The Unseen Costs of Corporate Innovation Theatre

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.

The Rise and Fall

Despite investing billions in digital R&D between 1993 and 2005, Kodak executives didn't seize the digital photography opportunity, refusing to pivot from the lucrative film business. The result was a 99.7% decimation of shareholder value, down from US$31 billion in 1996 to less than US$100 million at bankruptcy in 2012.

Nokia's leaders fundamentally misunderstood the shift from hardware to software-driven ecosystems pioneered by Apple's iPhone. The company treated its Symbian OS as a mere feature rather than a platform while competitors built integrated ecosystems. Nokia's value collapsed from its €110 billion peak in 2007 to €6.28 billion by July 2012 before it sold its mobile business to Microsoft in 2013.

During the broader digital shift of the late 1990s, Amazon - which started as an online bookstore in a world where bookstores were everywhere - built a robust culture of innovation. It expanded beyond books to compete with all of retail, built a third-party seller marketplace, survived the dotcom bubble, and today remains one of the top five US sharemarket-listed companies.

The lesson? Being big won't protect you from flawed innovation processes.

The Global Scale of Innovation Waste

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.

Today, artificial intelligence has introduced the latest costly frontier of innovation waste. A landmark 2025 report from MIT's Project NANDA 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 as much as US$190 billion in wasted capital. The RAND Corporation corroborates the trend, highlighting that over 80% of all AI projects fail - double the rate of non-AI technology projects.

The New Zealand Context

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.

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.

Five Sources of Innovation Waste

1. The Sunk-Cost Fallacy

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".

The Concorde is the famous example - the British and French governments continued investing in the supersonic jet knowing it could never be profitable. Other examples include Microsoft Zune 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 future investment. It needed to consider future value. But these decisions are rarely about the numbers. They're about ego, protecting careers and being right.

2. The Cost of Cultural Risk Appetite

While ego drives the sunk-cost fallacy, in low risk cultures the innovation outcomes are mediocre rather than eradicated completely. Low aspiration results in safe, status quo and conformist innovation.

The real issue of a low risk culture is not innovation failure, 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 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.

3. The Paradox of Innovation

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: "Failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it's going to work, it's not an experiment."

Companies like Amazon, Apple and Microsoft have invested in multiple failed innovation projects. Amazon's Fire Phone, Apple's AirPower, and Microsoft's Band fitness tracker, among others.

The real innovation 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 while actually playing it safe.

4. The Corporate Theatre of Ego

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.

This top-down theatre of ego rejects diverse thinking from the wider team, narrowing the scope of potential innovation. Decision-makers become the 'Innovation Gatekeepers', and reinterpret an organisation's strategic priorities to suit them.

5. Systems and Processes Failures

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.

These can include inefficient processes to surface good ideas, poor allocation of R&D budgets, lack of a clear strategy, lack of technology literacy among leadership, and poor data management leading to massive delays and cost overruns.

Moving from Waste to Value

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.

A Culture of Fail Forward

An organisation's leaders need to embrace a fail culture that is supported by disciplined strategy and rigorous execution.

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.

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Eoghan Neligan is Founder at Gravity, Auckland's leading product and innovation agency. Gravity has worked with One NZ, Mitre 10, and Tika on projects including One Good Kiwi, Trade-In, and Mitre 10 Services.