The world is changing so quickly that the reality for leaders has become innovate or die. But the bankruptcy of Eastman Kodak Co. demonstrates that even monster companies that have vast research and development programs and are aware of the current trends can get it wrong. To succeed, leaders need to repent of deadly sins that derail innovation, says Scott Anthony, Singapore-based president of consultancy Innosight LLC and author of The Little Black Book of Innovation. Read an excerpt from the book
Why is innovation essential for future success?
If you look back 10 years, Microsoft was an unstoppable monopoly. Google was a company that hadn't quite figured out its business model and Facebook CEO Mark Zuckerberg was still in high school. You can predict with absolute certainty that there will be just as many dramatic changes in the next 10 years. So even the most cutting edge organization can never stop innovating. There are many theories and reams have been written about innovation, but it really boils down to five words: something different that has impact.
I find it interesting that Facebook has set out in its IPO statement that it intends to try new things and not everything is going to work. I think that's a clear indication that Mr. Zuckerberg recognizes that it can never slow down the pace of innovation.
You say there are seven deadly sins that hinder innovation. What are they?
Pride causes leaders to insist on an inflated view of quality, which can result in overshooting what the customers really want.
Sloth is a lack of urgency that allows innovation efforts to slow to a crawl.
Gluttony develops when an abundance of people and resources creates bloated research efforts when what's really needed are simpler, quicker approaches.
Lust tempts leaders to waste energy chasing every potential opportunity rather than focusing on the goals that are the most essential and achievable.
Envy develops when management lavishes the most attention on people in new ventures, creating an "us versus them" relationship with people in the profitable core business who feel less incentive to innovate.
Wrath punishes risk takers who don't succeed, which stifles future enthusiasm for innovation.
Greed leads to impatience for growth that tempts leaders to put too much priority on lines and markets that actually have low potential.
What's the worst?
It's important to avoid them all, but the one that gets organizations into the most trouble is the sin of gluttony. This is a strange thing because we think that one of the advantages a large company has is that it has the capabilities to think big; it has the resources and the ability to throw a lot of people at problems. But in a weird twist, deep pockets and huge teams actually inhibit innovation because they lead to overly slow, overly linear efforts to innovate. Putting teams of bodies on problems leads to haggling and indecision when actually small teams typically innovate more quickly.
How do you identify priorities for innovation?
It's easy for a leader inside any size of organization to get myopic. It's hard to get outside; you're caught up in meetings and discussions that can make it feel that you're making progress when in reality the competition is gaining on you. You need to take a hard look at how you're spending your time and create the time to get into the market, spend time with customers to get to know what they need and explore unfilled opportunities.
You say over-analysis is a waste of time; don't you still have to assess your progress?
I advise people to determine what's behind their need for more analysis. Often, the reason behind it is a lack of certainty about your basic assumptions. Good innovators are always on the lookout for ways to run tests that can turn assumptions into firm knowledge. Go back to the scientific methods you learned in high school science class: here's the hypothesis, run an experiment such as small-scale test marketing or focus groups or discussions with clients, and see if it happens in the way you assume.
What does Eastman Kodak Co.'s bankruptcy teach about innovation?
The easy narrative is that Kodak was a company just blind to the disruptive changes in its marketplace, but like many easy narratives, this one is wrong. Instead, the Kodak story is about a company that read its market correctly and made many right moves, including pioneering work in digital photography, but was unable to move away far enough and fast enough from its core business model. The big lesson of Kodak is that innovation is hard stuff, and that even an insightful company can go wrong if it doesn't push far enough, fast enough into uncomfortable territory.
How did Kodak miscalculate?
A fatal flaw is they primarily focused on photography. In an alternate universe, Kodak could have taken (its online photo site) Ofoto and changed it from a site where people shared photos to one where people would share updates about their lives, news feeds and so on. You probably have used a site like that before, if you are one of nearly 1 billion Facebook users around the world. Instead, Kodak used Ofoto as a way to get people to print pictures. It's natural for a company to extend the business model it knows, but that can cause it to miss big growth opportunities.
What's the lesson that teaches?
Start innovating before you need to. The challenge I call The Innovator's Paradox is that when you have the most freedom to change, you don't feel the urgency. For example, in the early days of the market disruption caused by digital imaging – the late 1990s – Kodak's core film business actually was growing. A lack of urgency allows a company to treat new growth efforts as science experiments that are academically interesting but not vital. However, once the urgency grows, degrees of freedom narrow rapidly, as attention goes to staunching the bleeding in the core business.
So the strategy should be to place multiple small bets, not just one big bet. It's always hard to know which idea is going to be "The One," especially in fast-changing industries. A better approach is to develop a portfolio and pipeline of growth strategies – again, started early enough that there is time to incubate, revise and grow the best.
What can a leader do to persuade employees that change is necessary?
It's important to be a role model of the behaviour you want to see in others. People need to spend more of their time in the market with customers, and as a leader you should demonstrate this by spending more time with customers. Another thing leaders should do is shine spotlights on innovative things happening in their organizations: not just the things that make the headlines but everyday improvements that allow the business to function better.
The third thing is to make it clear that good failure is never wrong.A lot of times there is a mindset in organizations that failures can't be tolerated and a head has to roll if somebody screws up. That's a really bad mindset if you're encouraging innovation. If things don't work out as planned – but it was a good effort – you should celebrate it.