Organizations that have all the money, talent and technology in the world are struggling to innovate with deadly consequences. Why?
- They get real comfortable
- They take it nice and slow
- They stop caring about those pesky customers
The most important reason out of the above is number 3; the senior leaders stop caring about serving their customer. Instead, they prefer to serve themselves the easiest and most profitable path to success. Innovation is hard and risky; it’s much easier to force your customer to use your tired product/service offering over and over again than create new value propositions. Let us look at some examples:
- Kodak; inventors of the digital camera, envisioned serving (highly profitable) camera film until 2025 because, you know, that works well for Kodak! (Fuji, the main competitor, managed to adapt quite effectively) Why didn’t Kodak change? Do you know what the profit margins on photographic film were? About 80 %! “Leo J. Thomas, senior vice president and Kodak’s director of research, told the Wall Street Journal in 1985: “It is very hard to find anything [with profit margins] like color photography that is legal.” It’s much easier to sell that profitably than work out what to do with the new-fangled ‘digital’.
- VW; masterminds of the greatest corporate scandal in recent history, felt it was much easier to lie to you about the standards of their cars instead of innovating new engine technology (unlike like Tesla who just secured 350,000+ Model 3 pre-orders). The current cost of this mess is 16.2 billion EURO and counting(expect a lot more). Why didn’t they change? Because they are VW. They are number 1. They are made in Germany. They are the best. Why would you change if you are super awesome (even if you’re a cheat)?
- Nokia; they had a fully functional, iPhone like prototype, in the mid-2000s before Apple’s iPhone. But they didn’t make it a reality because it was inconvenient to the business plan and nobody was prepared to talk about the massive challengesNokia actually faced in catching up with Apple. Why didn’t they change? They couldn’t bring themselves to take the risk of change.
- Alcatel Lucent; the company that could have invented Skype but chose not to because it’s much more profitable to charge crazy fees for international calls. Why didn’t they change? Because they have a culture that doesn’t embrace difficultthings like change. Despite having access to enormous amounts of research and talent, it just couldn’t change. Things got so bad that they were bought by Nokia… ‘Change, it’s just not convenient’ would be a great tagline.
- Intel; poor Intel, they are quite liked but completely missed the boat on mobile. They recently cut 12,000 jobsand face becoming irrelevant as the world moves away from laptops & PCs. We used to prefer ‘Intel Inside’ but now we like ARM and Qualcomm more. Why didn’t they change? They were too busy trying to sell us bigger, faster processors when what we actually wanted was smaller, energy efficient ones. Oops.
- Blockbuster; these guys preferred you to drive to the video store and pay outrageous late fees instead of using TECHNOLOGY to make your life easier. What happens when you stop caring about what your customer really wants? Hello Netflix, bye bye Blockbuster. Why didn’t they change? Because they didn’t care enough to go through the pain of changing themselves. They were so confident, they actually laughed at Netflix’s offer to work together. That’s a 40 billion USD LOL!
- Taxi companies; these guys are crying around the world because of services like Uber but think about it. Why didn’t a taxi company invent Uber? It’s not rocket science, the technology is fairly straightforward and you already have a fleet of drivers. You don’t do it because you don’t really care about making things easier for your customer. Why do we have to incentivize ordinary people to become part-time drivers just to get a fair level of service?! The price-gouging, rudeness and lack of interest in customer service that is a hallmark of taxi service around the world has simply created the conditions for Uber et all to thrive. Did you know that Uberwas founded because Travis and Garrett (Uber co-founders) couldn’t hail a taxi in Paris? If you’ve ever tried to hail a taxi in Paris, you will understand their frustration. When you stop caring, don’t be surprised if someone steals all you customers 🙂
To remain relevant, it is important to focus on the speed of innovation. Even if organizations manage to create some innovation, they fail to do it fast enough. Nokia, Blockbuster and Kodak are all examples of being far too slow. They think they can ‘gradually feed in the disruptive change’. Kodak honestly believed you would still be buying photographic film from them in 2016. The basic fact is that the senior management of most organizations today fail to understand the speed of 21st Century VUCA change and are years if not decades out of sync with what is really happening on the ground.
How can it be that senior managers don’t know what is happening on the ground? Because they stopped caring about what really matters. When leaders stop caring about their product and its impact, about their customers and their staff, and only obsesses about quarterly reports, their organization is doomed because it will never innovate and it will never be able to keep up with today’s change. When you care, you connect with the world around you and strive to deliver the best possible product to your customers even if it means disrupting the way you do things. Your commitment to excellent is what compels you to break down what you do so you can re-build yourself to be even better.
Looking at the next decade; the most comfortable, slow and uncaring industries I can see are automotive, education, healthcare & finance. Tesla, Google & Apple will lead the charge (pun intended) backed by a flood of new Chinese brands and resurgent Asian manufacturers. The old guard in auto will rapidly find themselves on the wrong foot and facing irrelevance; too old and slow to change. In education, there will be a bloodbath as the new ‘Generation Z’, having seen their brothers and sisters waste their lives and money at university only to end up lost, unemployed and/or underemployed, go elsewhere. With employers largely disinterested in your academic qualifications, new providers such as Hackreactor will spring up to prepare talent for the needs of the labor camp (market, I meant market). In healthcare, the basic failure to provide effective personalized medicine will provide massive new opportunities, especially in the booming Asian markets where the rapidly-ageing population in ASEAN & China will drive continuous healthcare breakthroughs. Finally, banks. Customers will reward the incompetence of their existing providers by going elsewhere. New currencies will rise with the new generation; you aren’t going to use Bitcoin but your daughter will. She will wonder why you put up with the misery of outrageous bank fees and scandalous currency conversion issues. Companies like Transferwise are already changing the game, there are many more behind them in the rapidly growing ‘fintech’ space. If you are a player in any of these markets, and you are not leading innovation efforts that are disrupting your business model right now, you are in deep trouble. Here some examples of companies getting it right.
The bottom line is that companies fail to innovate because senior managers are not prepared to disrupt their existing business models. Instead of searching for better value propositions (which is risky and hard), they prefer the easier route of selling the same stuff over and over again. Of those that try to innovate, most of them are far too slow because they underestimate the market or they find the change too inconvenient. The difference comes down to how much you care, how connected you are to your customer and how far you are willing to go for them. Great leaders are willing to disrupt themselves to be excellent, average leaders get comfortable. Who do you want to be?