Alone we can not do much, so we work in teams to make things that make our lives better. As we want to make bigger things, teams get bigger, but we also start to be inefficient. Inefficient means that we work a lot but make less. The bigger the team, the more inefficient it is. Both Apple and Chinese Communist Party become inefficient with size.
As teams grow, team members loose contact with people outside – customers. Even if they are in physical contact with customers, they do not depend on them. They focus on people who can actually reward them – their managers. And those managers have managers, who also have managers, who focus on shareholders. This is the essence of shareholder value ideology which dominates most big companies.
Such companies usually do not innovate products but focus on, what they call, internal innovation. Internal innovations aim to offset the inefficiencies of team size, and maximize the profit without greatly improving the products. I do not like to use the word innovation for such changes, but many do. Shareholder value with its internal innovation has created some of the biggest global problems – obesity, cancer, climate crisis – because customers were not really listened to.
Only real innovation is open innovation because it gives power to the customers. Without direct customer input, companies innovate to support their internal hierarchies, which in the long run hurts them as well. Open innovation balances the internal with customer needs, actually benefiting shareholders in the long run.