There’s a lot of talk about innovation being the key to business success, but so many businesses I see are still playing the old game and losing simply because they don’t really understand what this actually means.  This week I came across an article in which David Kerpen interviewed Jason Fried of Seven Signals that reinforced the message I have been giving my clients for years – “You are only as good as your NEXT big idea”.

Think back to the days when business life was as slow as retirement might seem today and you’ll maybe remember the way businesses used to go through endless cycles of famine and feast.  With the benefit of hindsight its easy to see what was happening.  A business would come up with a product or a model that resonated with the market (in those days it was often a matter of luck) and they would milk it for all it was worth.  They didn’t give a lot of thought to why they had hit this rich vein of success, they just scaled up and went for bigger numbers.

After a while (and in those days product development lead times were much longer than today) competitors would turn up and start making their life tough with similar propositions, improved in some way either cosmetically, technically or at a better price and from then on it was a slow slide back to the bad old times for the originator.  At some point on the slide, usually when they had hit rock-bottom, they decided to do something radical and re-invented the business, maybe developing a new product and off they would go again.

Usually these improvements in fortune were the product of management changes and clear management styles emerged.  There were what we called “transformationists” who, as the name suggests were the people who came up with the new stuff and engineered the revival of suffering businesses and there were “transactionists” to whom the business was handed over in order that they might perpetuate the new formula.  This path of boom and bust was generally accepted as the way things were done.  Transformationists and transactionists were separate and different and were hardly ever in the building at the same time.

Then things started to speed up and the cycles became so quick that barely had the transactionists got their feet under the desk than the tyransformationists were back in to do their stuff. True to Darwin’s theory a new breed of manager evolved, those who could both transform and manage on an on-going basis.  Not before time you might think. And that’s basically where we are today except there was a missing ingredient.

It took a very long time for businesses to understand that the products themselves were rarely the reason for the success of the business.  These were in fact a product of the real asset. Products were successful because they were new, different.  As the world emerged from the austerity of the post-war period products began to capture the imagination of customers because they were fresh and exciting rather than purely practical. A new phenomenon emerged – throwing away something that worked and replacing it with something that looked better or incorporated an additional function. Increasingly it was innovation that was driving business and that was driven by internal culture and that in turn was driven by branding. Eventually businesses were only as good as their NEXT big idea and to stay on top they needed to be in a state of continual change and reinvention.  In the intervening years businesses (ABB Brown Boveri being a case in point) reduced their product development time from years to months, switched-on businesses have big teams working on new ideas and as a result innovative new products are obsolete before you get them out of the box.

Kerpen’s piece reflects on this and makes the critical point that because the pace of business life is as fast as it is today no business can afford to wait until circumstances force them to innovate.  Apart from anything else changes made under duress are fraught with compromise, so your chances of success are greatly diminished. The time to change is when you are enjoying success.

This is probably the lesson that businesses I come across find it hardest to accept. Fear of the unknown and fear of failing to squeeze all the juice from an idea or product still combine in equal part to make managers reluctant to plan ahead.  Sure there are businesses out there with three or more generations of new products under development, but theses are the successful ones and successes are still the minority.  Its no coincidence that the vast majority of new businesses fail within the average lifecycle of products in their sector.

You might argue that these one-trick ponies are the incubators of new ideas and to some extent you’d be right. We are developing a new progressive model almost by default. In the tech sector start-ups with a great idea are often snapped up by the big players, but this has its weaknesses. The great new ideas generated by these small businesses are a product of culture and once the business is absorbed into a big corporation, that culture is usually smothered. The big concerns are consuming new businesses with an ever-increasing appetite. Besides, you can’t rely on being snapped up by a behemoth, which is why my advice to start up’s is focus on developing your innovative culture.  That, and not the product it created dictates your future.

Phil Darby
February 24, 2014

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