Innovation is not a linear pursuit that occurs in a straight line or through ‘production-line’ thinking where a single unit of input guarantees a single unit of output. And when innovation is looked at through the wrong prism, it creates blindspots.
For organisations there are four main obstructions:
1. What got you here won’t get you there
When you hear people say things like, ‘this is how we do things’ or ‘what has worked in the past is’… you know that they are using the past as a reference for the future.
The challenge with this thinking is that it makes the assumption that the forces acting in your industry are exactly the same forces today as in the past.
Evidence: Bongani Mqababa, former CFO of Amplats, recounts an interesting story of how they dealt with the extreme forces of the 2012 trading period when platinum prices declined sharply and labour productivity dropped close on 10%.
They had to rethink their business by migrating from a volume player to a value player, so they devised a strategy to move from being the largest producer of platinum in the country to being amongst the highest-grade outputs with lower volumes but higher earnings.
Remedy: Einstein once defined insanity as doing the same thing over and over again and expecting different results. Overcoming this blindspot starts with the acknowledgment that new challenges require new solutions. Companies that do not evolve will become obsolete.
2. Knowing what we know
Here lies the Achilles of many leaders who rise through the ranks: They think that the world they rose through is the world they are now called to lead. Why do you think many businesses are recruiting leaders externally these days? What is needed is objectivity and the ability to see things as they are, and not as they used to be.
Evidence: When Don Thompson took over McDonald’s and was advised that the growing health trend of the 21st century would threaten his business model, he believed that cosmetic menu changes would halt the approaching storm of disruption. Soon, the Shake Shack franchise was growing at a rate of 412% per annum, whilst McDonald’s was beginning to lose market share and seeing revenue growth subside.
Remedy: Leaders must deal with the world as it is now. This emphasises the need for an organisation to have a strong and independent board and chairperson.
3. False positives
Budgets, revenues and market share are often ‘false positives’. We must never mistake the ability to attract a customer with the ability to build a business that helps the customer. We must not interpret our ability to succeed today as an indication of how significant we will be tomorrow.
Evidence: In 1964, even when they knew that the computer was the technology of the future, Smith Corona grew typewriter sales 67% year on year, even releasing a version of the typewriter that was sleek, easy to use and ‘modern’.
Remedy: Measure what matters, not what moves. The obsession of management accountants to measure what moves must be shifted or complemented with a strong and external ability to measure what matters.
4. Comparing apples with oranges
Smith Corona believed that their version of the typewriter was better than the world’s best version of a computer, and they were right. Their mistake, though, was that they were comparing the 100th iteration of the typewriter with the second version of the computer. This is a common mistake leaders make when they are invested in a path or direction: They compare disparate things to prove that their direction or strategy is correct.
Evidence: When Google was experimenting with the Android platform, Nokia believed that this would not affect their ubiquitous and highly favoured Symbian platform. Android of old was unstable and unreliable… but its philosophy was stronger. When Nokia awoke to the reality of a world being dominated by Android, it was too late.
Remedy: Build a set of outputs or results that are significant in customers’ lives.