The secret of continued success
What is the secret of continued success? Well here’s a thought - it is the ability to continuously innovate. It is the ability to second-guess what customers will be wanting next year and the year after so that you are ready to serve them and steal a march on the competition.
"Woah" you might say, "surely it is possible to be successful without innovation". It depends what you mean by successful. There are a few old companies around, not many, but enough for us to use as examples. Cadwalader, Wickersham & Taft is a firm of lawyers in the US that was established in 1792 - but I wager that you have never heard of them even though they employ more than 400 attorneys. In the UK, RJ Balson & Son, a butchers, was founded over 500 years ago and is still a butcher shop today. So I guess to that extent these companies are successful. But I'm talking about success that brings growth. Simply existing for a few hundred years is successful but it isn’t the same as pushing ever onwards and upwards. This is extremely difficult to achieve without innovation. Some companies enjoy a purple patch of innovation and believe that they have the Holy Grail only to find that a fiendishly clever competitor or a change in customer tastes has altered the rules of the game.
There are some innovative companies that have been around for a fairly long time. Disney comes to mind with its inventive animations and its move into streaming. 3M is over a hundred years old and it pushes hard on new products with around a third of its revenue coming from products that are less than 5 years old. Apple has been doing well recently although it has had a few ups and downs since its inception in 1976. Google too has shown a fast pair of heels in the last 20 years. Can these companies maintain this momentum for the next 20 years?
It raises the question of "how do we innovate?". It seems that a good deal of product innovation comes from Lady Luck. There are too many serendipitous examples of innovations for us to ignore. Velcro, Viagra, X-rays, Bakelite, Teflon, super glue, Post-it notes, Saccharin (to name but a few) are all accidental innovations. Relying on luck for success is not a model to be recommended. However, it is possible to exploit this paradigm. How many super inventions have escaped us because they were born into an environment that didn't recognise them or couldn't encourage their development? The chances of success can be increased by creating an environment that fosters “new” and “different”.
Successful innovation requires a state of mind. It needs the company to welcome change, accept failures, encourage what might seem offbeat ideas, and love experimentation. A company with a significant research and development expenditure but lacking these characteristics that fertilize innovations may find that it isn't getting payback. Nearly 20% of pharmaceutical companies’ costs are on research and development and yet there have been pitifully few blockbuster drugs developed over the last two decades. Could it be that the culture and highly regulated pharma environment stymies the innovation they are looking for?
There are frameworks for innovation and they are featured on this website. One of the most famous is Stage Gate New Product Development. The model begins with brainstorming and idea generation after which the selected concepts go through screens to test which is likely to be financially viable.
Blue Ocean Strategy is another innovation framework in which you try to recognise opportunities for new products among customers and potential customers, looking for their unmet needs. All fairly obvious but difficult to turn into practice.
So what to do? Certainly it is worth using the innovation frameworks such as Blue Ocean, Diffusion Of Innovation, Disruptive Innovation, Stage Gate Development, and Edward de Bono's six thinking hats. Market research tools such as conjoint and SIMALTO can help determine whether an innovation has value in the eyes of potential customers.
For the real secret of success, that is to create a company with in-built innovation, we must return to the most important factor of all - culture. An innovative company needs to be bold. It needs to be prepared to take risks. Innovation will have its failures and these have costs. Too tight a grip on costs and nothing will change. Too liberal a policy on costs and bankruptcy may beckon.
And innovation isn't just about products. It applies to everything you do. If there is a better way of manufacturing the same product, this is innovation. If there is a better way of serving the customer, it is innovation. If the company needs to change to adjust to the market, it is innovation.
Here are five ways that you can build a culture of innovation:
Lead from the top – make it clear that the leaders of the business believe in innovation and encourage it. As always, such commitments have to stand firm when times get hard.
Encourage innovation at the bottom – new ideas very often come from employees at the coal face. They are the ones who see what customers want and how they are using products. They are talking and listening to customers and will be the first to see opportunities.
Accept failure – the stage gate approach to innovation understands that not all innovations will go forward. It isn't a failure to drop an idea that isn't going to be financially successful. But it would be a failure if there were no learnings as to why certain products don't make it.
Act quickly – procrastination kills innovation. The aim is to modify, test, modify again and do so as quickly as possible. This means employees must be empowered to make decisions rather than be slowed down by bureaucratic decision-making on the top floor.
Stay close to what you know – don't move too far from your customer base with your innovations. Your customers know you and you know them. Your customers will be your first port of call when you launch a new product. It is tempting to look at new ideas beyond your area of competence but these are the ones that could cost you dearly.