It's unlikely that you'd come across many business leaders who would say that innovation is a bad thing. In fact, most leaders would tell you that they continually strive to create an environment that fosters innovation -- one that encourages experimentation, tolerates failure, and fosters a sense of collaboration among all team members.
Everyone knows innovation is critical for organizations of all sizes today, but the pandemic forced us to drive 3-5 years of innovation into 14 months. This crisis taught us two things, 1) we can innovate significantly faster than we thought while still delivering the day-to-day business, and 2) we learned that the siloed initiative approach to innovation is woefully inadequate.
It is abundantly clear that innovation must be woven into the daily DNA of our companies, and it must belong to all of us. Yet, armed with this new understanding, we still find ourselves asking ourselves why is innovation so difficult and how do I build the innovation capability and a culture of innovation in my company? After all, most businesses rely on innovation when they enter the market, fighting to carve out their own space. Without an innovative product or service, it can be challenging for a company to gain a foothold in the market. They need some leg up on their competitors, whether it be a new product, a new process, or a philosophical change.
While most companies seem to be driven by an innovative mindset, the answers to why innovation is so complex can be counterintuitive -- at least until you look at how companies grow over time and how that initial spark of corporate innovation can harden into a fixed mindset, making future innovation more difficult.
The 4 Types of Corporate Innovation
Over thirty years ago, Rebecca Henderson and Kim Clark published a foundational study investigating the different types of product innovation and how firms often struggle to develop and incorporate these advances. While the world has changed significantly in the past three decades, these four types of innovation still ring true today.
Breaking down these kinds of corporate innovation can offer invaluable insight into why innovation is so difficult.
Incremental innovation ignores structural changes in favor of improving the core components of a product or service. Rather than entirely rethinking product design or production, these changes seek to eliminate inefficiencies or improve overall quality.
Unlike incremental innovation, modular advances focus on the fundamental design concepts while maintaining the relationship between the components and that core concept, such as the shift from analog to digital telephones. The underlying concept remains the same; it's the way that concept is enacted that has changed.
Architectural innovation is the flipside of modular innovation. Rather than rethinking a core concept, innovators rethink how those core concepts relate to each other, looking for changes that benefit the end-user. This may require some changes in the core components, but the main difference is how those components work together, like the shift to front-wheel drive transmission systems.
As the name implies, radical innovation is the most extreme form of innovation, reimagining both the central concepts and how those core technologies relate to each other. This paradigm-shifting kind of innovation can be highly successful, but it also carries the highest risk.
Identifying these four types of innovation can be a valuable tool in understanding why companies may struggle to continue to innovate. They may focus on some aspects of the development process, including employee upskilling to stay up-to-date with current technologies. However, while these efforts are important, they don't address the most significant innovation challenges most businesses face.
One of the underlying reasons that companies struggle to innovate over time is, quite simply, fear. And that's entirely understandable. While starting a business always involves some level of risk, the equation changes as companies begin to grow. The larger the company is, the more there is to lose, so many businesses quickly become risk-averse.
Not only can fear inhibit innovation from an organization level, it’s equally important to ensure that employees feel safe expressing new and innovative ideas for the business. If there is a deep feeling of fear perpetuating throughout the company when it comes to challenging the status quo, it’s going to be nearly impossible to have those conversations pushing innovative thoughts and solutions.
Risk-taking requires being comfortable with the unknown. As businesses expand, those unknowns pose a compounding threat to the wellbeing of the company. However, the best leaders understand that there are different kinds of risk, assessing the value of their innovation efforts in relation to the relative nature of that risk.
Financial risk, for instance, can pose a significant challenge to a business if it isn't properly capitalized to handle the potential losses. However, these risks can be carefully managed, both before taking the risk and after seeing the initial performance.
Innovations that pose health and safety risks to consumers not only expose companies to lawsuits but could also severely damage their reputations. Between the financial challenges and potential harm to the brand, many companies only make gestures at innovation, preferring instead to continue business as usual.
Short-Term vs. Long-Term Goals
For many companies, one of the most significant early milestones is their IPO. Beyond the influx of cash into your business, an IPO often stands as a stamp of approval. This mile marker indicates a company has not only succeeded but has established itself as a significant player in the marketplace.
But once your company goes public, the long-term goal of sustained growth can be subverted by the short-term needs of the shareholders. This can lead to a further aversion to risk since innovation and development costs have to be considered long-term investments. These long-term goals may ultimately provide a more significant return, but for most shareholders, it's the quarterly returns and dividend payments that matter the most.
This can lead businesses to defer or even largely abandon corporate innovation. The result, of course, is that these businesses end up getting passed by more innovative companies, perhaps smaller firms with fewer obstructions in their path.
There's an adage among craftspeople: If it isn't broken, don't fix it. While this mindset can keep plumbers, carpenters, and other craftspeople from performing unnecessary work and potentially creating more problems, it often leads to a company's decline and, ultimately, their demise.
For most companies, it's not a conscious decision to remain set in their ways. Indeed, as these businesses enter the marketplace, they rely on innovation and new ways of thinking to establish themselves.
