you—simply go ahead to Chapter 1 or 3 as detailed above.
1
PROBLEM:
Innovation Is No Longer Optional
The way we live—and the way we do business—is changing like never before. Our growing interconnectedness is transforming the way the world works. As power shifts from the hands of central authors to the hands of the people, movements are becoming more powerful and moving more rapidly than ever before.
—Richard Branson, CEO of Virgin
It’s a Dickens of a Time
Those organizations that are leading change in their industries are winning. Those that are “reacting” to the forces of change are losing.
During a recent speech at the UK Marketing Society’s annual conference in London, I thought it would be funny to loosely recite Charles Dickens:
It is the best of times, it is the worst of times. It is the age of wisdom, it is the age of foolishness. It is the season of light, it is the season of darkness. We have everything before us, we have nothing before us. We are all going direct to heaven, we are all going direct the other way.
A few laughed, but most didn’t. I would learn later that most saw it as confirmation that these days are indeed the worst of times.
The life cycle from monopoly to commodity used to take decades. Today, because of the internet, it’s often measured in less than a year. The consequence is acceleration of Joseph Schumpeter’s Creative Destruction—organizations that don’t innovate are destroyed by those that have embraced a mindset of never-ending, continuous innovation.
The new reality was made clear following the recession of 2008, when the marketplace didn’t bounce back like it had in the past. The good news, from my perspective, is that the world as we knew it is NEVER coming back. The world has changed, rewarding those who innovate and destroying the profitability of those who don’t.
In 2011 we conducted a survey of CEOs for the US Department of Commerce, the results of which quantified the gap between those who innovate and those who don’t. The survey found that those who had an innovation mindset following the recession realized significantly better business results three years after the recession of 2008.
SALES GROWTH: +84% for innovators versus +4% for noninnovators
PROFIT GROWTH: +96% for innovators versus +13% for noninnovators
EMPLOYEE GROWTH: +64% for innovators versus +1% for noninnovators
A similar study with CEOs of companies in Ireland found nearly identical results. I’ve found similar patterns in qualitative interviews in Korea, Vietnam, Turkey, Mexico, Spain, and Italy. Today, we live in a global economy. And, no matter where you live, if you’re not meaningfully unique, you’d better be cheap.
The root cause for the differences in results was that, when the recession hit, those who embraced innovation quickly pivoted. They changed their offerings, realizing nearly double the percentage of company sales in products or services that they didn’t offer three years before (37% versus 19%). They also went after new customers, nearly doubling the percentage of sales from new customers (domestic and export) versus three years before (43% versus 23%).
It’s Not a Theory—The Pace of Business Has Really Changed
In the past, there was little urgency to change what we offer or how we work. It was possible to create a for-profit or nonprofit company based on an innovative service or product and to market it to the same customers for years.
Over the careers of most senior leaders, the life cycle of profitability for new products and services has been long. It has not been uncommon for a company founder to innovate and for the life cycle of their offerings to last for two generations. Children of innovators, if they managed the family business right, could have great careers. By the third generation, the marketplace usually changes such that it needs to be reinvented if the organization is to survive. Sadly, most don’t—and only 3% of family businesses make it to the fourth generation.
In the past, it has been possible to succeed even with an inferior product or service in your region. This was because customers didn’t know that there were other alternatives available in their towns or countries (or the world) that offered greater value for the money.
The internet has changed everything. Today, customers have the ability to know more about what alternatives exist in the world. It gives them the ability to painlessly compare value for the money. It also gives them the ability to share their experiences with other buyers, making it hard for companies to make false promises. For example, when you put a new “design skin” on the same old product, customers quickly figure out that your “improvement” is just skin deep.
Today, a business doesn’t last for a generation. In many industries, product or service life cycles are now months or years.
Timed Out
A friend of 25 years told me recently that he has “Timed Out.” He went on to explain, “The world has changed and I’m no longer relevant or respected.”
Timed Out is a concept that the Innovation Engineering Pioneers and myself just don’t get. Timed Out is something that happens to you when you stop learning and growing. Timed Out is something that happens when you’re dead!
With the Timed Out mindset, great wisdom is prematurely lost to the organization. Yes, the world has changed. However, what’s needed is for those with 30-plus years of experience to fully engage in gaining a working understanding of the new opportunities that technology makes possible. Then they need to commit themselves to mentoring the next generation of leaders, just as they were taught when they were younger.
A mindset of Timed Out is sad. Worse than that is the SELFISH mindset. It exists across all industries—for-profit, nonprofit, large companies, and small ones. It goes something like this: “I have two/four years until retirement. I think I can make it without changing.” Or: “I am close to being eligible to take early retirement. I don’t want to do anything that will risk it.”
This mindset is SELFISH. It causes deep, deep resentment among younger workers who still have marriages, young children, and/or big college bills to pay off in the future. They feel betrayed as the older workers, whom they have looked up to for years, suddenly are exposed as frauds in their minds. Hmmm . . . and we wonder why younger generations are not engaged?
The Innovation Engineering Pioneers believe that the internet, with its transparency and increased cycle speed, is a GREAT THING. It creates separation between those who are dead and those who are alive. It rewards those with the courage to create differences that matter. It makes it easier to connect with new customers around the world.
Today Is a Repeat of History
The internet has created exponential growth in our ability to exchange information. On a much smaller scale, a similar increase occurred at the turn of the century before last in the USA.
From 1870 to 1910, there was explosive growth in the ability of the marketplace to exchange information. During this time period, 5.1 million phones were installed, railroads developed into an efficient national network, and the concepts of “brands” and national advertising were born. In just four years, from 1871 to 1875, the number of brands with registered trademarks grew nearly tenfold, from 121 to 1,138.
The consequence of this increased exchange of information