To innovate or not to innovate? That is not the question.
Innovation for competitive advantage
Our company is excitedly working on a new version of product X that is clearly superior to any competitor in the market. We launch it in May and watch our sales rise with glee. The month after a competitor has just invented a new process on more cost-effective process to make a key component and is reducing prices by 20% forcing us to drop prices too.
The month after that another competitor offers additional services to the client concerning lead times and delivery, taking some of our business for themselves. Two months after that, yet another competitor not present in market segment Y (in which we were market leader), suddenly makes a bid for it with a new retail outlet. Come September a big company from a different industry acquires a competitor and packages both company products together, offering our clients a hitherto unprecedented package that we can’t match. As our sales team is busy defending our existing customer strongholds, a new start-up company enters the market demonstrating how their products are far more respectful to the environment and hiring Al Gore as their spokesperson. And we know that a completely new technology that may make ALL our products today completely obsolete is under the works somewhere.
Is any of this happening in YOUR business? Which is the most innovative company in this context? Or has one company really reinvented a new business model to sustain it in a differentiated segment for quite some time to come?
The above scenarios are a trifle generic yet quite universal, depicting reality in any competitive business.
To innovate or not to innovate – that is is clearly NOT the question. The question is how to innovate, and how much, and how fast.
Companies in competitive environments are condemned to do new things that add value (ie innovate) all the time. When they have completed an innovative venture (product, service, process etc) they will seek to extract the most value from it and then move on to the next new thing. And the next one. And the next. The time it takes to extract value from your last great thing before you move to the next one is a crucial strategic judgment. Too fast could mean no profit, too slow could mean becoming obsolete.
Here are some more crucial issues arising from innovation in competitive environments:
- How to simultaneously deliver operational excellence today and innovation tomorrow?
- How to best choose between different types of innovation – radical/risky/disruptive vs incremental/improving?
- Who in your organization is mobilized for innovation?
- How might change the rules of your business so you can legally enjoy the fruits of monopoly for a while?
- Which is the best timing for carving out your own exclusive territory – that true, deep “blue ocean” strategy?
- How far are you ready to go in reinventing your own organization (especially if it seems to work quite well, thank you)?
And above all: How much are you prepared to reinvent yourself?
image credit: creditnet & endeavourinvest
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Dimis Michaelides, Managing Director at Performa Consulting, is global business consultant and keynote speaker on The Art of Innovation. His book, The Art of Innovation: Integrating Creativity in Organizations, was published in 2007.
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