When culture, systems, and processes create activity without progress
Every enterprise can become irrelevant when it fails to innovate, and no company is too big to fail. Just like the cautionary tales of Nokia and Kodak.
In the late-1990s, every 20-something planned their night out on their Nokia phone and snapped the highlights on their analogue camera - probably using Kodak film. Yet both these former powerhouse corporations, which sold hundreds of thousands of products, were eclipsed just years later.
It wasn’t because they lacked entrepreneurial endeavour or creative smarts; From 1997, Nokia was the decade-long dominant player in the global mobile phone market; Kodak invented the first digital camera. These previously unstoppable behemoths failed because their corporate innovation decision-making was flawed:
During the broader digital shift of the late 1990s, Amazon, which started as an online bookstore in a world where bookstores were everywhere, started on their robust culture of innovation. It brought on more products to compete with all of retail, and built and scaled a third-seller marketplace. It survived the dotcom bubble, then expanded product offerings while scaling its core business. Today, Amazon remains one of the top five US sharemarket-listed companies along with other innovative tech pioneers, Apple, Microsoft and Google parent, Alphabet.
The lesson? Being big won’t protect you from flawed innovation processes.
As my colleague James Boult said in his article The Gatekeepers Gamit: Why innovation dies at the door of corporates “Your choice may be to innovate or become irrelevant.”
The financial and operational scale of innovation waste is staggering. While precise figures vary, conservative estimates suggest that failed corporate innovation projects cost hundreds of billions of dollars in value globally each year. Some estimates put that figure as high as a US$2.3 trillion-dollar drain on the global economy. Studies from 2023 to 2025 consistently report that a substantial majority of all innovation projects, between 40% and 90%, end in partial or complete failure, never achieving their intended commercial or strategic outcomes, a trend more pronounced in the tech sector.
Today, artificial intelligence has introduced the latest costly frontier of innovation waste. The rush to adopt AI has led to a wave of pilot projects, but success has been elusive for many. A landmark 2025 report from MIT’s Project NANDA, The GenAI Divide: State of AI in Business 2025 found that as many as 95% of generative AI pilot programs inside organisations are failing to achieve revenue growth.
With global AI investments projected to approach US$200 billion by the end of 2025 according to Goldman Sachs, this up to 95% failure rate represents billions of dollars in wasted capital - as much as US$190 billion. The RAND Corporation corroborates the trend, highlighting that over 80% of all AI projects fail, double the rate of non-AI technology projects.
In Aotearoa New Zealand, we operate in a smaller, more interconnected economy. We face similar pressures to innovate but usually with more constrained resources, both human and capital. While research and public information on the specific dollar costs of failed innovation here is limited, we can assume the stakes are high, if not higher.
A misstep in innovation strategy or a major project failure can have a disproportionate impact on the NZ market and our national economy. The universal lessons we can learn from global failures, in particular rigorous processes designed for success, limited gatekeeping, evidence-based iterations and strategic alignment, are therefore perhaps more important here.
Even that 40-90% failed innovation has a beginning, middle and end. Unlike an enterprise’s successes, however, innovation failures are often hidden by a culture of opaqueness or marketing spin in shareholder reports. So quantifying the real human and financial resource deficit in the tangled debris of innovation theatre is multifaceted.
Let’s instead consider some of those failings and that waste.
One of the most insidious forms of compounding innovation waste is the sunk-cost fallacy. This is where enterprises continue to fund failing projects because “we’ve already invested so much”. It’s the company that’s burned through the budget, or spent 12-months on a new product, but customer testing shows it's never going to fly - literally, in the case of The Concorde.
The Concorde is the famous example of sunk-cost, where the British and French governments continued investing in the supersonic jet knowing it could never be profitable - which became known as the Concorde Fallacy.
Other examples include Microsoft Zune, which tried to compete with Apple’s iPod, and Blockbuster, which railed against Netflix’s growing market domination by investing in… more physical stores.
Decision making in these instances should never have been about calculating past investment to inform the future investment. Rather, it needed to consider future value. But these decisions are rarely about the numbers. They’re about ego, protecting careers and being right.
While ego drives the sunk-cost fallacy, in low risk cultures the innovation outcomes are mediocre rather than eradicated completely. The low aspiration results in safe, status quo and conformist innovation. It may have a higher chance of success, but the reward and impact may be dramatically reduced. As the saying goes, low risk, low reward.
The real issue of a low risk culture is not innovation failure however, but that customers will find what they need from a competitor, those with more ambitious and disruptive innovation that meets their changing needs. Like Nokia users becoming iPhone (and Apple eco-system) users, and Kodak film replaced by digital uploads.
