THREE STEPS TO STRATEGIC INNOVATION
By Cecilia R. Edwards
The old adage is still true today: “If a business isn’t growing, it’s dying.” In eras past, it may have been possible for a business to coast through its mature stage and continue to generate reasonable profits. However, in the modern day of rapid technological advancement, a business must implement significant amounts of change to simply maintain current performance. Companies that do not engage in strategic innovation — i.e., proactive efforts to continuously reinvent themselves and create new, breakthrough approaches — are relegating themselves to sure obsolescence and demise.
In 2005, Vijay Govindarajan and Chris Trimble published 10 Rules for Strategic Innovators: From Idea to Execution (“Ten Rules”), in which they articulate a path to success for mature companies. More than a decade later, their advice is still quite relevant for today’s businesses. In particular, by practicing three of the guiding principles shared in Ten Rules — forget, borrow and learn — a company can create an entirely new growth curve for itself and “reinvent” its future.
To innovate for growth, companies need to guard against unintentionally maintaining past norms — spoken and unspoken — as their default modus operandi.
A good example of this is Nintendo. Now the world’s largest and most successful gaming company, Nintendo began in 1889 as a playing card company and thrived in that market for 50 years. When the founder’s grandson took the reins, the journey to Nintendo’s current success took a circuitous route, with stops in taxi service, instant rice, hourly hotels and toys. None of these business models were related to the company’s past success in playing cards. But eventually, Nintendo took advantage of an opportunity that seemed an expansion of its foray into toys, developing the arcade game Donkey Kong and propelling itself to new levels of success.
Here are four steps to forgetting old norms and welcoming new possibilities.
- Examine business models from a wide range of industries.
- Staff with a diversity of people; include both entrepreneurs and those from mature businesses, as well as industry experts, those with unique skills in emerging technologies, etc.
- Deliberately determine the culture — values, beliefs and decision biases — that support the business. Don’t assume a culture, and don’t let one naturally emerge.
- Expand the concept of the market as broadly as possible, then determine in what segment of that market to focus the business.
Not every aspect of a business model needs to be novel, unique or innovative. In fact, borrowing great ideas and capabilities from other established companies in the marketplace is a smart, speedy way to propel growth.
Procter and Gamble historically relied only on internal teams and a network of trusted contacts to support the design, development and supply of new products. But when the company came up with the idea of printing images on Pringles potato chips, it took a different route. P&G found a university professor and bakery operator in Bologna, Italy, who had invented a way to print edible images on cakes and cookies. By borrowing his process and technology, with only a few tweaks, P&G was able to bring Pringles Print to market in a fraction of the time and cost the company would have incurred had it developed the technology in house.
Inspired by this success, A.G. Lafley, who was CEO at that time, later set a goal to have 50 percent of innovation coming from outside the company as a way to sustain growth and inspire new, billion-dollar businesses within the company.
To be a better borrower:
- Determine which things should be outsourced (borrowed from traditional industries) and which things should be created in house.
- Carefully determine when to borrow the reputation or brand of others through partnering or hiring individuals with valuable personal brands.
- When partnering with other companies, be clear about how tensions will be managed.
- Don’t partner to save costs; partner for strategic advantage only.
In times past, companies would not dare release a product to market before it had been perfected, and the time to market was long. More importantly, the time to receive feedback was even longer. It was not until long after significant time and investment had already been made that real market insights (not those manufactured by focus groups) were received. Reacting to mistakes was time consuming and costly.
Google has mastered a better way, incorporating learning into every facet of its business model. Google has adopted a “ship-then-iterate” approach to product release. The Chrome browser introduction is a good example. Google made enough of an investment in time and money to push Chrome to market quickly, then pushed out a new version every six weeks, improving the product incrementally based on a continuous stream of feedback from real-world users. This approach does not always result in success, and failed products are pulled with equal speed. But even these unsuccessful products are not considered a waste, because the best features and learnings are incorporated into other products.
To learn quickly:
- Dedicate sufficient (more than usual) time to planning; do not let the “planning is not doing” syndrome dominate.
- Use a frequent and agile planning cycle to accelerate learning.
- Use planning tools that are flexible and quick; avoid creating a false sense of precision by providing too many details.
- Focus on increasing ability to predict the market by testing uncertainties as quickly as possible.
Forgetting old norms, borrowing assets from others and learning by rapid iteration are three principles any company can use to avoid strategic obsolescence. By proactively changing the rules of the game and creating new paths to profit, a company can stave off maturity and create sustained growth.
Cecilia Edwards, a former rocket scientist and strategy consultant to Fortune 500/Global 1000 corporations, is a partner with Everest Group, a Dallas-based consulting firm. She guides organizations in leveraging next-generation IT solutions to drive value for the enterprise.