Industries and markets are led by organizations that have great products and services. The ones that maintain and expand their lead are the ones that successfully roll out innovation practices that help them maintain their momentum and status. This approach to innovation is also meant to undermine competitions and some companies even endorse self-cannibalization as a way to expand their leadership gap in their competitive environment. Apple did not have to discontinue its successful iPod business, but it decided that if it did not do it with a new approach to product innovation and lifecycle, a competitor would eventually force it to do so. The net result was a refocus on a product, the iPhone. Not too many companies are able to adopt such a high-risk, but also high-upside approach to business when it has market leadership position.
On the opposite spectrum of innovation, the laggards often wonder why it always feels like they are playing catch-up to competitors. Markets are changing faster than they can keep up; traditional competitors are fading while new ones surface, and products and services are coming to market faster than they can blink. More importantly, consumer attitude changes at a rapid pace, driven by new needs and new technologies.
The factors that seem overwhelming in product and service lifecycle– speed from idea to concept, speed to prototype and build, speed to launch – are frequently problems created by very reactive environments, and by those who feel that they cannot keep up. The root cause of this struggle as it exists today is that in most instances, the innovation pipeline is empty as laggards are comfortable with business-as-usual and remain reactive to market forces, while successful companies are innovating and disrupting business. There are a multitude of reasons why this happens and they can often be traced back the corporate culture and business environment.
While the barriers to innovation may not be new or unique, they fall into five distinct problem areas, all of which relate to stakeholder denial and/or rejection of the challenge, and therefore to a corporate culture in need of a boost. When asked about innovation, stakeholders who resist often cite these arguments:
We do not have a problem - denial: Sometimes companies think they are already innovative but fall instead into a state of denial and complacency. When denial persists for decades, innovations, even in small doses, can seem disruptive and create a sense of insecurity. When nothing has changed over the years and customers appear satisfied, why make changes? The processes that these companies use have indeed proven to work during a specific timeframe but may not be proven to be effective in the future. Examples of such complacency abound. Wang and Digital Equipment, companies that relied on offering large mainframes computer systems, dominated the first wave of IT. These companies have neglected the innovations that took place in the second wave of IT with the emergence of mass computing systems such as desktops and laptops. The first wave of companies simply disappeared because of denial and complacency. We are now witnessing similar pattern as we move from the second to the third wave, dominated by ultra-mobility and big data, leaving many second wave companies unprepared. Failure in leadership to challenge the company to embrace innovation is at the core of many company problems, as they feel comfortable in their current position until they are no longer relevant to the market.
It is a future problem - avoidance: It is not unheard of for market share leaders to have strong relationships and partners within their categories. These often feed market growth and result in ever-stronger market leadership. On top of that, if a brand has a strong image, solid channel partners, why worry about the future? Indeed many corporate leaders recognize the changing nature of business and the acceleration of innovation and creativity that is taking place in their respective industries. However, many tend to delay decision making because of various factors, from a lack of financial resources, to a deficit in technical and management skills, to simply lack of leadership. The net result is the delaying of innovation practices to an undetermined future, putting the company at risk of loss of competitiveness.
It is not my problem - structural: The rigidity of corporate structures in many companies means that managers do not have an incentive to think outside the box. Meeting bottom line goals can sometimes conflict with innovation, considering that managers have preset goals to meet or exceed within the context of their business unit or department. Many times, tied to these successes are bonuses and commissions. In this type of a culture, fostering innovation takes a back seat. Although many of these managers understand the benefits of innovation, they do not feel being part of the solution and consider that taking an innovative approach is not their problem given that there is no direct stake in the process. At the end, this denial may not be attributable to mid-level managers or many of the senior-level executives, as it is the responsibility of the CEO, the board, and the C-Suite to create the proper mechanisms that make innovation all employees’ responsibility.
It is someone else’s problem - lack of leadership: Innovation often reports in to senior leadership. Removed from the central business, and with minimal accountability to business partners, agendas can conflict. Imagine if you will a scenario where you are the Vice President responsible for sales training. You have insights and enough tribal knowledge to run your business smoothly. Your success at the end of each quarter is measured on how many training events you had and how many of those you trained actually recommend your brand of products and services.
