It's viewed as a leading indicator of future growth and profitability, so why don't all companies innovate? The culture has to be born and bred in the company
There is no doubt most companies today are big believers in the idea of innovation. Its importance is heralded in corporate visions and mission statements. The chief executive officer speaks its glory in almost every speech, and its importance is celebrated on internal posters as well as in the company's marketing materials.
It's simple: Wall Street believes innovation is the leading indicator of future growth and profitability. There's even an index fund that just invests in what it thinks are the country's 20 most innovative companies. So how come we're not being overwhelmed by innovative new products and services? Unfortunately, that's simple to answer as well.
Saying you believe in something is one thing. Living what you believe is another. Let's not fool ourselves. Even the biggest "glass-is-half-full" optimist has to concede the reality: Most companies don't believe in innovation enough to do much more than pretend.
Three Common Approaches
You can see the proof of that in three approaches companies typically take to try to show the world they're innovative:
1. The big sweeping announcement. "Five years from now, we will get 50% (or some other big number) of our revenues from products that don't exist today," the chairman announces with great fanfare. Everyone applauds, and then absolutely nothing changes about the way the company does business.
2. Let's make a list. The company hires an ideation company to help it brainstorm all the things it might want to add innovation to, and then nothing happens??ue to turf wars over resources or a lack of commitment to the idea by people who say, "I would have loved to do something with that list, but I had to keep doing my day job."
3. The innovation drive-by. The organization hires a company like ours to help it create a new product quickly. But like anything new within the company, it ends up being mired in internal politics, bureaucracy ("Whose budget do we charge for this?"), and turf wars. It really shouldn't be so hard to get a product out the door. No wonder there are only 20 companies in the innovation index.
Why don't companies make innovation an essential part of the way they do business? Because it's hard. Because it requires an unwavering, wholehearted leap of faith??acked by a major investment, not only of money, but of people, processes, and infrastructure. It requires audacious goals, evangelism, consistency, education, training, diversity, expert tools, expert processes, and an environment conducive to creating sustainable innovation results that are aligned with financial outcomes.
Transforming a 100-Year-Old Product
Google (GOOG) and Apple (AAPL) are the obvious examples of companies that actually do this, of course. But let's keep it real; if your company didn't start out like Google or Apple with innovation firmly implanted in its DNA, then you might believe radical innovation within your company is unrealistic.
But it doesn't have to be. Consider the Sterno Group (a client of ours), the company that invented the "safe, portable fire" category a hundred years ago and continues to dominate the category to this day.
They demonstrate how you can turn around a "battleship"??f you want it enough. President Bruce Williamson has begun transforming the company with a very simple idea: Instead of taking our (remarkable) technical expertise and creating products we hope customers will like, we are going to go to the customer and say, "What can we do to help you?" In essence, Williamson has restructured the company leadership with believers who share this customer-driven mentality, which now drives both short-term and long-term product development and brand management.
Those who did not want to change are gone. Those who stayed are required to spend 20% of their work week thinking, innovating, creating value-added improvements.
A Culture of Innovation
The world's most innovative companies??hink Amazon (AMZN), GE (GE), Nike (NKE), and Procter & Gamble (PG)??emonstrate that innovation is an essential part of their organization by giving it the same level of status, clout, equality, and attention as they do their fundamental core competencies (e.g., operations, customer service, quality). Why aren't many other companies doing this, too?
Google CEO Eric Schmidt has an answer. He told Business Week's Robert D. Hof: "I think it's cultural. You have to have the culture, and you have to get it right." The world's most innovative companies are authentic in word and deed. And it all starts at the top.
The Sterno leadership team's faith in their innovation initiative is real??ndividually and collectively. And because they believe, they evangelize. You have to believe??s they do??hat this new way of doing business will lead to success. You have to believe??s Wall Street does??hat innovation is essential, not just important. (The difference is simple: The important, you put on a to-do list; the essential goes on a to-die-for list.)
The question to ask is this: Are we going to intentionally, strategically, and tangibly align and operate the company around a culture of innovation, or do we just hope the company will evolve into something close enough?