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Most large organizations have launched innovation initiatives in the last five years. They have built dedicated labs, appointed chief innovation officers, trained cohorts in design thinking, and run internal hackathons with genuine enthusiasm. The ideas that emerged were often promising. And then they derailed. Someone asked for strategic alignment of the business case, another for ownership clarity, a third for cross-functional sign-off before any resources could be committed. Approvals, handoffs, and procedural questions suffocated momentum.
This pattern has become so common that many executives regard it as an unfortunate but immutable feature of corporate life. Innovation is difficult. Organizations are complex. All of that sounds plausible. It also misses the central issue. In too many cases, organizations are trying to generate continuous innovation while still operating through a system designed for a different economic age. The question applies across scales: large companies struggle to regain adaptability, while startups struggle to preserve it when growth inevitably increases process, hierarchy, and coordination complexity.
The Legacy Operating System
That coordination system was built for the industrial era. Its strengths were formidable: scale, consistency, control, and efficiency. Value creation was organized through specialization, clear reporting lines, formal planning, and the reduction of variance. Many companies still carry this logic deep in their architecture. They have adopted the language of agility and entrepreneurial energy, but the underlying operating system remains largely intact. Initiative is still channeled through functional silos, annual budget cycles, layered approval processes, and centralized resource allocation. Organizations want rapid adaptation while relying on a century-old coordination model.
That contradiction explains a great deal. Most organizations do not suffer from a shortage of ideas. They suffer from the difficulty of moving fragile new value through a system optimized for something else. Early-stage innovation needs speed, local judgment, fast feedback, and the freedom to revise direction. Industrial-age operating systems prefer certainty, predefined plans, and detailed alignment before movement begins. Ideas entering such a system are often diluted long before they have had the chance to prove their value.
This is why so many innovation efforts become theatrical. Workshops are held. Concepts are presented. But the deeper architecture of coordination that could turn ingenuity into innovation remains untouched. The organization celebrates entrepreneurial behavior while preserving an internal logic that rewards caution, compliance, and procedural legitimacy. Innovation remains extra work, never a standard organizational capability.
When the System Becomes the Obstacle
The relevance of this problem depends on the business arena. Some companies still compete where product cycles are long, variation is limited, and standardization pays. In those conditions, a control-oriented operating system can still perform well. Yet many firms no longer live in such arenas. Their markets move quickly. Customer expectations shift fast. Technological change constantly challenges their products and services. Under these conditions, the inherited operating system becomes a liability. It slows the sensing of weak signals, delays response, increases the cost of learning, and separates decision-making from the front end of operations. In an AI-enabled context, this architecture becomes even more decisive: data and machine intelligence can accelerate sensing and iteration, but only if human judgment, local authority, and resource movement are close enough to turn those signals into action.
This is why the design of the entrepreneurial operating system has become a strategic question. When environmental volatility exceeds the adaptive capacity of the organization, the coordination logic that once delivered reliable performance becomes the primary obstacle to adaptation. Organizations executing faithfully against a design that no longer fits their environment will find their coordination logic slowing them precisely when speed matters most. The contrast becomes visible in companies that have treated proximity, feedback, and resource movement not as cultural aspirations, but as design principles.
Proximity as Architecture: Haier and Xiaomi
Haier offers a revealing example. It operates in markets where customer needs evolve quickly and distance from customers carries a direct commercial cost. Haier responded by moving far beyond the traditional model of a centralized corporation with an innovation department. The company rebuilt its entire operating system for speed, product differentiation, and sensing of customer needs. Innovation was given an organizational path rather than symbolic encouragement.
Another revealing example is Xiaomi. It grew in a mobile phone market where customer expectations change quickly and product differentiation depends on constant adaptation. Xiaomi built a feedback loop between users and product teams that fed directly into weekly development cycles. In its early years, user communities became part of the innovation pipeline, rapidly uncovering unmet needs in a market then dominated by US tech companies. Xiaomi’s approach is one of proximity, iteration, and rapid correction. It reduces the distance between the people using the product and the people improving it. The underlying coordination architecture is drastically different.
What separates organizations that convert ideas reliably from those that do not is rarely talent or ambition. It is whether the operating system creates a short path from observation to action. At Haier and Xiaomi, that path is deliberately engineered. Decision-making authority is located near the knowledge that informs it. Resources move before certainty arrives. Experiments can be integrated without re-entering the full weight of legacy approval structures. More importantly, both companies built the coordination infrastructure needed to reconfigure hundreds of teams around new market opportunities with speed, precision, and scale.
Designing the Entrepreneurial Operating System
An organization built entirely around industrial discipline will find it difficult to sense and respond in time. Likewise, an organization built entirely around fluid experimentation will struggle to scale into hundreds of teams and deliver reliably. Strategic maturity lies in knowing where stability is valuable, where adaptability is essential, and how the two can be connected so that they build on each other’s strength. That is the work of operating system design.
A useful diagnostic is to ask where an idea loses speed. Does it slow down because customer insight is weak, because teams lack authority, because resources cannot move, or because scaling requires a level of reliability the experiment has not yet earned? Different answers point to different design problems. The entrepreneurial operating system is not a call for permanent fluidity; it is the discipline of knowing which parts of the organization need freedom, which need reliability, and how learning travels between them. That is the work of operating system design.
The operating system matters because it determines what a company can repeatedly convert into action. It decides how quickly feedback travels, how easily resources move, how much initiative survives contact with procedure, and how rapidly experiments grow into business. Culture matters. Leadership matters. Strategy matters. Yet over time they all meet the practical constraints of the operating system. The decisive question is whether that system is designed to carry new ideas into value creation. Companies that address this constraint directly will become better at innovation and harder to compete with.
About the authors:
Janka Krings-Klebe and Jörg Schreiner are strategy experts, speakers, and lecturers specializing in ecosystemic organizational transformation and operating models for complexity. They are the cofounders of co-shift GmbH, where they work with organizations to move from hierarchical control structures toward adaptive, ecosystem-based forms of value creation. They are the authors of The Antifragile Organization: From Hierarchies to Ecosystems (2025). For this work, they were shortlisted for the Thinkers50 Strategy Award 2025.