Failing innovation; bottom line economics
Originally published on LinkedIn
Incumbents and market leaders in many sectors continue to crave innovation as their market shares are under threat by the rise of ‘disruptive’ new businesses. The latter’s products/services often offer a unique value and these new players tend to attract new consumers to existing markets. This incremental growth, in most cases, is the main driver behind the growth of these newcomers. As the ‘disruptors’ attract new consumers others are persuaded to buy that particular product/service as well. Given that the offerings often provide an ‘added benefit’ or, in the case of the FMCG sector, the use of more ethically sourced raw input, I view this trend as positive as the ‘too big to fail’ market players are somewhat forced to rethink their production processes and/or market penetration strategies altogether.
There are numerous methods for large incumbent market players to ‘institutionalise innovation’ into their respective company cultures, however, no ‘best-practice method’ has a proven track record for success as of yet. Many discussions, as well as research, exists around innovation in general and the aforementioned incumbents have invested heavily in finding a method with which the ‘next best thing’ can be found.
One of the ways in which this might be done is the incubator approach. I personally am not a particular fan of the externalisation of idea generation that this approach entails, as I believe very valid and innovative internal ideas are still being neglected, are unspoken of or are killed off by several layers of management within these large organisations. Even internal calls to action are often lacking in the activation of employees for several reasons, examples of which could be that employees do not believe their idea would be valued or that there is no real incentive to ‘step up to the plate’ which could lead to potential failure in front of colleagues.
These incumbent players should ‘smart-up’ instead of look for start-ups, more emphasis needs to be put on the fact that ‘failure is all right’ to allow ideas to be shared via internal platforms on a regular basis. A lot of highly innovative ideas go unnoticed because people are afraid to ‘fail’ in front of their colleagues, besides, some employees might simply be too comfortable due to a steady revenue stream. Yet as changes are slowly affecting that steady stream senior executives will come knocking as they themselves are reprimanded by shareholders. This state of panic often leads nowhere in the end as the same process of ‘idea management’ continues to kill off any sound suggestion to overhaul current strategies as it might require too significant an investment to do so and/or as the change does not guarantee any ROI upon analysing its trajectory. Both are reasons for senior managers to disregard any such innovative ideas.
“If you’re not prepared to be wrong, you’ll never come up with anything original.” — Sir Ken Robinson
“You don’t learn to walk by following rules. You learn by doing and falling over.” Sir Richard Branson*
Innovation often comes through failure and eventually failure leads to success; great entrepreneurs, business leaders and management thinkers alike have all mentioned something in this regard. For big business, failure might mean the complete loss of a significant investment yet this fear of losing might lead to losing out to start-ups who do create that niche product/service that attracts both existing and new costumers (i.e. incremental penetration). The individuals that run these start-ups do ‘have to’ step up to the plate regardless and innovate without fear of failure. It is under these circumstances that lead them to innovate, that lead them to success. This success often does come after failure, as we might not hear of the numerous of failed start-ups we do hear of those that succeed, mainly because their success is of such significant proportion. To those who now think, ‘Well, do these large corporations not simply buy the start-up once it succeeds’. Yes, perhaps that is true yet acquiring a successful start-up, or incubating numerous of start-ups, will cost a lot more than openly cultivating that innovation internally in the first place,
An indefinite amount of opportunities await, as threats are apparent in the state of idleness it is almost certain these will also appear in those undiscovered white spaces. Though acting with too much caution or fear leads to a bitter end as one succumbs to the threat(s). Rather big business would be better off creating and sustaining a culture of facilitated failure, incentivising employees to speak up throughout all ranks at a local level and to hire managers who have the authority to follow their ‘entrepreneurial instinct’. Who knows, one of the graduates might stumble upon the next algorithm that will revolutionise the way in which we do business in the digital hemisphere or perhaps a formula for a soft drink that will rule the world for decades to come.
*The above quote by Richard Branson was used in the description for an event held in 2015, ‘Entrepreneurs Instinct. Do big business need more of it?’
