The Importance Of Ongoing Improvement And Innovation To Competitive Advantage.

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When a start-up or mature company comes up with a disruptive product, and can relish the joy of being the first to market and the innovative winner, that joy is invariably short-lived.  Smartphones, apps, and essentially everything in today’s information-demanding economy, have an extremely short life cycle, which brings to the fore the requirement for continuous innovation if corporations are to remain relevant.

Various sources reveal that Apple, Cisco, Google, and others have a 4-year product pipeline, meaning that they have innovative solutions either launch-ready or in-progress for the next 4 years.  Such a pipeline requires above-average forecasting skill and an acute ability to gauge the product desires of global markets.  Steve Jobs, however, reversed the traditional order, decided to go his own route and created the IPod and the IPad first, believing that the market would want them and would create the mass desire he was forecasting (ie: the market didn’t know what it wanted, so he drove their desires – a risk that in retrospect paid off handsomely).

Innovation is the mother of sustainability in todays marketplace, so what is the best way to implement an innovation mindset within companies who right now are resting on their current product offerings, yet have no plan on how to sustain growth?

A sustainable mindset

If a sustainable mindset doesn’t exist within the company from the top on down, investors and stakeholders will quickly exit, or possibly refrain from investing in the first place.  Sustainability in this context means that the company must have in place a plan to innovate existing products, develop ancillary products to augment the customer experience with current offerings, or acquire other companies to achieve desired growth, market share, and return for shareholders.

Warren Buffet in his biography “The Warren Buffet Way”, emphasizes that unless he is able to find companies to invest in that will provide his required return for the investors of Berkshire Hathaway, he will return unused cash to them via dividends.  Entrenched within his valuation of a prospective investment is the ability for it to provide above average returns over the long term, which itself will require continuous innovation.

Some may say that some of Buffets investments, such as Coca-Cola or GEICO insurance, don’t need to innovate.  On the contrary, for any company to remain relevant in today’s domestic and global economies, innovation seems to be of the highest priority, not necessarily in the products that the company provides, as in the case of insurance, but rather in the methods of delivery and the means by which optimal customer service - both at bricks and mortar locations and online – is deployed.

Talent and ambition

No company founder will be able to devise and singularly direct a company’s innovation.  Great start-ups and mature companies alike leverage the incredible talents at their disposal, making corporate growth in today’s economy a shared achievement.  Unlike no other time in history, there is a high correlation between the success of corporate interests and the decentralized nature of its management and operations.  In fact, it’s in such decentralized environments that innovation seems to prosper.

New ideas generally don’t come during a “planning” meeting - those structured occasions where the pre-meditated environment basically serves to extinguish the creative properties of its’ attendees.

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Rather, new ideas come at anytime, mostly when employees are most relaxed and with no sense of a requirement to perform on demand.  Successful companies today provide such a relaxing environment; this is evidenced by the many interior design operations that have sprung up with the mandate to provide a “soft and creative” working environment.  What “dream” job doesn’t include a Foosball table in the lobby, or free coffee at any time?

Capable leadership able to facilitate an innovative environment

Possibly most important in facilitating an innovative environment is to have company leadership aware enough to prevent its demise.  A few observations here are worth noting.

First, aside from the fact that old dogs can learn new tricks, the tendency of old-school management veterans to insert structure and hierarchy into the company can possibly stifle its innovative and fluid nature.  Conversely, however, their experience can serve to ascertain just how much structure to season the innovative culture with so that growth and organization dovetail beautifully to harness the full potential of the organization.  Thus defines a key component of managerial ability, to give people what they need without taking away what they want.

The opposite of an innovative environment is complacency.  Toxic to the corporation, complacency is easily observed when leaders become observers rather than eager participants, employees become boastful, and an attitude of entitlement pervades the company.  It’s top leaderships’ responsibility to keep this mindset out of their company.

Leaders have a responsibility to recruit and retain new talent, because rising stars are always pursuing new opportunities.  As Cindy Wahler states in her article “The Perils Of Workforce Complacency”, Leadership must foster and reward a culture that rewards and champions change and gives a platform for new directions.

Managers most intent on sustaining the competitive advantage of the companies they lead continuously keep their ears to the ground and mine for competitive intelligence.  Actively listening to customers not just by understanding their present requirements but also by anticipating their future needs is integral to being a successful company.

Senior leaders must champion the innovative culture in the company.  They need to be rewarded for recruiting and developing thought-disruptors; if they can’t do this, then they may be unfit to lead in today’s ultra-competitive economy that requires swift and decisive change.

This leads to a final observation regarding implementing an innovative culture; that  non-urgent players must be weeded out.  They are the ones – the weak links – who will stifle innovation and impair the company’s growth and competitiveness.  Such players may not be bad people, but are just in the wrong working environment for who they are.  Their agenda is one of maintaining a status quo that provides protection and minimal change.  Many corporations of the past (think Compaq, Texas Instruments, Wang Computer) facilitated their own extinction by keeping this  mindset.

Without an innovative culture, companies are forecasting their demise, or at least quick acquisition.   So before going to ask for additional financing, or planning that next product launch, proper planning requires having a substantial product pipeline in place to sustain revenues and relevancy.  Doing so will enable the company to actively pursue its growth potential.

Comments and suggestions are welcome.  Read more of our blog posts at http://www.burgesskilpatrick.com/blog or at https://www.facebook.com/BurgessKilpatrick

Nicholas Kilpatrick is a partner at the accounting firm of Burgess Kilpatrick.  He leads the firm’s consulting and strategy practice and works with companies to enhance their Analytics, Forecasting, and Data Optimization functions.  The practice’s focus includes quantitative forecasting, corporate and unit strategy and planning.  Please visit our website at www.burgesskilpatrick.com or on Facebook at www.facebook.com/BurgessKilpatrick for more information on our firm.