In business there generally are two types of innovation: incremental innovation and radical innovation. The latter tends to disrupt the business internally, the industry it competes in (if not several other industries too) and customers’ lives. In fact, Clayton Christensen, a Harvard Business School professor, had coined the phrase “disruptive innovation” and how this “displaces” everything from the competition and customers to the business itself.
The trick to sustainable competitive advantage – and by this I mean remaining on top of your game over the long term – is to embrace innovation. If you don’t innovate, your business will decline or, worse, suddenly be overtaken and die.
One fundamental question I sometimes like to ask business leaders or top management is the following and their answer (whatever it is) is very telling: do you play to win – or to not lose? If you play ‘to not lose’ you’ve lost already, particularly in today’s fast changing world.
I don’t care if you have a monopoly, huge cash reserves or a market share of over 90 per cent: if you don’t innovate you will die.
Without meaning to be misunderstood: great and successful companies need a mixture of answers to that key question but the leader of any business must ‘play to win’. Period.
Business innovation is not something you delegate to creative people; it is something top management (especially the CEO) must embrace and infuse into the company’s culture. Equally as fundamental though is the absolute need to have an appropriate internal structure that systematically pursues and champions innovation.
My point is that without the right set up or structure in place you can’t attempt to innovate your business since it doesn’t work like that.
If you want your company over the medium term to innovate its business model, business processes, products and services, it must be designed and built with that capability.
How to do so? Not an easy question and it depends on the business or organisation in question but what I’d be looking to change is how the company thinks, decides and acts. This can be done by, for instance, having cross-functional meeting formats, mission-specific teams that disband as soon as the mission is achieved, more interaction with the customer (look at what Lego or Harley Davidson are doing in this regard) and a culture that encourages experimentation.
If you don’t innovate, your business will decline or, worse, suddenly be overtaken and die
We need to realise that today ideas, business models or strategies, whether we like it or not, have a short expiry date and that is why you need to constantly improve and adapt to compete and win.
Incidentally, that is also why the question “do you play to win – or to not lose?” is fundamental to your company’s survival. You must always play to win!
I guess it is a sign of our times. For a new entrant to emulate your business model and start serving your customers is arguably today the easiest it has probably ever been. The internet has revolutionised and (I would also say) democratised business in general; anyone can be an entrepreneur and start competing with incumbents wherever they may be. Even better or more threatening (since it depends on where you are standing or who you are) a well funded and established business from a completely different industry can now enter your industry and compete. You have to constantly innovate to always be ahead of the game.
Steve Jobs is quoted to have once said: “Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R & D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.”
This is precisely what I mean when I advocate “[changing]…how the company thinks, decides and acts” and building the right set up or structure. In order to “get it” you must be pre-disposed to innovation.
Kevin-James Fenech is director consultant at Fenci Consulting Ltd.
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