Albert Einstein allegedly once said “insanity is doing the same thing over and over again and expecting different results”. Today companies face increasing demands for reducing costs to be competitive. This usually results in rising pressure for standardizing and systematizing all processes to be cost efficient. Consequently, the outcome of standardization is the ability to do the same thing over and over again with the same level of quality. The problem with this is that when customers’ preferences and the competitive environment changes, the company has trouble changing its standardized processes.
As the speed of industrial change keeps accelerating, the ability for companies to renew themselves has become vital. In fact, research shows that companies are dying more quickly than ever before. Subsequently, being able to innovate and change is more important than being able to do the same thing over and over again with less and less cost.
In the new competitive environment, it is not anymore about coming up with new innovative products, services and solutions. Nor is it about quickly adapting to changes in customers’ contexts and competition. A large study on innovations revealed that innovations creating by far the most value were focused on innovating business models and networks.
Groundbreaking innovations have a much broader scope than only a narrow focus on products or services. In other words, companies that don’t take the market as given, but that are shaping the market are the ones that create most value. These kinds of value creating companies do three things differently. Namely, they:
- reframe the business
- experiment as a rule
- have leaders who lead differently
Reframing the business is about challenging the conventional wisdom and taken-for-granted beliefs in the industry and your company. Industry disruptors are often ones who take a fresh approach to one or more conventional wisdoms and create an entirely new business model around it. For example, Uber challenged a number of wisdoms such as owning your fleet of taxis and customers paying the fare plus a tip. In order to accomplish this kind of disruption, the conventional wisdom must first be identified and then reframed.
Once you have a conventional wisdom, it can be reframed systematically. If your goal is to shape the market, then getting as many perspectives as possible is highly advisable. There are several techniques for reframing. For instance, in inverting a company does the opposite of what it formerly did or what everyone else is doing. Instead of charging for the use of its patents, Tesla announced that everyone is invited to exploit them free of charge, in order to grow the electric car industry as a whole. Another technique is a mash-up in which a company combines two or more seemingly unrelated features or businesses to create something novel. An example of this is the birth of the Apple ecosystem combining music players, mobile phones, operating systems, content through iTunes and the App Store from a huge number of third party providers.
Market shapers embrace experimentation over comprehensive planning, customer’s voice over intuition, and iterative design over traditional R&D process-driven development. As the future is unknown, it is better to try things out as early as possible. If a product or a complete solution should fail, it is beneficial to know it before you have invested huge sums of money in it.
An experimentation mindset needs to be infused in the organization to be effective. It is rooted in a test-and-learn thinking in which assumptions are replaced with experiential knowledge. As Amazon’s Jeff Bezos said, “to invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment.”
Finally, to be a value-creating innovator, the company’s leaders need to cultivate innovation through their behavior. In a fresh study, the key competence distinguishing innovative company leaders from the rest was demonstrating curiosity. Thus, leaders need to exhibit a desire to know more, take initiative to go into new areas, and create an accepting attitude towards mistakes.
Leaders of innovation must also manage the risks of experimenting with new approaches. Boldness must be balanced with a reasonable understanding of the downsides and a plan for action if the negative consequences materialize. In addition, leaders must instill courage in their organization, as well as maintain a strategic perspective in their actions.
If there is one thing innovative leaders don’t score highly on, it is in maintaining order and accuracy. While order and accuracy are often needed, it is not the first priority when the company is on the roll to disrupt its market.