Innovation is the art of competing with one’s self. That’s why it is difficult. Very difficult. Innovation is often perceived as a threat to existing jobs and change often creates uncertainty. The light bulb was not invented by candle-makers, and e-mail was not invented by the postal service. As a manager, you are responsible for the bottom line next month, and that makes it difficult to prioritise time to work on the development of the services and products you will live off in three years’ time.
We are all good strategists in hindsight. The question is what you should do when you are in the middle of it all, under pressure and have to run a large, modern company. Many mature organisations struggle to develop the new services their customers want, often because they are concerned about cannibalising their own core business.
One dramatic, but relevant piece of advice is to stop selling what you are currently selling.
Ask yourself: “What will we make money on in the future?” What advantages do the cloud-based, hyperscaled platforms with their global ecosystems have which could threaten you: Google, Apple, Facebook and Amazon and others will be able to replace part of what you are currently doing in one way or another. Absolutely no industry will escape this development. What part of your store will be affected? And even more importantly: What part of your business should you really invest in and not least innovate in?
New players will enter your sector. Because they can.
The merging of sectors we are currently seeing is all-encompassing. The companies mentioned above are not alone in entering new sectors, and they do so simply because they can. Given that Apple has over a billion devices out in the market as well as the world’s largest database of credit card numbers through iTunes, it is entirely logical for them to develop a payment service. And the changes are happening fast. It is no more than a decade since Facebook was a start-up business. At the time, Microsoft was the only tech company on the list of the world’s six most valuable companies. Today, only one company on that list is not a technology company.
Change is not throwing digital dust on existing processes
The problem with many digital strategies is that they are generally aimed at streamlining existing business models using new technology. People soon become convinced they have done the right thing because their margins improve, but are the adjustments actually what is needed in order to face up to the future? Are they enough?
It would be better to understand how society and the customer’s world are changing and act accordingly. Your entire business model will then very probably have to be adjusted or reconfigured.
The art of working on a new version of oneself in parallel
When the dotcom bubble burst, Schibsted continued to invest even though it did not have a clear picture of how it would make money online. It even allowed the new services to compete with existing services. Free online advertising cannibalised the paper newspaper, but Schibsted took the risk. When Netflix competed with itself in 2011, shifting its focus from DVDs to streaming, its share price fell by 80 percent. Very few board members and investors would accept such a dramatic drop. Today, developments are taking place at an even faster pace, and the magnitude of the challenge facing managers and boards has not lessened in any way.
Established players can cultivate new initiatives, and ensure future competitive advantages at the same time. The challenge presented by the new initiatives is often that earnings are not huge. But the challenges associated with not trying can quickly become overwhelming.
Where does one start?
Change and innovation are nothing new. Society has always innovated and it will continue to do so. At a fast pace. It is not the case that strategic resources no longer mean anything, but without any link to innovation capacity, one can quickly end up on a slippery slope.
As a consultancy company, we see many ways of adapting to the future. There is more than one way to skin a cat in this process. But there is one thing which is common to those who succeed – they want to. They have made a conscious decision that the cost of innovating will be less than that of not innovating. They are therefore well on the way to the future already.