How can I have a problem when I do not know what it is (Inability to define and frame the challenge): For many, innovation may be a function that exists somewhere in the company and does not affect them. Their understanding can be myopic and singular honing to just new products. Part of the problem is that there is very little interest in integrating innovation in one’s day-to-day practices. Not only is it perceived as the domain of another department, but also even defining what it is and how it can improve one’s performance is hard to hard. As American philosopher John Dewey stated, “A problem well put is half solved.” Attaining this goal of defining the problem is often very challenging in traditional industries where innovation has not been fully endorsed.
Specific to these problems, how might we as innovators drive change?
Agents of change
As the innovation challenge continues, brands and companies must remind themselves of adoption of innovation strategies could make them lose competitive edge and will force them to be followers rather than leaders. This is true regardless of the sector they play in, even among the most traditional industries. Whether you sell direct to consumers or you sell to businesses – customers are increasingly accustomed to consuming products featuring new technologies and services that are more sophisticated. A company that is not able to face the innovation challenge, risk to become irrelevant.
Advice specific to the challenges outlined above,
Complacent companies need to understand the risk of underestimating innovation. The argument in favor of innovation is that organizations need to remain innovative because they do not know when changes will come, what form they will take, or where they may come from. Innovation is not meant to solve today’s problems only. In fact, companies may not feel that they have a problem today, but by ignoring innovation, they eventually risk of falling behind. Take for example the large appliance category in which heritage brands like GE, Whirlpool, and Maytag dominated the US market for over sixty years. In the early 2000’s, South Korea’s Samsung and LG entered the large appliance category, and flipped the category on its head. New technologies emerged; appliances reconfigured, quality improved, new colors introduced, and with these introductions came market acceptance for these new brands, leading to an increasing consumer demand. Retailers that were once loyal partners to the heritage brands reassessed their position and switched loyalties. As it continues to innovate, now China’s Haier is in the background, on the cusp of breaking through in the US market. In the meantime, the once giants try to regain their positions and grow their brands but have been facing cultural challenges that prevent them from deploying innovation for success.
Those who avoid the challenge, while there are many factors that contribute to companies disappearing; those that do not innovate today may not exist in five years. It was not so long ago that Circuit City was one of the top consumer electronics destinations, Sony the electronics brand that consumers aspired to own, and there was a Blockbuster on almost every corner. Leading a market today is by no means a guarantee of future successes and companies have to stay on the cutting edge to continue to generate customer value. Waiting for tomorrow to adopt innovation is a contradiction in itself. Innovation is a problem of today and must be rolled out to try to secure the future.
Why deny that is your problem? It is! One of the considerations to change this type of culture where everyone feels that innovation is someone else’s problem is that they must all have some type of innovation accountability and incentives. For change to occur, in addition to short-term successes, long-term strategy and solutions must be included in success measures, including establishing metrics that reward innovation outcomes. This problem will only be solved (size of business and verticals) when everyone has accountable and is rewarded for innovation.
You are the leader, so it’s not someone else’s problem. Not if you value your relevance, and contribution to the growth of your organization. Embedding innovation within functional teams of the organization would better serve the company on the near and short term. This is where the transfer of knowledge through innovation mentors can take place; otherwise, this might be a daunting task to contemplate. Innovators must understand the short and long-term business challenges – they have skin in the game, customer wants and needs and perhaps most importantly the innovation expectation and output. This embedment of skills throughout the organization will guide alignment on vision, and give everyone insight into the innovation journey and help to create stakeholder value.
When there is difficulty in Defining and framing the innovation challenge, there has to be a switch to an innovation mind-set starting top down. Leaders must commit to educating the business about innovation and the innovation process. Perhaps a good place to start would be with Doblin’s Ten Types of Innovation. This model can inspire teams in various ways, as it highlights innovation as much more than just new products. Highlighting company innovations within each of the Ten Types can drive greater meaning to the model. In addition, in using real examples, employees can understand and appreciate their role in the innovation process.
For a culture of innovation to proliferate, for it to be effective, innovation must become a part of everyday vocabulary, embraced and even imposed by leadership, and trickled down into the various functions of an organization with clear mandates and incentives. Successful companies often say that everyone must be an agent of positive change, and that starts at the top so everyone is empowered to drive change.