The Cost of Not Innovating
By Jeffrey Baumgartner
Loss of Leadership
Think of the market leader in almost any market and most likely that company is also the most innovative in the market. Innovation and market leadership go hand in hand and this should be obvious. Market leaders implement new product ideas, service ideas and process ideas first. Followers copy those ideas. Followers are not leaders.
If you fail to innovate and take the market lead, your competitors will do so. If no one in your industry innovates, then a start up in Silicon Valley, Mumbai or Paris will come up with an industry disrupting innovation. The taxi industry was one of the world's least innovative. Then Uber came along.
Tight Margins
If you fail to innovate, then you probably compete on price and that leaves you with tight margins. New product ideas give you a first mover's advantage that allows you to get big margins on new products. Apple is notorious for having some of the widest margins in the technology sector and they get away with it because they sell, stylish, innovative products that people desire − and are willing to pay through the nose for. Their competitors can only make similar products at lower prices and survive on smaller margins.
Moreover, innovation is not just about new products. It is also a matter of
improving processes and efficiency. If you can reduce 10% of your operational
costs without having to give all the savings to your customers, you can increase
your margins.
But, if you are not innovating, you are either letting others in your sector innovate and selling similar products at reduced prices or you are in a sector where there is little innovation. In either case, that means selling on price which in turn means tight margins.
Missed Opportunities
Innovation is not just about coming up with bold, new ideas. It is also about exploiting opportunities. Bill Gates saw a huge opportunity when IBM launched its personal computers. He realised there was money to be made in operating systems and software. So, he bought the rights to a simple operating system for IBMs machines. That made him rich.
Elon Musk did not invent the electric car. The idea had been around for more than a century. However, he saw an opportunity to use existing technologies to put together a luxury electric car. His Tesla looks pretty much like other luxury cars and the batteries are essentially mobile telephone batteries batched together. Nevertheless, he put together something new and innovative at the right time. Tesla came from nowhere to being one of the most highly valued car companies on the planet.
Indeed, many great innovations are largely to do with spotting and exploiting opportunities. If you spot opportunities, but fail to exploit them, then you miss out. If your people have ideas about exploiting opportunities, but fail to take action on those ideas, then you miss out.
Struggle to Get and Keep Great Employees
There is a reason the world's top software engineers apply to work at Google, Facebook and other innovative companies. In part, of course, it is good wages. But, mostly it is about the opportunity to work at a leading company that listens to your ideas. It is the dream of inventing something brilliant, seeing it succeed and being recognised for your contribution. It is also the pride of working for a leading, innovative company.
If your company does not innovate, you will struggle to hire the best people. They will want to work with innovators. You will have to entice them with great packages and promises. And, even if you do convince them to join you, if they soon see their ideas are being rejected for being too exciting, too bold, too risky, they will leave as soon as the find a job at a more innovative company.
Miss Out on the Fun
Leading or even being a part of an innovative company is fun. It is like being in the lead in a race. You feel you and your colleagues are making a difference in the world. You take pride in working for a company that people admire.
Why Be a Follower When You Could Be a Leader?
So, why resign yourself to being a follower rather than a leader? Why accept tight margins rather than fat ones? Why miss out in opportunities that are begging to be exploited? Why struggle to hire and retain great people? Why miss out on the fun? Innovate instead and be a leader, earn fat margins, exploit opportunities, hire the best people and have a great time doing so. Which path would you prefer to take?
Want a Little Help?
If you are in the process of turning your business into an innovative leader or you wish to regain leadership, I can help through coaching, advice and/or workshops for your team. Moreover, this summer (June-August 2017), my first coaching/advice session is free. It's a risk-free opportunity for you to see if my methods resonate with you.
Contact me or learn more here.
R103/20170621
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