Innovation, reinvention and transformation are all terms that regularly top the list of survey responses when CEOs are asked about their key strategic priorities. New roles are emerging in the enterprise as a result – Chief Innovation Officer, Chief Ideation Officer, and Chief Digital Officer to name a few. But why is innovation and reinvention so important in modern business? Isn’t it enough to drive hyper efficiency and effectiveness by continually improving our processes and technology?
Innovating to survive
With the explosion of start up firms seeking to capitalise on digital and technological disruption, the ability to innovate and pivot the business is becoming a core competitive differentiator and driver of value. It's no longer the speed of business that creates challenges, but the speed of disruption that’s permeating business models and causing organisations to rethink how they operate. It has even been said that the much-celebrated Information Age is now over; we are now in the Creative Era, where speed of innovation is the only source of sustainable advantage.
One of the key attributes of organisations that have not just survived significant market transitions but flourished is the ability to manage and adapt to rapid change. PwC’s Fiorella Iannuzzelli defines this capability as ‘enterprise resilience’. She says, “Enterprise resilience requires innovation and innovative thinking to manage disruptors and change. Innovation is key to building this adaptive capacity and relevance for companies. Organisations that have clearly defined and identified what their business purpose and objectives are can use innovation as a way to evolve through change while maintaining alignment to their core strategy”.
Now or never
Many organisations acknowledge the strategic importance of innovation but less see it as an urgent task. Innovation must be regarded as a constant state, and this requires a change in mindset, dedication and persistence. It must become a process. However, for large enterprises, where predictability is key, being innovative is easier said than done. These organisations rely on consistent structures and measurable processes to remain efficient, and employees are typically averse to change, preferring to seek efficiencies by leveraging existing assets and distribution channels. In addition, stakeholders prefer a predictable return on their investment rather than a risky endeavour. Such organisations are more likely to make marginal improvements to old processes than replace them with newer systems. This leaves them vulnerable to competitors, who disrupt the market with new ideas, new momentum and new solutions.
Change is inherently risky, and the bigger the organisation, the higher the stakes. But what’s more risky is stasis. According to Steve Denning, author of The Leader’s Guide to Radical Management, ‘milking the cash cow’ is no longer a feasible strategy for enterprises. He says, “Globalisation and the shift in power in the marketplace from buyer to seller are dramatically shortening the life expectancy of firms that are merely milking their cash cows”. Half a century ago, the life expectancy of a firm in the Fortune 500 was around 75 years. Now it’s less than 15 years and declining even further. Denning warns that by not adding value, firms not only stop playing offense, but they forget how to play offense. In other words, they die.
Business as usual doesn’t cut it anymore. Innovation is the new management paradigm, and it’s not going away anytime soon – it’s necessary to be competitive today and tomorrow. While change can be daunting for large enterprises in particular, the ramifications for resisting it can be dire.
Our new ‘how to’ guide, ‘The age of innovation: When change is no longer an option’, looks out why innovation is critical to organisational success and how IT leaders can adopt a more innovative approach. Click here to download a complimentary copy.