This is an excerpt from Empower: How to Co-Create the Future. The full 200+ page book is available by donation!

“We need to get back to some kind of innovation,
because you can’t shrink your way to greatness”

-Rita Gunther McGrath

excerpt from book

David Passiak: My last book Disruption Revolution looked at the revolution of innovation that occurred in the aftermath of the 2008/2009 economic crash. There was a basic idea that Bryan Solis talked about, which is that constraint drives innovation. Cutting back on resources forced companies to find new ways of generating revenue. Meanwhile, entrepreneurs rallied around the term “disruption” to create all these new innovative products and services. This became a catalyst for the collaborative and sharing economy with the meteoric rise of companies like Airbnb, Uber, Lyft, TaskRabbit, and so on.

So much discussion about innovation and economic recovery focuses on disruptive startups. How do the big companies that you work with view the trends since the crash? What can we learn from what happened, and how might they approach strategy differently going into the future?

Rita Gunther McGrath: Let’s start with your idea that constraint drives innovation. Any design thinker can tell you that what designers want most when they start a project is to understand the constraints, because that helps drive where the creativity is going to be focused.

Post-2008, the basic strategy was to stop everything, downsize, cut, get rid of anything unnecessary, and try to right the ship. The downside of that was a lot of people working on innovation either got booted out or were taught to funnel their innovation towards cost cuts. Then starting in around 2010/2011, we started to see more of these companies beginning to say, “Hey, we need to get back to growth.”

We need to get back to some kind of innovation, because you can’t shrink your way to greatness. Lots of companies struggle doing both—running today’s business and having the right practices for a system of innovation—so there’s a lot of talk about innovation, but not very much actual innovating.

The public markets exacerbate this because you can’t make a plan to drive innovation that diminishes the pressure in the short term to forecast earnings. Your typical manager will say, “I can get by for two, four, six, eight more quarters before lack of investment in the future catches up. What’s the incentive?”

RITA GUNTHER MCGRATH is a globally recognized expert on strategy, innovation, and growth with an emphasis on corporate entrepreneurship. Her work and ideas help CEOs and senior executives chart a pathway to success in today’s rapidly changing and volatile environments. McGrath is highly valued for her rare ability to connect research to business problems. Thinkers50 named Rita in their top ten global list of management thinkers overall for 2015 and 2013 and presented Rita with the #1 award for Strategy, the Distinguished Achievement Award, in 2013. Rita has also been inducted into the Strategic Management Society “Fellows” in recognition of her impact on the field. She consistently appears in lists of the top professors to follow on Twitter. McGrath is the author of four books; the most recent being the best-selling The End of Competitive Advantage (Harvard Business Review Press), rated the #1 book of the year by Strategy+Business.