The Innovation Illusion: Why Corporate Rhetoric Isn't Driving Real Renewal

• Short-Termism Trap: Nordic firms often prioritize core business over future-facing innovation, leading to underfunded initiatives and a self-reinforcing cycle of short-term pressures.
• Innovation Theater: Many corporate innovation activities, like hackathons and pitch competitions, lack strategic depth and business impact due to insufficient structural support and execution muscle.
• Structural Friction: Cultural and governance mismatches, such as low risk tolerance and misaligned incentives, hinder innovation in industrial firms.
• Leadership Imperative: To drive real innovation, Nordic executives must shift governance from cost control to value creation, protect long-term initiatives, and appoint influential innovation sponsors.

Innovation has long been the darling of strategy decks and shareholder letters. In quarterly earnings calls and keynote speeches, executives of large Nordic industrial corporations extol the virtues of transformation, digitalization, and venturing into new growth arenas. Yet behind the public optimism, Innovation and Venturing (I&V) professionals on the inside tell a different story—one of underfunded initiatives, short-term pressures, and cultural inertia.

In this piece, we unpack the underlying reasons behind this disconnect. We explore why so many Horizon 2 and 3 initiatives—those aimed at adjacent or breakthrough innovation—fail to thrive inside legacy industrial structures. And we examine what corporate leaders must do if they are serious about transforming their innovation rhetoric into a reliable growth engine.

The Short-Termism Trap: An Endemic Challenge

The assumption that corporations prioritize their core business at the expense of future-facing innovation is not just anecdotal—it's backed by data. Finnish and broader Nordic firms have invested heavily in R&D inputs, but much of it supports incremental improvements. A 2023 McKinsey report revealed that only 2% of Nordic companies had successfully scaled businesses in adjacent markets, versus 17% in the U.S.

During economic downturns or strategic pivots, innovation funding is often the first casualty. Horizon 1 activities—the operational core—consume attention and resources. The result is a self-reinforcing cycle: the lack of long-term investment leads to fewer success stories, which then reinforces the view that bold innovation is too risky or unproductive.

Consider a global industrial firm navigating a bold decarbonization strategy. Despite strong long-term vision, its leadership faced intense internal scrutiny and mounting short-term financial pressures. Innovation teams were challenged to justify sustainability investments that offered uncertain returns and fell outside conventional budgeting cycles.

In contrast, another company in the energy sector committed early to renewable solutions. At the time, the move was seen as speculative and financially burdensome. Yet, years later, that strategic bet has become the foundation of the firm's transformation and international market leadership—proving that patient capital and long-horizon thinking can yield outsized rewards.

Innovation Theater: Activity Without Impact

One of the most insidious barriers to corporate innovation is what some call "innovation theater"—a flurry of visible activity that lacks strategic depth and business impact. Idea hackathons, pitch competitions, internal accelerators: these often generate enthusiasm, but the majority of concepts never reach the market or a paying customer.

Why? Because there's no structural mandate or execution muscle behind them. I&V professionals routinely cite a lack of budget authority, integration pathways, or business unit buy-in. Middle managers, incentivized by short-term KPIs, deprioritize collaboration. Innovation becomes a sideshow rather than a serious growth vehicle.

As one innovation leader put it: "We launched over 100 projects, but when the funding dried up or the spotlight moved on, most of them quietly disappeared."

Structural Friction: Culture, Governance, and Metrics

Much of the innovation paralysis in industrial firms stems from mismatches between ambition and architecture.

Culturally, Nordic industrial companies tend to favor precision and reliability over experimentation. Risk tolerance is low. Failure is still seen as reputational damage rather than a learning opportunity.

Structurally, innovation teams are often embedded within core operations—where their mandate to experiment conflicts with process-heavy governance. Corporate hierarchies and legacy approval chains slow down decision-making to the point where the market opportunity has moved on.

Incentivization is equally misaligned. Horizon 3 ventures are judged on the same financial KPIs as Horizon 1 operations. There is little room for metrics like learning velocity, customer validation, or option value.

Without correcting these governance blind spots, even the most talented innovation teams are set up to fail.

What Great Looks Like: A New Model for Industrial Innovation

Some companies are breaking the mold. They adopt separate legal structures for venture building. They allocate funding through CAPEX, not OPEX, to protect long-term innovation from budget cuts. They stage-gate projects not by ROI but by evidence of progress. And they assign executive sponsors who can navigate the political and operational complexity of scaling new ventures.

The energy sector company, again, is a standout. Their transformation from a fossil-fuel refiner into the world leader in renewable diesel was made possible by long-term vision, political support, and strategic patience. It took 10 years. Most companies give innovation teams 10 months.

Similarly, Venture Studio models—like those Shift Actions deploys—offer a governance framework that blends internal assets with startup-style agility. Studios enable corporates to explore new business models while managing risk and maintaining strategic alignment.

The Leadership Imperative: From Lip Service to Ownership

So why do so many corporate leaders still treat innovation as a slogan rather than a system? Because talking about innovation is easy. Building the structures, allocating capital, and committing to uncertain timelines is not.

But the cost of inaction is rising. As sustainability demands, talent expectations, and technology cycles accelerate, the core business model alone won't carry industrial firms into the next decade.

To lead in innovation, Nordic executives must:

• Shift innovation governance from cost control to value creation
• Protect Horizon 2/3 initiatives with dedicated funding, talent, and KPIs
• Treat internal ventures as strategic assets, not distractions
• Appoint innovation sponsors with real influence—ideally at the board level
  
  

Executive Call to Action: Is Your Innovation Model Fit for the Future?

It's time to stop measuring innovation by activity and start measuring it by velocity, evidence, and renewal.

At Shift Actions, we challenge leadership teams to reassess their innovation maturity. Our Breakthrough Innovation Maturity Assessment reveals where your company is stuck—and how to build the capability to explore, validate, and scale new ventures repeatedly.

If you're serious about turning rhetoric into results, let us show you what great looks like.

Book an executive briefing today!