Why corporations need to rethink innovation
Why corporations need to rethink innovation
Innovation has risks, but the one that succeeds can boost revenue and customer satisfaction. Companies that adopt new ideas have the edge over their competitors and likely remain in business. But lack of innovation can cause business failure.
A recent survey estimates that 84% of customers want to buy from innovative companies. Organizations like Nokia, Blackberry, Circuit City, and MySpace failed because they ignored the importance of innovation in their business.
How a company approaches partial or total disruption can determine its future. For example, in the last 21 years, 52% of Fortune 500 companies became bankrupt, merged, or disappeared because of innovation. An organization that is looking to retain its customers should rethink innovation.
So, why do corporations fail to adopt new ideas, and what's the solution to the fear of innovation?
Here the most significant barriers to building an innovation-friendly workplace:
A lack of innovation in enterprise companies comes down to fear of the outcome. Clayton Christensen, a Harvard Business School Professor estimates that 95% of new products fail. But failure is also an opportunity for businesses to learn and grow.
New ideas can be impressive, but the challenge is whether they will work or not. Many questions come to mind when there's an idea about change. What happens to the company or me if the thesis fails? Who bears the risk in case of failure? Do I risk too much if I adopt this restructuring? These are essential questions but are often driven by fear. And that's understandable. Why? It is hard to predict the outcome of innovation accurately.
Short-term thinking harms businesses as 80% of CFO's opted for quarter results against long-term economic value. Many organizations focus on practices that bring quick results or align with their short-term goals. While looking to achieve immediate financial success, companies spend huge amounts to advertise and market their products. After using up the budget, very little remains to support the innovation drive. Organizations should view each solution with long-term in mind.
The responsibility to adopt fresh ideas often rests on the company's leadership. If the leadership is not open to innovations, the employees are not expected to act otherwise. An innovative leader is ready to embrace new ideas that could change the company's fortunes. Though it might take time, companies must build a culture of innovation and their leadership plays a crucial role in making that happen.
Innovation may not succeed if the business lacks clues about what customers want. Many organizational changes fail because they are not centered on solving customers' problems. Since customers' desires and tastes keep changing, satisfying their needs should be the main reason for innovation. For disruptive innovation, businesses should understand the feelings and behaviors of their customers. Companies who base their innovation on understanding their customers constantly keep their finger on the pulse for example through contextual inquiries, questionnaires, or product analytics to learn more about their users.
Innovation comes as a fresh idea that should be nurtured. Leaders and employees face time constraints, so it's possible to postpone innovation discussions and focus on sales drive or customer engagement. Everyone in the organization should learn to prioritize practices that promote innovation. Research that used data from a survey of 186 participants, concluded that creativity is positively related to daily planning behaviour, confidence on long-range planning, perceived control of time and tenacity and negatively related to preference for disorganization.
Companies often set goals and track key performance indicators (KPIs). But in most cases, these goals fail to align with resources that promote innovation. While setting other business targets, don't lose track of innovation. As the old saying goes: “You get what you measure.”, so measurement on innovation if you want people to pay attention to it.
A new study indicates that happy employees tend to be more productive and loyal to the organization than disgruntled ones. Companies fail to innovate because of the poor working conditions of their workers. For instance, team members may not give their best to the work if they're underpaid. An organization should make its workplace safe and comfortable for team members to explore new ideas. Corporations should provide incentives and special promotions for employees with outstanding achievements in innovation.
Innovation requires funding, but what is enough? For example, companies need to hire resourceful individuals with creative minds. Money should be invested in building teams, designing prototypes, and quality testing. The amount of money invested in innovation projects shows the company's commitment to its success. A company that wants to stand out from its competitors should set a reasonable budget for innovation projects while also setting reasonable constraints.
Having an innovative mindset is key to the success of any organization. How the employees feel about the business can cause failure. Companies that stand the test of time owe their success to the innovative culture of leaders and employees. Everyone should think about creating something new. This mindset must first be adopted in the leadership and then on all levels of the organization. Businesses should learn to nurture innovative ideas and encourage staff members to develop a habit of thinking beyond their circle.
Innovation has a significant impact on employee retention. About 70% of US workers hope to leave their current job for one that promotes innovation.
Without the proper innovative framework, companies may not get the expected results. Many organizations have no plans or formidable structures for innovation. With the appropriate framework, it's easy to evaluate the potential of the new ideas. Companies should create systems for assessing and analyzing fresh ideas efficiently.
Disruption is an opportunity to grow but not to fail. And consumers want companies that offer new products. If you want to outsmart the innovation failures; try these options below:
Incremental innovation is a sectional shakeup that does not involve the fundamental part of the organization. For its adoption, incremental innovation should not take huge chunks of the budget but will enhance the fortunes of the company's owners and investors. Besides, it should be easy to manage without posing severe threats to the organization's business model or revenue sources. A few examples of incremental innovation include:
Most corporations fail the innovation test when struggling with competitors. Meanwhile, competition is the reason many successful organizations invest in innovative solutions. In another twist, no innovation plans exist when the company is not facing any competition.
When a company faces these problems, disruptive innovation can be the solution. In this case, disrupt the business but don't touch the operations that generate the revenue and commonwealth.
Disruptive innovation doesn't have to occur within the company. Organizations that want to innovate should replicate themselves through subsidiaries. They can set aside funds for investing in startups or acquiring other companies.
Companies like Google, Facebook, and Amazon are examples of enterprises that have utilized disruptive innovation.
An organization's success depends on its ability to innovate. As the business world changes and there's constant competition for market dominance, companies must innovate or risk losing the game. How you approach innovation can help with managing the associated risks. Still, it would help if you understood what is already working and unique about your business in your customers’ eyes before opting for either disruptive or incremental innovation.