Does it seem to you that most of your innovation effort falls into a black hole somewhere in your organization?
A lot of money was spent on different innovation projects & in startup portfolio, without any clear results and encouraging signs that you are on the right track. Too many corporate projects and strategic initiatives are sprouting everywhere and all the time.
In this article, we’ll describe 7 common and critical problems of innovation in established firms. Halas, there are more than just these 7 problems, but regarding the impact of them, these need to be addressed first and foremost.
1. Lack of a clarified innovation ambition
First thing first, an innovation strategy should not be an independent plan to grow market share or profits through product and service innovation. It must always stay aligned with your growth strategy.
We have discussed an innovation ambition in a previous article – the very cornerstone in your innovation strategy. Again, we stress the importance of such transparency on innovation ambition. You build this first and the rest will follow.
2. No growth driver (or too many)
A growth driver is the driving force of your future business. When the current rules have changed and new entrants are rushing to join the game, playing with the old pawns will make your business obsolete in the short-medium term.
A growth driver could be:
- a disruptive business model – including new distribution channels, new value proposition;
- a newly acquired technology;
- a new product/service positioning;
- a resourceful internal organization – including flexible processes & systems;
- the available operational tools and methods etc.
or all of the above.
Yet again, companies should focus two one or three strategic driving forces instead of 100. A common mistake when it comes to strategic positioning in short/medium term is to have too many viable options.
Does it sound familiar? (Source)
3. No effective defence against global competitors
Just kidding. But it is true that Chinese firms are really levelling up their innovation game.
Take the mobile phone market for example. Apple has had troubles breaking into the Greater China market, and the fight is getting harder with the appearance of home-grown Chinese smartphones. The proof? Apple’s revenue in China is down 27% in comparison to that of last year.
Chinese smartphones have the same excellent design that is inspired by Apple (or “stolen from Apple” – as you like). They are equipped with premium features (Leica camera, AI chipset, long-lasting battery etc.) and are sold much lower price. As a consequence, Chinese smartphones not only takes up 41% of all smartphones sold in Greater China, but Xiaomi alone has become the 4th biggest smartphone provider in the world.
That’s just one example. No matter what your business is, you will easily find examples where competitors in emerging countries are threatening to take up your market share with cheaper and good-enough solutions.
4. Top managers don’t know how to drive innovation
This is a classical case, yet it is not only the fault of top managers. They just don’t have the right tools. It is difficult to pilot in the unknown: which innovative options should I take, if I don’t know whether the product/service is going to function and who will buy or use this.
As Pascal Le Masson has put it:
| The “unknown” is distinguished from the “uncertain” in that uncertainty refers to an event which is itself known and whose probability of occurrence can be estimated. By contrast, the “unknown” refers to events which can hardly be imagined and therefore cannot be described.
It does not help when there has been a lot of hype about new techs and practices inside and outside the industry. You probably have heard or even explored the potentials of AI, big data, blockchain, virtual assistant etc. to your business. The top managers, therefore, have had a hard time identifying which one really matters to their business, to decide to invest in.
5. Unmatched perimeters to evaluate innovation
Breakthrough innovation will never work in a million years, if we never set up the right criteria to judge it!
Established companies have been judging a breakthrough innovation – with all those unknown elements – with the same set of criteria to judge a business-as-usual product or service.
We have addressed this problem of why innovation ideas and projects die like flies in established companies in this article (in French). We invite you to revisit it to read the detailed analysis.
6. Too long time-to-market
The ideal situation is when you can test fast, fail fast and learn fast. None of these three steps should be ignored.
You can test and fail fast but learn and leverage absolutely nothing. In that case, it is a waste of money and effort, while your competitor is moving closer to the realisation of a killer product/service.
Let’s take another example of Apple, this time they got it right. They iPod project developed the first prototype of the product within 8 weeks. As most of the skills to produce the iPod was not even owned by Apple – they set up a team from several companies with different backgrounds to develop both the hardware & software. The iPod was launched in 6 months.
Should this project had failed, Apple wouldn’t have lost much time and money (in total, Apple spent only 3.1% of its revenues for R&D). Should Apple had taken longer than 6 months, this would have been the market of someone else.
While your company is contemplating on the viability of a new idea on paper for years, someone somewhere might have developed the first prototype.
7. Invest a fortune in startups and that’s it
Established companies have been investing in startups as a source of innovation and talents to stay competitive. Take the example of the banking industry, it seems to become a race of who is betting on the right Fintech horse.
The issue, however, is how to turn the experience in the collaboration (or the buyout) into the competitive assets. To spent millions to bet on the right horse in the race without a mechanism to learn from what has been done, be it success or failure, is too risky and unwise. If the startup dies, everything they have learnt and mastered dies with them.
Beyond business potential, these ventures must help to create new systems, assets and technologies – that will be a part of your firm stock of know-how.
The 7 problems addressed here are in fact the implications of malfunctions in 3 activities – strategy, innovation management and organization. To innovate efficiently – i.e to make sure that all innovation efforts do not end up being a waste of time and investment, firms need to solve these malfunctions – which are the components of what we call an innovation machine at Stim.
How? At Stim, we propose a program to onboard the members of the executive committee and the innovation team to collectively define an innovation ambition in an efficient way and in a short amount of time, and to design an innovation machine inside their company.
Does this speak to you? Do these innovation issues concern you on a regular basis? Shoot me an email at firstname.lastname@example.org to discuss in more detail!
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