Why Business Stops Innovating?
Quite often, today's innovators become tomorrow's laggards, and many either die or just stop growing. The real question is: Why?
Some of the popular and innovative companies of yesterday such as Hollywood Video, Borders, THQ, KB Toys, Frontier Airlines, Trump Entertainment Resorts, Nortel, Habitat, Polaroid are dead.
Some reasons for the eventual demise and the death of innovation at these companies are:
1. Dependence on the familiar - Most companies become over-dependent on existing products for far too long, keep on adding bells and whistles and additional features that current customers keep on asking for, until they realize that these products are now bloated and obsolete. Worse yet, new customers don't want to buy the bloatware, and existing customers are also getting tired of the extra things that are not needed.
2. Change of management structure - Many times, as the company grows, the culture, leadership and management becomes more and more process oriented, and less and less innovation or skunk-works focused. Initially, the founders and managers are hands-on and are always talking to employees, partners and customers. With more growth, the management spends more time in the corner offices. Fewer real ideas surface up that result in home run type innovations.
3. No more risk-taking - During the startup phase of the company, risk-taking is ingrained in the company's core. Everyone, including the founders, are gutsy, share and experiment with lots of ideas, make lots of mistakes, learn from these, and keep on trying new things until they stick. As the company grows, hires a CFO, adds management layers, and begins to focus on profits from existing customers, less and less of risk-taking happens.
4. Creative employee turnover - As the company grows, many of the original creative product managers, innovators and marketers move on to managerial or higher-paying jobs within the company, and eventually move out of their positions. Many also quit and join other companies. Hence, the company loses out on the core creative talent that was responsible for making great products.
5. Commoditization and Competition - As the markets for the products mature, more and more competitors enter and bring better and cheaper products. Companies that don't innovate and don't differentiate are left with only one choice: Reduce the price of their existing products. Eventually, the company ends up selling old products that fewer customers want and that don't make any money! Margins drop and losses increase that result in eventual bankruptcy.
Few businesses are able to re-define and re-engineer themselves and find new ways to disrupt and innovate, time and again. Apple was almost dead. However, Steve Jobs was able to bring it back from near demise by bringing new innovations to the marketplace and creating an energetic, collaborative innovative culture (with a lot of hard-working engineers). Apple hit home run after home run with the introduction of iMac, iPod, iTunes, iPhone and iPad. Netflix disrupted Blockbuster and Hollywood video's video rental business by creating a No Late Fees video rental by mail... however, the growth of streaming online video, YouTube, Vimeo, etc. would have surely killed this business. Instead, Netflix embraced streaming video, and created new models of serving movies and TV shows online, and again conquered the market. Now, Netflix is creating new content and sharing them directly with members. Microsoft is still around. Many in Silicon Valley may not warm up to Microsoft as a real innovator. However, Microsoft has transformed their products and business models many times to continually evolve and grow. Xbox 360 and Kinect are big hits! Microsoft 365 is finding a lot of subscribers. And although the Surface may not be on solid footing yet, Windows 8 mobile is becoming a viable operating system for smartphones. Many don't realize that Google is a new innovator (well, in Silicon Valley years, Google is old now) born in 1997. However, in 16 years, Google has become a dominant global company that not only became synonymous with Search but also Video, Mobile, Maps, Images and more. Google keeps on innovating, keeps on trying... as is the case with Google Glass and Google+. These innovators don't rest on past products. Rather they stay up and tinker, experiment, try out new things, and bring out new innovations.
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Some of the popular and innovative companies of yesterday such as Hollywood Video, Borders, THQ, KB Toys, Frontier Airlines, Trump Entertainment Resorts, Nortel, Habitat, Polaroid are dead.
Some reasons for the eventual demise and the death of innovation at these companies are:
1. Dependence on the familiar - Most companies become over-dependent on existing products for far too long, keep on adding bells and whistles and additional features that current customers keep on asking for, until they realize that these products are now bloated and obsolete. Worse yet, new customers don't want to buy the bloatware, and existing customers are also getting tired of the extra things that are not needed.
2. Change of management structure - Many times, as the company grows, the culture, leadership and management becomes more and more process oriented, and less and less innovation or skunk-works focused. Initially, the founders and managers are hands-on and are always talking to employees, partners and customers. With more growth, the management spends more time in the corner offices. Fewer real ideas surface up that result in home run type innovations.
3. No more risk-taking - During the startup phase of the company, risk-taking is ingrained in the company's core. Everyone, including the founders, are gutsy, share and experiment with lots of ideas, make lots of mistakes, learn from these, and keep on trying new things until they stick. As the company grows, hires a CFO, adds management layers, and begins to focus on profits from existing customers, less and less of risk-taking happens.
4. Creative employee turnover - As the company grows, many of the original creative product managers, innovators and marketers move on to managerial or higher-paying jobs within the company, and eventually move out of their positions. Many also quit and join other companies. Hence, the company loses out on the core creative talent that was responsible for making great products.
5. Commoditization and Competition - As the markets for the products mature, more and more competitors enter and bring better and cheaper products. Companies that don't innovate and don't differentiate are left with only one choice: Reduce the price of their existing products. Eventually, the company ends up selling old products that fewer customers want and that don't make any money! Margins drop and losses increase that result in eventual bankruptcy.
Few businesses are able to re-define and re-engineer themselves and find new ways to disrupt and innovate, time and again. Apple was almost dead. However, Steve Jobs was able to bring it back from near demise by bringing new innovations to the marketplace and creating an energetic, collaborative innovative culture (with a lot of hard-working engineers). Apple hit home run after home run with the introduction of iMac, iPod, iTunes, iPhone and iPad. Netflix disrupted Blockbuster and Hollywood video's video rental business by creating a No Late Fees video rental by mail... however, the growth of streaming online video, YouTube, Vimeo, etc. would have surely killed this business. Instead, Netflix embraced streaming video, and created new models of serving movies and TV shows online, and again conquered the market. Now, Netflix is creating new content and sharing them directly with members. Microsoft is still around. Many in Silicon Valley may not warm up to Microsoft as a real innovator. However, Microsoft has transformed their products and business models many times to continually evolve and grow. Xbox 360 and Kinect are big hits! Microsoft 365 is finding a lot of subscribers. And although the Surface may not be on solid footing yet, Windows 8 mobile is becoming a viable operating system for smartphones. Many don't realize that Google is a new innovator (well, in Silicon Valley years, Google is old now) born in 1997. However, in 16 years, Google has become a dominant global company that not only became synonymous with Search but also Video, Mobile, Maps, Images and more. Google keeps on innovating, keeps on trying... as is the case with Google Glass and Google+. These innovators don't rest on past products. Rather they stay up and tinker, experiment, try out new things, and bring out new innovations.
Download Apple's Innovation Strategy and Learn how Steve Jobs made Apple the #1 Innovative company in the world.
Download the Leading eBook on Creativity and Innovation in Business
Innovation eBook & Business Innovation Resource Kit
Used by 1,000+ innovators worldwide! It's a Free Download now... Pay it Forward!!
Download Now
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