The only way to achieve real growth is to create offerings so innovative that they contain “must haves” that define new subcategories, because market inertia makes alternatives ineffective. What is needed is substantial or transformative innovation that disrupts the marketplace. The remarkable fact is that such innovation rarely occurs in the organizations that have strong profitable positions in established categories, and thus have the resources to deliver change. Why? It is the curse of success that can take several forms:
First on the list is the insidious and common “stick-to-your-knitting” curse. Firms have been successful focusing on their core businesses: investing vigorously in incremental innovation to reduce costs and improve the offering, pursuing “my brand is better than your brand marketing” to engender more customers and higher loyalty, and building assets and capabilities that support the business. This commitment strategy however, leads to:
- A failure to see opportunities even when they are obvious
- A bias against any innovation that may cannibalize the core business. Why invest in an offering that may kill the golden goose?
- An organizational structure that gives undo power to the large existing silos
- A fear of going outside the existing set of skills and assets
Second is the related “too small to matter” curse. McDonalds, Intel, Frito-Lay, Microsoft, and Coke all have had innovation smothered by their huge brands and businesses. Any embryonic business idea will simply not matter financially, so why bother?
Third, is the “competing story” curse. Nearly every executive in the organization will have a list of investments that are worthy, even indispensable, for his or her silo business. A proposed new offering, particularly a game changer, will compete for those resources. Even though most will represent marginal new offerings or more marketing that is unlikely to foster growth, they will have strong advocates. There is also the competing story that emphasizes the risks of the technological barriers that will not be overcome, that the market is smaller than planned, and that the customers will not respond. With decision influences biased, the competing stories are likely to win.
Finally, there is the “short-term financials “curse.” The pressure to create short-term growth and margins, driven by needs of stock investors and by managers with short job tenures can be intense. Short-term results can best be obtained by diverting R&D funds to support or enhance the core businesses. Creating a new business platform is risky, expensive, and likely to result in short-term financial pain.
So, how can substantial or transformation innovation occur in the face of these impediments? It’s not easy as the culture, people, processes, and structure of the organization may need to be changed. It helps to have a strong, informed strategic vision and then to centralize strategic decision making and resource allocation so that the successful silos do not prevent innovations from moving forward. It also helps when there is a crisis. Crisis conditions enabled the Chrysler minivan to live, for Lou Gerstner to reinvent IBM, and for the Walmart environmental initiative to happen. In the absence of a real crisis, an artificial one can sometimes be created, as we saw when the CEO of Toyota mandated that the Prius be designed in two years.
Allowing and enhancing real, market-changing innovation has never been more vital. Being aware of the curses of success is the first step.