The accepted narrative is that the bigger an organisation gets the more difficult it is for the organisation to innovate and/or change.

It’s one that I largely agree with.

In a recent post on LinkedIn I wrote:

“Just like the housing sector, innovation in the NHS (or any large organisation) faces hurdles due to its complex structure, with various stakeholders having different priorities.”

Tom Murtha commented in reply:

“And with each merger the problems get bigger”.

And he continued with a creditable degree of honesty:

“My view now with hindsight on the mergers I was responsible for is that we lost more than we gained”.

This struck me as interesting grounds for a post. The organisation I work for has been through five mergers whilst I’ve worked there, and has just announced the intention of a sixth. I have in the past – half jokingly – said I would quit if there was another merger.

So what has changed?

To begin to understand how organisational expansion impacts creativity, we must address two questions:

• Are small organisations fundamentally better at innovation?
• How exactly do mergers or growth compromise this capacity?

1. Is small always better?

The relationship between organisational size and innovation is not simple; size usually dictates the type of innovation pursued, rather than determining superiority.

Joseph Schumpeter was an Austrian-born economist best known for his theories on innovation, entrepreneurship, and economic development. He taught that economic growth isn’t a smooth, continuous process but is driven by periods of disruption initiated by the entrepreneur, who he defined as the person who carries out ‘new combinations of resources’.

His most famous contribution is the concept of ‘Creative Destruction’, where the introduction of radical innovations—such as a new product, a new method of production, or a new market— destroys old industries and business models while simultaneously creating new ones, thereby driving long-term progress.

The Schumpeter Mark I model, often associated with small, nimble organisations, describes this creative destruction pattern driven by new market entrants and the resulting high turbulence. Small organisations thrive in the space of exploration, radical innovation and product innovation—introducing disruptive changes to the market. Their structural advantages include flat, flexible structures, fewer managerial layers, rapid communication, and a propensity to accept novelty.

This minimises the bureaucracy that often plagues larger entities. Research suggests that small teams are optimised for disruption, whereas large teams are better at development and deployment, producing ‘sequels rather than new narratives’.

In contrast, the Schumpeter Mark II model posits that large organisations are actually ideal innovators because innovation requires massive resources, capital, and the ability to manage immense cost and risk. They are expertly placed to deploy incremental innovation precisely because of their scale and established business model. Arguably this applies to companies like Apple today. They aren’t doing anything radical or disruptive but they are continually upgrading on an annual basis.

So the rather unsatisfactory answer to ‘are small organisations better at innovation?’ is: it depends on which type of innovation you are pursuing.

2. Do Mergers Adversely Affect Innovation?

Merger and integration processes are intensive, absorbing the time and energy of managers, leading to a reduced commitment to long-term R&D investment. Simultaneously, the initial costs of integration costs drain resources that might otherwise be allocated to innovation.

As organisations grow, bureaucracy, approval layers, and hierarchy increase. This complex management structure results in slower response times and increases the coordination cost (often seen through concepts like the Ringelmann Effect and Brooks’s law). The power to kill a new idea is often vested in a single person(s) whose interests may skew decisions, shrinking the incentive to contribute.

Cultural clashes are common, it’s not for nothing you hear people who move to smaller organisations talk about the ‘refreshing lack of politics’. Culture clash results in employee frustration, disengagement, and a high risk of losing key talent.

However there are large organisations that avoid this, and we should learn from what is different about them.

The Chinese appliance giant Haier is shattering the narrative that being large automatically leads to bureaucracy. Despite being a massive enterprise with over 100,000 employees, Haier has pioneered a radical management model called RenDanHeYi to maintain its competitive edge.

This dismantles the rigid hierarchy by breaking the organisation into thousands of autonomous micro-enterprises that function like independent startups. Each micro-enterprise has full power over its operations and is directly accountable to external customers, ensuring that innovation is driven by real-time demand.

This structure allows Haier to leverage the scale and resources of a large corporation (supply chain, brand power) while preserving the speed and entrepreneurial fire of a small one. Haier proves that size doesn’t have to be the enemy of innovation—it just requires a complete organisational revolution!

Buurtzorg (Dutch for neighbourhood care) is a global leader in showing how a large, growing organisation can be a force against bureaucracy. This home-care provider has scaled to over 10,000 nurses in over 900 teams without any middle managers.

The traditional model of home healthcare is a perfect example of bureaucracy crushing innovation and quality of care. Patients are seen by numerous staff in short, task-oriented visits, resulting in fragmentation and poor service.

Yet the innovation at Buurtzorg lies in its modular structure: small, self-managing teams of up to 12 nurses are responsible for the holistic care of 50-60 clients in a specific neighbourhood. These autonomous teams handle everything—from scheduling and recruitment to direct, comprehensive patient care.

Buurtzorg’s success is rooted in the principle of “humanity over bureaucracy.” By decentralising all decision-making to colleagues closest to the user and supporting the teams with a minimal, efficient back office and smart IT systems, the organisation achieves what most find impossible: it combines the professional freedom of a small practice with the stability and scale of a national organisation. This leads to higher user satisfaction, better outcomes, and a happier, more efficient workforce.

To go back to Tom’s point then – why have large organisations mostly failed to follow the lessons from the likes of Haeir and Buurtzorg?

It’s because large organisations kill innovation not by size, but by inertia.

There’s no reason that being big means remote and bloated – other than lazy design, and a lack of creative management.

To avoid this, we must embrace organisational ambidexterity—balancing core efficiency (exploitation) with radical flexibility (exploration).

That’s why I believe the Bromford Flagship model of place based working – the blueprint of which draws on inspiration from both Haier and Buurtzorg – can succeed.

77 decentralised place based teams (micro-enterprises) who have zero distance from the customer but can draw upon the R+D resources and scale of a large organisation.

It needn’t be an either/or.

You can be big AND hyperlocal.

You can ensure that a big organisation nurtures the disruptive spirit of a small one.

You can prevent innovation from being crushed by conformity.

So the only question is: are you up for an organisational revolution?