Innovation is difficult.

There, how’s that for kicking in open doors. In most companies, the main focus is on the “invention” part of innovation: people are stimulated individually, or in R&D teams, to find new technologies or creative ways to do business. However, this is not the most difficult phase of innovation. Getting the innovation into your business is…

Director of Fortis Venturing, Kris Vandervelpen put it very well when he said that when it comes to business development, companies are subject to two major forces. The first force is “sustaining the business”. This is a very powerful force that pushes the company forward on its current path. This is the quest for growth and market share, driven by sales targets, management bonusses and the comfort zone of doing “business as usual”. In a twisted turn of faith, this is also the path that will lead to the final dimise of the company. Companies that blindly follow the forward path will end up driving themselves into the ground. It just takes the insight that markets are finite, or that a bigger or more agile competitor is around the corner to put a stop to the seamingly infinite path forward. There is an end to the yellow brick road.

In most companies, there is a second force at work. It is the force of creativity and innovation. It is the force of people trying to reinvent business models, reinvent business strategies and ultimately possibly reinvent the company. By definition, this force is perpendicular to the “business as usual” force. The innovative force contstantly tries to push the company off the straight line.

Interestingly, the laws of Newton also apply to”business physics”. Here too, every action is met with an equal and opposite reaction. In the case of the sustaining force, the opposite force is the external pressure of the market and competitors. The innovative force, however, is countered by an internal force: that of preservation. Internally, innovation and creativity are seen as threaths to the status quo. This force has the ability to disturb the power balance in the company. Innovations can cannibalise existing business and therefore also the management power that goes with this existing business.

Top management must find ways to mitigate these problems and foster the innovative forces within the company. There is a great example of a major company with an interesting take on this. The major business unit managers have classic sales and growth targets for their units, but each of them is also made responsible for a small and innovative project in the company that has the potential to cannibalise their own business unit. Their annual bonus also depends on the success of this disruptive project…

In summary:

• Companies must innovate to survive
• The innovative force is orthogonal to the sustaining business model
• Established business will counter the innovative force to protect the status quo
• Innovation in a company is a painstaking process; it takes guts and persistence

Next time you look at your company’s balanced scorecard, ask yourself how you are fostering innovation and if you have KPIs that are aimed at cannibalising your current business…

Tags: business, cannibalism, change, innovation, newton

This entry was posted on Monday, March 31st, 2008 at 19:54 and is filed under business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Written by: Koen Pellegrims