collection of workers behind them, there is nothing that can be done differently. A management structure based on costs and profit is unlikely to understand the value of investing in different technologies. It is easier to buy existing startup companies and consume those products. This pattern has to be repeated to continue the “innovation”.
Personally, I have heard the story about Google allowing employees to work on anything they want for one day a week. I think this is largely folklore now. Have a read of this article about the myth of 20%. It makes sense that it would be hard to allow for this for such a massive company. It is more clear that people would need to do their work first before being able to work on side projects. As a manager, it would be hard to accept that the project is 20% slower based on workers taking the time to work on something else. Also, the side project could easily consume more than 20% since it is the passion of the worker to do that instead. It would be wiser to give the side project full focus for some duration of time. This is higher risk and therefore more unlikely to be accepted by the company.
The truth is that innovation is largely being there at the right time, with the right idea, and the right team. It does not have to be an amazing idea, just enough to disrupt the existing models. In fact, the idea is not really the most powerful aspect. The ability to see the need for the product is more relevant than just coming up with the idea. If you can correctly see a path, you can build a whole series of projects that can build a massive company over time.
And, it is okay to fail. In fact, the failures reveal more information about the right path. Ignoring or hiding the failures only leads to more failure. Large companies do not like to fail since it could impact their image and therefore it could impact their value. Small companies do not have this problem in their pursuit for growth.
So, finally, to answer your question: Large companies are not good at innovation. Small companies are better at it and are unlikely to use structure to enforce it. It all comes down to taking risks. If you have nothing to lose, then risk means little. You have a lot more to gain than to lose. And finally, innovation is largely about having the freedom to express and work on ideas. It is far simpler than what you have heard.
In my own work career, I have had the chance to work on new ideas. Looking back, it was far easier to work on things as a small company. As the company grew, there were more people telling me that I either did not have time or that it did not match with current product plans. The unwritten expectation was that I would work on these things on my own and then later try to convince managers of the value. Given the environment, this approach made little sense. They had not invested anything in having me work on it and could easily say no based on how they said no to most everything employees suggested. The risk was too high and the outcome would be too frustrating. Some other workers thought it would have been better to create a startup company and then sell it to the company than to try to do it internally. There is some truth to this.
I have had a lot of time to think about this topic. It seems that the truth is never what you hear. Innovation is a personal passion that can only be encouraged with an environment that fosters freedom and taking chances. It is not something that can be created from internal propaganda or managed by people that have no idea what is needed. Innovation is best expressed in places that do not care about failure. Trying to do something new requires finding a new path through uncharted territory. That makes innovators similar to explorers. In history, explorers only report to management at the start and end of the journey. Maybe that is a valid model in today’s world as well.