Who Should Innovate?

Organisations of all sizes, in all industries, in all parts of the world must innovate to achieve sustained competitive advantage.

The ultimate goal of branding is sustained competitive advantage. As technological cycles compress and ideas accelerate around the globe, brands who fail to consistently and creatively add value for their customers will quickly find their future in jeopardy.  Research continues to show that companies who excel at innovation are more profitable, yet many leaders of the following types of businesses continue to dismiss innovation as a necessary condition of their future success. Innovation is an integral part of differentiation in today’s marketplace.

Monopolies & industry leaders: The biggest reason for failed sustained category leadership is complacency. Satisfied executives often sit idly while opportunities pass them by because market leaders have no incentive to cannibalise sales when markets are booming. When management emphasises execution of existing systems rather than challenging the foundation of what helped them achieve success, they are already trending toward obsolescence. History has shown that monopoly control is never permanent.  Structural realities in every industry have and will continue to change.

Companies determined to stick to core competencies & customers: Traditional management theories have long-advocated brands focus on their core competencies and most valuable customers. But this assumes a company’s unique strength will always be relevant and that today’s most valuable customers will remain so in future. Incumbents easily overlook upstarts who gain trust with customer segments they have ignored while, over time, these segments may become the most dominant.

Cost-competitive & commoditised brands: There can be no sustained cost advantage when global economies are constantly moving through different stages of development. Asia’s early economic development, for example, can be attributed to low-cost advantages which enabled companies to undercut global competition. But as their economies developed, only the most innovative companies came to be represented among the world’s most valuable brands. Those that compete on cost are now being undercut by brands from newly emerging economies.

Publicly traded companies: The focus of stock markets on quarterly returns has entrenched management systems which discourage dramatic change. The result of this system has been a disastrous decline in global competitiveness. Because game-changing innovations are risky and stock markets pound innovators, most firms gravitate toward safer, more gradual change.  A different kind of thinking is required from today’s sustainable brand leaders.

Brands in Asia: Thriving in Asia requires several types of innovations as deregulation, trade liberalization and social change continue to alter the competitive landscape for brands in the region. The density of urban regions and sparsely populated rural regions pushes companies to redefine distribution networks while simultaneously addressing the cost needs of lower-income consumers. On the higher-value scale, a recent study by Nielsen supports the theory that Asia Pacific consumers are addicted to “newness.” This characteristic demands that brands continuously reinvent their products or services as a requirement for doing business.

Companies who lack R&D: Quite often, a spark for innovation comes from the simple act of listening to customers, encouraging creativity among employees and giving them a voice. Established companies can also harness creativity though partnership agreements with hungry start-ups that not only provide strategic insight and an unbiased perspective, but help keep an eye on future competitors. These activities can be just as productive as and more cost effective than pursuing traditional R&D.

Companies reliant on R&D: Innovation must permeate every single level of an organization, allowing employees to not only feel like they are a part of future growth, but actively participate in it. Sometimes only a warehouse worker, not a person with “R&D” in their job-description, can identify a problem and solution that reinforces brand differentiation. However, it takes a courageous CEO to listen, act and stand behind a lower-level employee’s idea. Innovation problems are often leadership problems. Disruptive change is a question of mind-set, not money.

Hierarchical organisations: Although a chain of command that promotes uniformity and controls quality is vital to ensure consumers can rely on a brand promise, traditional hierarchies do not nurture innovation. Today’s businesses need to shift away from hierarchy toward “wirearchy” – a more networked structure that encourages a flow of constructive thinking.

Small companies: Without innovation, there is no reason for small companies to exist. Small business must serve a niche in a way that larger competitors cannot. There is, in fact, growing theory that mega-brands should purposely limit themselves in order to innovate because smaller companies have financial constraints that drive them to make things easier, simpler and cheaper for their customers.

These lessons apply to organisations of all sizes, in all industries, in all parts of the world. The constant pursuit of improvement through innovation has become a necessary condition for sustained competitive advantage for brands in the twenty first century.