THE ILLUSION OF INNOVATION

Corporations desperately need to come up with innovations but are going about it in the wrong ways, according to this penetrating business study.

Parker, the CEO of the venture capital firm High Alpha Innovation, decries the “innovation theater” that he sees at many companies in which dedicated teams act busy without generating useful, transformative ideas. In this book, he presents a far-reaching critique of corporate culture, specifically its aversion to upheaval. He argues that companies aim to conduct business with maximum efficiency while avoiding risk; they employ hierarchical “vetocracies” that enable managers to thwart any threat to the status quo. By contrast, Parker says, disruptive innovation requires a firm to pursue uncertain goals and spend money on projects that may not pan out and can’t be justified by short-term metrics. Innovation’s benefits, he asserts, lie in learning of new skills and creating options a company can pursue when radical changes in the economy occur. The rise of artificial intelligence is one such cataclysm, he contends, which will force firms to either innovate or die. The solution to the conundrum, this book says, is for companies to empower mavericks and small teams to innovate without stifling bureaucratic constraints, to embrace the messiness of the process, and to conduct many low-cost investment experiments to find the few that will stick. Because such a path is hard for hidebound businesses to follow, Parker recommends a strategy of seeking out partnerships with nimble startup entrepreneurs, for whom innovation is second nature—the kind his own firm nurtures.

Parker’s primer draws on his own experiences in innovation—starting with a college mold-remediation business, which he promptly ditched—along with colorful historical case studies, including the National Basketball Association’s adoption of a three-point line and the demolition of the Valeo auto-parts company’s supply chain by the Covid-19 pandemic. He grounds his insights in a wealth of far-flung ideas, from economist Ronald Coase’s theory of the corporation as a machine for lowering transaction costs to seeing the Amazonian jungle as a metaphor for the riot of innovation that firms should incubate. Parker’s attack on corporate stodginess is biting and sardonic: “Our team felt like animals in a petting zoo, brought out for show but with limited ability to really do what we knew we could do best,” as he recalls of one innovation-management gig. But he also writes exuberantly about the potential of innovation, exulting that “we are currently living right at that unique moment in the history of the universe when things go crazy and exponential.” His writing strikes a nice balance between pithy aphorism (“Pessimists sound smart. But optimists make money, and they shape the future”) and concrete discussions of practicalities (“Here’s a quick heuristic: If you can build a forecast of first-year financial results for a new business concept with a high degree of confidence, you should likely launch the idea inside of a corporation”). The result is a clear-eyed take on the necessity for change in business, and the careful journey it demands.

A sweeping but down-to-earth manifesto on the promise and perils of trying new things.