The innovation waste: Underwhelming improvements that fail to excite customers or differentiate from competitors, inspiring an exodus of top talent seeking out bolder organisations, and market share decline as incremental innovation becomes indistinguishable from stagnation.
The capacity to innovate is the undisputed engine of corporate longevity. But in the pursuit of breakthrough innovation lies a paradox: that the road to success is paved with failure.
Amazon founder Jeff Bezos described this to shareholders in 2016 saying, "Failure and invention are inseparable twins,” adding:
“To invent you have to experiment, and if you know in advance that it's going to work, it's not an experiment. Most large organisations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there."
Companies like Amazon, Apple and Microsoft have invested in multiple failed innovation projects. Amazon’s Fire Phone, Apple’s wireless charging mat, AirPower, and Microsoft’s fitness tracker, Band, among others.
The very nature of invention requires venturing into the unknown, of allowing failure. It’s embracing uncertainty and accepting that not all bets will pay off. Yet despite costly failures costing billions, these tech giants have shown that innovation is not merely a pathway to competitive advantage but a prerequisite for their survival.
The innovation waste: There isn't any. Even Amazon's Fire Phone taught lessons that shaped Alexa's success. The real waste emerges when organisations claim to embrace experimentation but punish failure, creating a theatre of innovation where teams go through the motions of taking risks, of innovating, while actually playing it safe.
Leadership teams motivated by self-interest are another destructive barrier to innovation. This is when decision-makers are driven by ego and internal goals rather than the vision and interests of the enterprise. Where an executive promotes ideas that align with their personal career plan or financial incentives, and suppress or outright reject ideas that challenge them.
This top-down theatre of ego also rejects diverse thinking from the wider team, narrowing the scope of potential innovation. Decision-makers instead become the ‘Innovation Gatekeepers’, and reinterpret an organisation's strategic priorities to suit them and control the innovation project selection process.
Similarly, a new executive may discard a project mid-way through when their incoming vision clashes with the already-started project goals and biased interpretation of the company’s vision and goals.
The innovation waste: An organisation that optimises for internal politics rather than customer value, and haemorrhages talent and market position along the way.
While some level of failure is unavoidable and is even a necessary component of a healthy innovation culture, systemic widespread waste points to deeper process and leadership dysfunctions.
Regardless of how brilliant an idea or the technical capability of the team, innovation will die when organisational systems and processes are flawed. It will also show up at every stage of the innovation lifecycle, from ideation to deployment. These can include:
The innovation waste: This is no longer just direct financial losses of a failed project. It encompasses misallocated R&D budgets, squandered human capital, operational disruptions, reputational damage and the opportunity cost of pursuing the wrong ideas.
Addressing corporate innovation waste requires more than incremental improvements. It needs a fundamental reimagining of how organisations approach their innovation investment and execution.
Harvard Business Review research recommends funding projects incrementally based on evidence along the way. Rather than committing large budgets upfront, capital can be released in tranches as each startup project hits evidence-based, pre-agreed milestones. This approach:
An organisation's leaders need to embrace a fail culture that is supported by disciplined strategy and rigorous execution. As Bezos also told shareholders in 2016, “To invent you have to experiment, and if you know in advance that it's going to work, it's not an experiment.”
In response to the dramatic Fire Phone flop, the Amazon CEO told Washington Post’s Martin Baron, “If you think that’s a big failure, we’re working on much bigger failures right now - and I am not kidding. Some of them are going to make the Fire Phone look like a tiny little blip.” He added that as the size of Amazon has grown, “the size of your mistakes needs to grow along with that.”
Obi Felten, founder of Flourish Labs and a former leader at Alphabet's "moonshot factory," X, advocates for shifting the mindset from “failing fast" to "learning fast”. She says this promotes psychological safety where people feel safe reporting problems early without fear of punishment.
Felten recommends strategies like setting upfront "kill criteria" for projects to make ending them less emotional, celebrating the lessons learned from failure, and separating personal career success from project outcomes by promoting individuals who performed well even on failed projects.
Innovation reframing within an organisation builds resilience. It supports sustainable growth and reduces the likelihood of becoming the next Kodak or Nokia. Reducing innovation waste requires a profound cultural and strategic shift. One that challenges assumptions. One that champions a fresh internal methodology with the right team to drive innovation flexibly without interference. Importantly, it requires the entrenched belief that failure is not something to avoid, but could become your greatest strategic asset.