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Innovation The Classic Trap - Coggle Diagram
Innovation
The Classic Trap
Innovation is rediscovered as a growth enabler every half a dozen years
Encouraging the flourishing of innovation outside of normal planning cycles is setting aside special funds for unexpected opportunities.
That way, promising ideas don't have to wait for the next budget cycle, and innovators don't have to ask conventional managers for funding.
Still, despite changes to the environment and differences among types of innovation, each wave of enthusiasm has encountered similar dilemmas.
Consequently, a large body of knowledge about innovation dilemmas has arisen.
grand declarations about innovation are followed by mediocre execution that produces anemic results, and innovation groups are quietly disbanded in cost-cutting drives.
The current wave of innovation began in a more sober mood, following the dot-com crash and belt-tightening of the global recession. Having recognized the limits of acquisitions and become skeptical about technology hype, companies refocused on organic growth
The second wave was pressure to restructure during the takeover scare of the late 1980s. Buying groups were attacking traditional companies, seeking to unlock the value of underutilized assets; "Shareholder value" became a rallying cry.
In addition to requiring financing models and development partnerships, the innovation process requires the exemption of some corporate requirements; After all, there are numerous differences between established companies and startups.
Third was the digital mania of the 1990s. The promise (and threat) of the World Wide Web drove many established companies to seek radical new business models
The first was the dawn of the global information age in the late 1970s and early 1980s, an era that introduced new industries and threatened to topple old ones.
Each wave brought new concepts. For example, the rise of biotechnology, characterized by complicated licensing arrangements, helped legitimize the idea that established firms could outsource R&D and learn from entrepreneurial partners
Approaches to innovation also reflected changing economic conditions and geopolitical events
Yet despite all the research and literature, I still observe executives exhibiting the same lack of courage or knowledge that undercut previous waves of innovation.
The potential for premium prices and high margins lures executives to seek blockbuster innovations
Along the way, they expend enormous resources, though big hits are rare and unpredictable.
Meanwhile, in seeking the killer app, managers may reject opportunities that at first glance appear too small, and people who aren't involved in the big projects may feel marginalized.
Large consumer products companies typically leaked ideas that couldn't generate multi-hundred million dollar revenue
It discouraged investments in ideas that could not be tested and measured by conventional market research, or that were not based on experience, in favor of ideas close to current practice and not very innovative.
When a company is both too product centric and too revenue impatient, an additional problem can arise
The organization's innovation energy can dissipate across a raft of tiny me-too projects chasing immediate revenue.
An innovation strategy that includes incremental innovations and continuous improvement can help to liberate minds throughout the company, making people more receptive to change when big breakthroughs occur.
While a failure to encourage small wins can mean missed opportunities, too many trivial projects are like seeds sown on stony ground—they might sprout, but they do not take root and grow into anything useful.
If new ideas take the form not of distinctive innovations but of modest product variations, the resulting proliferation can dilute the brand, confuse customers, and increase internal complexity.
A second set of classical errors is in the works; specifically, the drive to throttle innovation with tight controls - the same planning, budgeting, and reviews applied to existing businesses.
Undervaluing and underinvesting in the human side of innovation is another common mistake. Top managers often put the best technicians in charge, not the best leaders.
Innovation efforts also stagnate when communication and relationship building outside of the team is neglected.
Companies must be careful with the way in which they structure the two entities, to avoid a clash of cultures or conflicting agendas.
The more dramatic approach is to create a unit apart from the mainstream business, which must still serve its embedded base.
The likelihood that companies will miss or stifle innovations increases when the potential innovations involve expertise from different industries or knowledge of different technologies.
Even when a new venture is launched within an existing business, culture clashes become class warfare if there are two classes of corporate citizens—those who have all the fun and those who make all the money.
Companies can develop an innovation strategy that works at all three levels of what I call the "innovation pyramid" - some big bets at the top that represent clear directions for the future and receive the bulk of the investment.
Influence flows down the pyramid, as big bets encourage small wins in the same direction, but it can also flow up, because big innovations sometimes start out as small tweaks.
Established companies can avoid falling into the classic traps that stifle innovation by broadening the search for new ideas, loosening tight controls and rigid structures, forging better connections between innovators and core operations, and cultivating communication and collaboration skills.
Innovation is doomed unless managers seeking it take time to learn from the past
Striking the right balance between exploiting and exploring requires organizational flexibility and close attention to relationships. It always has and always will be.