If you wanted to create a place that produced stuff people could really feel indifferent about — you’d struggle to do better than your modern-day corporation. 

When asked, top executives at the world’s biggest companies say innovation is their key to long-term success.

It makes sense, of course. According to a recent Economist study, we are in the midst of a “Cambrian explosion” of startups. Everything we do today is fair game for reinvention.

And companies that profitably delight their customers through continuous innovation are being rewarded handsomely. This year Google turns 16 years old and is celebrating with a valuation of more than $370B.

So if companies know they must innovate and customers are rewarding the most creative ones, why is innovation still so difficult to get right?

Innovation, Dilution and the Marianas Trench of bureaucracy

It’s not lack of drive, expertise or even a failure of imagination (though that happens plenty) that keeps companies from innovating. It comes down to one thing: Dilution.

Dilution happens as a natural byproduct of risk-aversion and a deep organizational structure. The bigger companies get, the deeper they get—like, Marianas Trench deep. And at each level, teams or managers are compelled to add their mark to an idea, or kill it completely.

It’s why nothing truly wonderful can ever come from “the bottom up.” As people struggle to surface an idea from the bureaucratic depths, it is watered down with “a little feedback,” “I love it but…,” or the dreaded appearance of the “devil’s advocate.” Everyone along the way trying add something when, if anything,  they should help refine its true purpose.

Or, as SAP’s CEO, Bill McDermott recently said, “A big company should not be structured like an onion and it shouldn’t make you cry when you peel back each layer.”

Creative gravedigging

If recent surveys are to be believed, this behavior will not change anytime soon. According to PwC, 78% of execs say they plan on treating innovation like any other process (think formal, structured – diluted). And those are the top companies.

You’ll probably recognize some of the behemoths that tried to innovate in this manner—Blockbuster, Blackberry, Kodak and HP are prime examples. Then there’s Dell, which is trying desperately to pull out of its nosedive after an unprecedented effort to go private—and free itself of the “quarterly results rat race.”

Some of these companies are no longer with us. The others haven’t released anything groundbreaking in years.

Why? Because when you “break new ground,” you’ve got to do something you haven’t done before. That’s innovation—and it will make management nervous.

Bottom line: If you’re not breaking new ground, you’re digging your own grave.

Pulling out of the death spiral

It would be easy to say, “Stop diluting your ideas.” Maybe it’s a good start, but it’s not going to solve anything.

Because dilution is not your only problem. It’s the symptom of a bigger problem, which results from a company’s inability to deal with two things: complexity, and fear of failure.

Ideas will fail frequently but, if you do it right, that won’t equate to failure (as we’ll talk about in part two of this series).

Remember: There are a thousand reasons for not doing anything. But these days, organizations have two choices—take risks and make real innovations, or suffer death by irrelevance.