How do big companies keep innovating? They act small

By Chuck Swoboda

When you work at a startup that’s developing fundamentally new technology, you’re fueled by a passion for innovation and a belief that anything is possible. In the early days at Cree, we had very big goals but with very limited resources, so the company’s founders divided themselves into small teams, each focused on a different part of the technology. We cultivated an environment that required each team to own their part of the problem and take the risks required to invent new technology.

This approach worked. We developed the groundbreaking products that helped us grow into the large, global business we are today. Even with more than 6,000 employees worldwide, we still look for opportunities to act small by creating smaller, independent innovation teams to solve a specific market or customer need, similar to what we did by necessity 29 years ago as a small startup.

There wasn’t a term for it at the time, but “acting small” has gained in popularity–books have even been published on the topic. Don’t get me wrong; large companies have their advantages. It’s the structure, process and oversight required to manage a large company that impedes innovation. The innovation process becomes bogged down by conflicting priorities, non-value added tasks and too much time spent updating people who think they need to be “in the know.” Risk taking ownership is replaced with risk management, which focuses more on talking about what went wrong instead of figuring out how to make it work.

Today, as we prepare to launch our latest innovation–our next-generation of LED bulbs –it reminded me of how just a few years earlier Cree acted small to tackle the light bulb industry, an industry resistant to change, all of which unfolded in an unmarked North Carolina warehouse.

At that time, most of the 10 billion light bulb sockets in the United States were still filled by outdated incandescent or ineffective compact fluorescent light bulbs. There were LED bulbs on the market, but consumers were slow to adopt because these bulbs were expensive, oddly shaped and didn’t work or act the way that people had grown to expect them to over the previous 137 years since Edison’s original invention.

This got our R&D team thinking–if other companies weren’t going to drive LED adoption, we would do it ourselves. We would design an LED bulb that looked and worked like the light bulbs consumers were used to buying, but lasted 20 times longer and cost less than any other LED bulb on the market. These alone were ambitious technical goals, but we also gave ourselves a nine-month deadline to make it happen.

We knew the business processes that enabled us to manage Cree as a global company could also limit the innovation and risk taking required to bring a revolutionary product to market. So we returned to the small company approach that made Cree a market leader in the first place; we created a small, five-person team isolated from the rest of the company to eliminate bureaucracy and enable quick decisions. It was simple–the team had to figure it out within the time window, or they would fail. There was no “plan B.” The team moved to an unnamed offsite location to limit distractions, reported directly to me and was disconnected from the rest of the company infrastructure, processes and oversight.

The result? We built an LED bulb that changed the industry. It looked and worked like a traditional light bulb, but lasted nearly 23 years and was priced to entice consumers to try LED for the first time. In less than a year after the launch, the Cree LED Bulb became one of the best-selling LED bulbs in America and Cree went from a brand with no consumer awareness to a company Fast Company counted among the world’s most innovative, with a product launch that students at Harvard Business School are analyzing in classrooms today.

While we’re proud of our success in forcing a century-old industry to truly deliver on the promise of LED lighting, this is just one example of how we keep innovation at our core and act small to solve big problems. We don’t always get it right, but we continue to replicate the startup environment as needed to empower small teams with the ownership and risk taking required to transform markets. We’ll never stop innovating—it’s what differentiates Cree in a crowded market.

Very few tech companies grow to become medium-sized companies, and even fewer companies grow to become large ones. Even less common are large companies that still innovate. The ones that do, have figured out how to act small.

This article is reproduced with the permission of Chuck Swoboda. Chuck is the author of The Innovator’s Spirit, host of the Innovators on Tap podcast, and a Forbes contributor. He is the Innovator-in-Residence at Marquette University, president of Cape Point Advisors, and the retired Chairman and CEO of Cree, Inc. You can access his latest content through his website or follow him on LinkedIn and Twitter.