- Organisations are weary of change
- Innovation isn’t top priority: ‘If it ain’t broke, why fix it?’
- There’s a lack of market orientation
- Company processes aren’t geared towards innovation
- Selling products or services without making a profit
Innovation – breaking from tradition and launching improved or new products and services – isn’t easy to accomplish. Gary Hamel, professor at London Business School and co-founder of The Management Innovation Exchange, and Nancy Tennant, vice president for innovation and margin realisation at the Whirlpool Corporation, write for Harvard Business Review: “For a product or service to be counted as innovative … it must be unique and compelling to the consumer, create a competitive advantage, sit on a migration path that can yield further innovations, and provide consumers with more value than anything else in the market”.
According to various research studies, however, 60 to 80 per cent of new products fail. This can be due to the product or service not creating real value, because it’s not marketed adequately, or because the idea isn’t taken through a proper process after which it eventually fizzles out. To increase the chances of innovation succeeding, it’s important to know exactly what causes the obstacles that lead to new product (and service) failure.
Organisations are weary of change
Innovation means change. But that seems a complicated feat, especially for large, established companies. Innovation brings changes that many employees, and even management, can’t identify with or that cause resistance and insecurity. In an article for Business News Daily, Nicole Fallon quotes James Ontra, CEO of presentation management company Shufflrr, “Even when everyone agrees [a change] is for the better … you are affecting the habits and routines of hundreds of individuals, as well as the legacy platforms that they have been using. We are all creatures of habit and treasure the consistency of routine. Innovation usually breaks that routine and can sometimes feel like a threat. Entrepreneurial attitudes should be rewarded within a team. When someone brings forth a new process or idea, let him or her run with it. Have the team member flesh it out in writing, and if the idea has merit, ask him or her to test it, along with some other colleagues”.
Conversely, and mainly because of their size, smaller companies are generally not as sluggish, not as complex, and are more agile than their larger, established counterparts. Startups, for instance, can act quicker because they don’t have to deal with lethargic bureaucracies and hierarchies throwing spanners in the works. They often possess a bigger appetite for risk and are less weary of change. The fact that they’re smaller also means that people within the company generally know each other and are much better networked – accelerating processes and improving collaboration.
Innovation isn’t top priority: ‘If it ain’t broke, why fix it?’
Company strategies may feature innovation among their top priorities, but in daily business operations, things usually look very different. In many organisations, innovation is regarded as a distraction to maintaining and growing the current business and often falls by the wayside as day-to-day business matters needing immediate focus, such as sales targets, take centre stage. They are what earns the revenue, they are what employees get rewarded for. Maintaining the current business while simultaneously preparing for future growth becomes almost like a competing commitment. Furthermore, because innovation isn’t generally part of an employee’s job description, it’s often viewed as an additional, and not immediately necessary task. Even leaders and management become comfortable with how their organisation performs (if it performs well, that is,) which results in a lack of urgency to change.
There’s a lack of market orientation
New products or services can also fail when they don’t offer any real value or improvement compared to existing products or services – in other words, when nobody wants to buy them. The ‘problem’ with innovators is that they love thinking up new ideas and creating new products – yet they fail to ask the important question: who will want or need this? This can be avoided by doing extensive market orientation and customer needs analyses, which is critical to finding out who your customers are and what makes them tick. Innovative products can only succeed when there’s in-depth knowledge of the market and the customer. The more you know about your target group, the more successful your innovations will be. What are your customers trying to accomplish? What tasks do they need to do? What need or want will make them buy your product?
Company processes aren’t geared towards innovation
Many regard innovation as a vision, a magical moment of insight. It’s however not the vision itself, but the methods and processes that turn the idea into reality. No matter how brilliant the idea, most of the time innovations perish if there are no processes in place that can drive the vision forward. Hamel and Tennant explain, “If, for example, a company’s budgeting process is inherently conservative and makes it difficult for first-line employees to get funding for small-scale experiments, any investment in innovation skills will be wasted. If its product development process places too much emphasis on removing risk from new launches, few new-to-the-world products will make it to market. If its assessment and compensation system doesn’t reward innovation performance, it will end up with managers who are more bean counters than trailblazers. If it lacks a financial reporting system that tracks innovation investment and staffing, no alarm bells will ring when an innovation project gets sacrificed on the altar of quarterly earnings”. Innovation is like an ecosystem, comprising of a talent team, strategies, budget allocations, and adequate management and leadership processes. It’s an ecosystem that continuously needs nurturing.
Selling products or services without making a profit
All your innovation prerequisites may be on point: you’ve determined that innovation is a top priority, you’ve done the market orientation and developed a product or service that your customers want, and the right processes are in place. But then there’s the question of profitability – because successful innovation is more than creating a product or service that offers value. Not only does it need to cover the costs of product manufacturing, delivery, and customer acquisition and retention; it obviously also needs to turn a profit. The reality is, however, that innovation often isn’t instantly profitable. Companies should therefore also allow for a long-term view, which means preparing to possibly operate at a loss in the short term. Long before new product development happens and manufacturing budgets are in place, however, in-depth pricing analyses and discussions with the target market should be among your organisation’s top priorities.
Create frameworks that encourage and nurture innovation
There are many factors that can lead to the failure of innovation – and it’s often not the quality of a new product or service itself. Some of the core reasons include a company’s fear of change, not prioritising innovation, inadequate information, and internal organisational issues. However, companies that want to become agile enough to be able to deal with rapid change and ensure their future survival should develop an innovation methodology and create a framework that encourages and nurtures innovation. Organisations can only successfully harness new opportunities and navigate rapidly changing markets if they systematically address all areas of their business – from mindsets and behaviours to policies and processes.