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Why You Need a Strategy for Innovation

Companies that believe they must choose between organic growth and innovation will inevitably fail – it is a false choice. In a recent post, we defined organic growth and discussed what it can and cannot accomplish. Here, we continue with innovation. Sustainable success is all about balancing the two.

Innovation was last decade’s business buzzword, and for good reason. Real innovation is hard, but the potential payoff is huge. High risk, high reward.

We define innovation as the commercialization of a marketplace discontinuity. By definition, then, innovation has unpredictability built in – no one is good enough to truly disrupt with planned regularity. And that makes many managers uncomfortable, so many have expanded the meaning of the word to encompass their comfort zone. What they actually do is specialize in line extensions like new sizes or flavors or small performance upgrades – but tell the world they are master innovators.

We believe those types of close-in projects can be terrific for driving organic growth. In most categories, they are necessary for maintaining core business health. However, they are rarely capable of driving sustainable, explosive growth.

Adam Hartung and others write on the need to reinvent organizations by building the exploration of white space into their business plans. They argue that companies who stick too tightly to their business models and their comfort zone eventually find themselves obsolete.

We don’t disagree. But here’s the conundrum: most of the time, sticking to the core business and the comfort zone works just fine. It makes good sense to focus on what you know, to be better than anyone at your one area of expertise, like the hedgehog who knows one invincible way to defend itself against bigger smarter predators.

Until one day when some fox figures out how to change the game. Then the hedgehog is dead. And there is no one you can hire to tell you when this time it really is different. You never know until it’s too late.

Game changers – discontinuities or true innovations – appear unpredictably. They are what Nassim Taleb calls “black swans” – events that no one expects until they suddenly rock your world.

To protect your business against the inevitable black swan, organic growth is not enough. Here is what you must do:

  • Remind yourself regularly that a black swan is just over the horizon, and it will someday obsolete what you do today, then
  • Build the processes and invest the resources necessary to optimize the likelihood that you will innovate (and obsolete yourself) before someone does it to you.
  • Recognize that innovation is easier said than done. Peter Murane of BrandJuice argues convincingly that the standard innovation processes used today are highly flawed. To be effective, be ready to innovate innovation.

The only prudent strategy for a growth company is to focus on strengthening the core – your hedgehog strategy – while simultaneously working to obsolete it before some fox does.

You can’t postpone working on discontinuous innovation until you need it. It’s too late by then.

But neither can you focus exclusively on innovation. Do that, and your core – your hedgehog that is your best defense most of the time – will wither and rot.

Sustainable success requires multitasking and balance. The growth company must pursue the right portfolio of organic growth projects and the right portfolio of innovation projects. Each must be balanced, and the combined portfolio must be balanced – for risk vs reward, for present vs future, for resource usage, and for pipeline needs.

No one said it was easy. But isn’t that the fun of it?

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