Business and marketing guru Guy Kawasaki did a great TEDx Talk titled The Art of Innovation (if you haven’t seen it, I highly recommend watching it). In his talk, he articulates that leaders and organizations are often caught off guard by the changes that disruption brings to an industry and its effects on their business curve.
Using an example of how people kept their food cold through the ages, his talk illustrates the fact that continuous improvement didn’t result in the modern-day refrigerator. A series of business curve “restarts” took us quickly from ice blocks to the fridge. Businesses that delivered ice blocks to their customers never saw it coming.
The key lesson? Don’t fall in love with your product. Products become obsolete. Instead, focus on how you can solve your customer’s problem better than anyone else can. Focus on new ways to solve problems. For example, ordering, receiving, and maintaining ice blocks in order to keep your food cold is inconvenient and labourious compared to the luxury a fridge offers. But ice block producers chose to focus on making delivery more convenient instead of taking it in a whole new direction.
The Business Curve
Most people are familiar with the business curve and how it works. Organizations are born; they grow; they reach their peak; they decline and begin cost cutting; they eventually die. Without exception, organizations follow this typical business lifecycle; that is, unless they innovate to restart the curve.
How do you restart your business curve?
Innovation is the process for restarting the curve. When a company innovates, either in the form of a new product, service, system improvement, etc., they in essence restart the business curve, starting back at the “birth” stage. The business curve can be restarted at any point. It is however, easier at some points than others. Let’s have a look.
- Innovation at the “Highest Profits” phase
The easiest time to restart your business curve is when you are sitting at the top. Here, margins are good; customers are coming to you and everything seems great. While it may seem tempting, this is not the time to sit back and maintain status quo. Before long, competitors will catch up to what you are doing; a rival company may start to beat you on price. At that point, it’s a race to the bottom, which devalues your product and usually puts resources at a premium. Since innovation requires the investment of some resources, it is easiest when you are sitting at the top of the curve.
- Innovation at the “Growth” phase
Things are good when the organization is growing. Sure, there are the usual growing pains associated with a company that is in the process of establishing itself. But this is also the time when demand is growing and systems are being developed and implemented. The future looks promising. This is a great time to implement an innovation system so that it becomes part of the core of the business. The opportunity to build innovation as a core competency, as part of the organization’s culture, is too good to pass up. In fact, putting an innovation system in place at this stage will positively shape the future of the company, building its capacity to both initiate and respond to industry disruption.
- Innovation at the “Cost Cutting” phase
In the cost cutting phase, an organization competes on price. With margins so thin, the focus is on leaning out the company to preserve revenue. This isn’t sustainable, nor is it comfortable. In this phase, innovation is the only way to restart the business curve and begin the climb out of cost cutting mode. The obvious problem is that resources are likely so scant by this point, an investment in anything (let alone innovation) is a pipedream. However, organizations brave enough to muster the resources to begin innovating at this stage, provided there’s still enough “runway” to do so, are likely to be rewarded by restarting the curve and reinventing the company.
So, while your competition is trying to deliver the cheapest ice blocks, you should be working on the next refrigerator. If you’re not, it’s time to redefine your business strategy to include innovation — or risk being left out in the cold.
Something to consider: What is really stopping you from innovating today?