Stick and Stagnate, or Twist and Grow: The Importance of Innovation
Innovation is on everyone’s lips, and not without reason.
Stories of once-disruptive ideas that laid the groundwork for household names like Airbnb and Facebook spark the collective imagination.
However, new ideas on their own aren’t enough, no matter how brilliant they are. It is their commercialization — bringing them to market, resolving customer problems, and selling — that constitutes innovation.
Yet innovation isn’t just about how much you can make or save thanks to new ideas — it’s also about how much you can lose if you neglect it.
As many spectacular business failures show, the stakes can be pretty high, especially now amidst the global recession and a major European armed conflict.
Why innovation matters more than ever
The COVID-19 outbreak abruptly demonstrated the need for innovation, testing the agility of companies to spot and take advantage of new possibilities proactively.
Capitalizing on emerging trends requires fast decision-making and space for pivoting — and this isn't possible without the right innovation structure in place. Without it, companies stand still while today and tomorrow's competitors glide past them.
Today, new startups can quickly develop top design and production capabilities, in many cases leapfrogging incumbents and becoming market leaders within a decade or less. The speed of commoditization has never been faster, making product differentiation increasingly difficult to sustain — and raising the bar on innovation strategies.
Consumers also expect brands to adapt swiftly to their ever-changing preferences and deliver easy and frictionless experiences.
These expectations are converging across all product segments and industries, so clients demand a similar customer journey no matter if you're in entertainment, retail, or banking. Brand consultancy Siegel+Gale estimates that by failing to provide simple experiences, companies lost around $402 billion in 2021 alone.
Innovation is also crucial to staying ahead of the competition, especially if you’re a first-mover. You may have carved out a niche in the market, but you are giving that benefit away if you don’t have the correct innovation strategy and structure.
The price for stagnation
Risks associated with neglecting innovation are evident in the banking sector, where long-established players have been slow to respond to their customers’ expectations for more accessible services.
Their lack of agility has left enormous gaps for fintechs (adopting approaches such as lean product development) to respond faster to their customers’ wants.
Many stories prove that companies with no innovation strategy risk sticking to outdated services, constraining their growth, and failing to commercialize new ideas. They may also overlook the danger of commoditizing their own product or services.
The failure of Kodak has always been the go-to example of what happens if you disregard the need to innovate.
The company invented the digital camera in 1975 but soon shelved it, believing it would cannibalize their core business of film and paper.
Missing a broader perspective, Kodak overlooked a huge opportunity — to the delight of its competitors, who implemented the invention on a large scale.
Nokia is another excellent example. The then mobile giant — with a market share of 49.4% in 2007 — didn't see the power of ecosystems. Despite common misconceptions, the Finnish phone wasn’t defeated by the iPhone per se, but rather by its inability to reinvent itself and its ecosystem quickly enough.
Stories like these underscore the importance of customer development and taking the time to analyze how to deliver more value and validate your product assumptions. It’s better to swallow a bitter pill at the beginning of the process than waste resources on developing products nobody wants to use. Or completely miss the window to adapt to customer wants and needs, as Nokia did.
That’s why companies need to learn how to fail fast, dirty, and cheap. Successful innovation and fast-cycle iterations go hand in glove, so the faster you fail, the faster you can discover the winning idea.
Different patterns of success
Of course, not all innovations follow a single pattern.
They can often emerge from apparent chaos, just as Lockheed Martin’s weaponry disruptions did in its secretive Skunk Works division in the 1940s.
Working under tight deadlines and compelling project constraints, a small and loosely structured engineering team delivered world-class aircraft 37 days sooner than expected. This success wouldn’t have been possible without granting specialists a high level of autonomy and freedom from the organizational constraints of their parent company.
Many innovative companies — startups and incumbents alike — have borrowed this innovation framework from Lockheed and cultivated a lean mindset of fast and iterative change.
They understand the benefits of giving their employees “think time” and creating an unrestrained environment for ideation and invention. As a result, when necessary, their teams can pivot dynamically to ensure their product remains relevant, just as Uber, Airbnb, and Netflix did.
However, more structured approaches and the development of standards can also spur innovation.
Clear “rules of the game” help structure activities and add efficiency and focus on the aspects that add the most value.
Of course, standards vary greatly depending on the industry and an organization's particular needs, but their ultimate objective is clear: business growth.
Growth needs innovation
Speaking of growing revenue and operations, all key growth strategies — from market entry to mergers & acquisitions (M&A) and scaling — are either directly or indirectly underpinned by innovation.
That again is where the significance of an innovative mindset becomes evident.
Even the best strategy does not move forward if the people involved aren’t prepared for it.
Implementing innovation is always demanding, even more so if it requires a wider organizational change.
This issue can be particularly poignant in large organizations where innovation often occurs in silos. Such companies may already have in-house innovation labs but struggle to implement new ideas due to complex decision loops, incompatible management, or incentivization structures.
The right mindset — embracing creativity from all corners of the organization, the bravery to take risks, and the ability to learn quickly from failures — is what pushes things forward on the road to innovation and growth.
It’s these traits that many successfully innovating companies share — and one of the factors pushing them to the pinnacle of their industries today and keeping them there in the future.