It's the start of a new year; a time to implement that budget you so painstakingly itemized out with senior leadership a few months prior. If you're like many businesses, you've scrutinized every facet of the business and identified how you're going to tweak your existing products to maximize revenue and profit. Similarly, like many other businesses whose time is running short, you could find yourself at the end of 2014 getting passed up in the marketplace by competitors while you try to squeeze every penny out of shrinking lines of revenue.
But, your plan was so detailed and the month-to-month incremental growth seemed so achievable. What went wrong?
Incrementalism vs. Innovation
In the 1930s, Austrian economist Joseph Schumpeter was one of the first influential minds in his field who studied radical innovation and how it is a driving force behind economic change. In his words, innovation is "the fundamental impulse that sets and keeps the capitalist engine in motion [that] comes from the new consumers' goods, the new methods of production, the new markets, the new forms of industrial organization that capitalist enterprise creates." These new opportunities lay waste to those businesses that become stuck in the slow evolution of incrementalism; a concept Schumpeter called "Creative Destruction."
Creative destruction has been witnessed all throughout history as new technologies have made entire industries obsolete. While this can have an upfront negative impact on those who are left behind, society as a whole benefits from rapid innovation. Though Apple single-handedly ruined the compact disc industry, most would agree that this out-of-the-blue advancement in technology has flipped the world on its axis for the better.
While incrementalism may seem like the safe way to maximize revenue from existing areas of business, it can be a vicious cycle that is often hard to escape. Inheriting bloated legacy systems in the name of maintaining the status quo has its costs. They can be tough to support by developers who have moved onto learning new and better technologies. They can also be difficult to manage and understand by less technical administrators and users. While your business struggles to patch all of the holes and figure out how to fine tune this behemoth which time has forgotten, your competitors are tenaciously plotting the 'next big thing' which will change your industry forever. Don't succumb to creative destruction through your failure to innovate.
A Calculated Risk
Innovation is not without its costs, however. Often times it takes a financial or resource investment that can risk the health of your business. You could fail. In fact, many do. After all, you're staring at uncharted territory. But there are ways to minimize your risk:
- Take a break from your regularly-scheduled incrementalism and set aside a block of time for your team to work on something completely unrelated to existing responsibilities. Here at Business.com, we sponsored a 24 hour 'Ship It' day where developers created their own prototypes. The results were impressive.
- Flatten your organization. In the fast-paced business world of the 21st century, we just don't have enough time to wait for innovative ideas to come from senior management alone. Companies from 3M to Google have flattened their organizational structure to empower innovative contributions at all levels of their business. Consider this: the Post-it Note was conceived on accident by a scientist; not a senior executive.
- Build a culture which rids itself of fear of failure. All great innovators have to stare fear in the face at some point, but they'll tell you that true innovation begins when failure no longer frightens.
"Innovation distinguishes between a leader and a follower." -- Steve Jobs
Sometimes innovation involves venturing in a direction that your customers don't even know they are ready for. Did Steve Jobs ask music lovers if they'd throw out their CD players for an iPod before he set out on development? Of course not! But now we can't imagine a world without music devices in our pockets. As Henry Ford (may have) famously stated, "If I had asked my customers what they wanted they would have said a faster horse." Whether or not he can be attributed with this quote is up for debate, but the point on innovation shouldn't be lost; some of the greatest innovators went in a direction that the customers didn't know they were prepared for... and did so with massive success.
As members in a diverse business environment, economist Murray Rothbard's declaration that "there is no reason why innovations cannot be continuous or take place in many industries" should inspire each of us, no matter where we work, to look in the mirror and ask ourselves: do we want to continue to follow through incrementalism or become leaders in our industry through revolutionary innovation? Fortune favors the bold.
(image via freedigitalphotos.net)