The latest Global Entrepreneurship Monitor 2010, published in late August, seems at first glance to paint a very positive picture of entrepreneurship in the Netherlands. According to the Monitor, the Netherlands now has the highest number of start-up businesses in Europe. In 2010, no less than 7.2% of the adult population was involved in establishing a start-up business or managing a business that had been up and running for less than 3.5 years.

So on the face of it, entrepreneurship is alive and kicking in the Netherlands. In fact, it’s healthier than it has been for decades. However, the Monitor also notes the shortcomings – or weaknesses – of the Dutch entrepreneurial world. Foremost among these is the modest level of product and business innovation. Partly as a result of this lack of innovation, the Netherlands has at best an average score in terms of the number of fast-growing businesses.

Unfortunately this comes at a time, the GEM survey notes, when the after-effects of the financial crisis mean that the economies of the world – including the Dutch economy – are confronted with a whole range of challenges that can only be met through ambitious and innovative entrepreneurship. Of course, there are still many innovative businesses in the Netherlands. A fact that is clearly attested to by the large number of entrants at this year’s edition of the Accenture Innovation Awards: no less than 1,235 submissions of innovative concepts, covering virtually every business sector and from platform innovations to unique innovative products, both from start-ups and major corporations

However, if the GEM survey is right, there is a real and growing gap between entrepreneurship and innovation in the Netherlands. This would mean this country is far and away the most entrepreneurial in Europe, and yet manages to be merely average in terms of innovation. How is that paradox possible?

The burden of large corporations

What we see at Accenture is that large corporates – which still account for a very sizeable portion of the country’s business activities and business revenues – find it more difficult than smaller, agile start-ups to truly embed innovation in their organisations. Large and established companies have invested lots of money, resources and people in their current business. They have factories, office buildings and large workforces to maintain and pay for. It’s easier and safer to focus on what they already know and currently are good at. On top of that, listed companies are forced to think far too much in terms of short-term results, with the aim of maintaining or bolstering their share price and creating shareholder value.

And yet it has been proven time and again that truly innovative companies create far more long-term value than companies than those that fail to innovate. Accenture research clearly shows that innovation is essential to long-term success and long-term profitable growth. We frequently look at companies’ future value on the stock exchange. What we see is that the more innovative a company is, the greater that future value, which obviously makes that company a lot more interesting for shareholders.

Real innovation is a high risk business, though, which is why we advise our clients to consciously balance their investment across innovation types: incremental, platform, and breakthrough. Each of these has a different level of reward and risk. Low risk incremental innovations help protect your current business, while platform innovations add value and can boost margins. However, high risk breakthrough innovations are the ones that open up whole new markets, producing a market-changing product or business model. Platform and breakthrough innovations are crucial for large corporations with ambitious organic growth aspirations.

It can be a lot easier for agile start-ups to execute on a breakthrough concept, as they’re unburdened by an existing business or major overheads, and they are entrepreneurial by definition. Some large corporates are innovative by nature, simply because they are active in innovative sectors (such as the semi-conductor industry). They have to continuously innovate to stay ahead of the competition. In other more traditional and conservative sectors, such as the financial industry, innovation can however be more difficult. These are often risk-averse and non-entrepreneurial companies, whose existing organisation will stifle or even suffocate a new, revolutionary business idea.

A way out: do the right thing right

While many of the innovative ideas entered for the Accenture Innovation Awards have indeed been submitted by start-ups, a significant number have still come from large corporates. Last year’s Accenture Innovation Awards actually rewarded a successful solution to this innovation dilemma faced by large companies, which came from the financial services industry.

One way out of the dilemma of how allocate the right amount of resources without risking your current business is to spin-off a new, innovative concept as a stand-alone business. This innovative route was taken by insurance company InShared, winners of last year’s Accenture Innovation Awards in the category Financial Marketing. InShared is a wholly-owned subsidiary of insurance giant Achmea. Achmea took a truly innovative concept – paying back unused premiums to its customers at the end of the year – and set up a new business to develop the concept. For Achmea, that was doing the right thing and doing the thing right, which is vital to successful innovation.

That’s just one great solution to the innovation dilemma. Each company needs to define the best way to foster true innovations within the context of their existing business. Because innovation is also about asking the right questions, a willingness to make tough decisions and the determination to get the execution right. And you have to do it the right way for your business.