But once they find their foothold, it's difficult to change established patterns. After all, it was their product or service that got them where they are, and changing the formula for success can mean risking everything they've gained.
Of course, as time passes, that model for success can very quickly become outmoded, and those companies that can't adapt or innovate are passed by. They can even fade out. However, by the time this realization sets in, there's not always much that can be done, especially if the fundamental business model no longer works. You simply have to look at Blockbuster or BlackBerry to see how quickly this can happen.
Part of the issue is staffing and promotion. Many companies tend to promote from within their own ranks, which helps preserve institutional knowledge, reward service, and dedication, limiting the downtime that accompanies a new hire.
However, hiring from within also limits outside perspectives. This can lead to insular thinking, creating a kind of echo chamber that can prevent a company from better understanding the changes that are occurring in the marketplace. This lack of varied perspectives is one of the most common—and most pernicious—innovation challenges.
Communication can also be a problem, especially in these more insular companies. All too often, innovative ideas are shot down before they can even be explored, dismissed as unnecessary changes to a formula that's still working. Instead of creating an environment of psychological safety, employees become intimidated and unwilling to share their ideas for fear of being shut down.
Finding Innovation Solutions and Innovative Ideas
The most crucial part of understanding why innovation is so difficult is to figure out ways to make innovation a part of your business. It's not easy, of course; there's no one, universal answer that works the same for every organization. Each company faces its own challenges based on the marketplace, the corporate structure, and the company culture.
However, that doesn't mean that there aren't some general principles that hold true across organizations. While you'll need to consider how each principle best applies to your business, these ideas can provide helpful guidance for avoiding the disruption that comes from falling behind innovation-focused companies.
What Is an Innovator?
First and foremost, it's important to understand what makes someone an innovator. The popular image is a creative savant, a genius who strikes upon a brilliant idea that changes the world.
While this may happen from time to time, for the most part, innovators are simply passionate people that are driven to change their area of interest and expertise. They don't have to be "geniuses"; instead, the best innovators are the ones who are dedicated to investigation and persistence.
What innovation requires is an environment that is welcoming of change. Anyone can be an innovator, as long as they have the opportunity and the tools. Given the pace of new ideas, trends, and technologies continues to accelerate, it’s critical that businesses provide these opportunities and tools like upskilling programs and hackathons to empower everyone to embrace being an innovator.
The best leaders are those who can foster the right environment, challenging their employees by asking the right questions, then providing them a safe space for experimentation—and failure.
Creativity isn't something you're born with. It's a skill that can be taught, and with practice, it can become second nature. Helping your employees to develop their creativity is a crucial part of encouraging innovation in your organization.
By emboldening employees to think outside of the box, you can organically generate new perspectives and ideas without being tied down by how your organization currently does business.
No matter how innovative a new idea is, it doesn't matter if there's no clear line of communication to get that idea heard. Consider Xerox, which developed a personal computer with a mouse and GUI, which they used only in-house. Because there was no mechanism to communicate their PC's potential effectively, Xerox remains a big player in printers, while others took the lead in personal computing.
In addition to being open to hearing new ideas without rejecting them out of hand, there needs to be a way to engage in discussions about new ideas, encouraging employees to pursue innovations that could help the company grow to new heights—or at least remain competitive with other innovators in the industry.
Failure and Success
Not all innovations are successful. In fact, after different levels of testing and implementation, a good percentage of new ideas will never see the light of day.
However, these failures should never be punished. Instead, they should be accepted as part of the innovation process. While many of these ideas will lead nowhere, some may open windows to new, more successful approaches to the same problem.
Successes should be celebrated far and wide. Whenever the company achieves a "win," it should be an occasion to congratulate everyone who had a hand in that success.
By celebrating wins, you help to build success into your company culture. Employees are energized by the recognition, which instills further motivation to seek new opportunities for wins.
One increasingly popular option is to find partners for innovation outside of the company. There are two different approaches to this kind of corporate innovation: From the inside out and from the outside in.
In the first model, companies work to manage the risk of innovation by structuring teams within the company along the lines of a start-up. These smaller groups are often treated as independent entities, with a semi-independent management structure that ultimately answers to the parent corporation but is given wide latitude to approach problems.
In the second model, the organization outsources the innovation process, partnering with a start-up or an established company to focus solely on innovation in target areas. Collaborating with start-ups is a mutually beneficial arrangement, as it provides funding for the entrepreneurs while limiting risk on the part of the corporation.
On the other hand, working with established companies offers the opportunity to network with other companies, combining resources to develop innovative solutions to shared problems and stronger relationships throughout the industry. With companies like Vation Ventures, you'll find you have access to a suite of partners and connections who will work with you to provide innovative solutions.
Building Innovation for Your Business
At Vation Ventures, our new sparkLAB program can help you build a culture of innovation for your company. sparkLAB streamlines the innovation process, saving you time and money while providing innovative solutions that will keep you at the forefront of your industry.
We provide start-to-finish assistance, from identifying your organization's needs through assessment and implementation. Contact us today to start your company's innovation journey.
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