Consumers today aren’t as loyal to brands as they once were. Don’t believe this statement? Just ask Nokia, a company that just years earlier was dominating the mobile phone industry. It wasn’t like the company was lagging behind on technology. Rather, the company has historically spent enormous amounts of money on research and development (R&D). Unfortunately for Nokia, it was unable to “translate all that R&D spending into products that people actually wanted to buy”. The company got caught up in its past success and didn’t realize the increasing importance of software. Because of this, companies like Apple and Google’s Android were able to surpass Nokia. Consumers were busy marveling at the latest iPhone and had moved on from admiring the hardware value proposition that Nokia once claimed.
It’s not just in the mobile phone industry. Companies that used to dominate industries such as Blockbuster are either not in existence or failing because of startups that come into the market that cater better to consumers’ changing needs.
So how can Chief Innovation Officers and companies keep going and continue innovating? They need to rethink existing frameworks for strategy development and consider the following in order to create an effective innovation strategy.
Traditionally, a strategy used the current time as a starting point and then incremental innovations were built upon that point until you reached a goal state. However, for modern strategic innovation planning, the future should be the starting point (because of ongoing disruption) and then you should plan backwards. Blockbuster made the mistake of focusing on improving the in-store experience and expanding the gaming selection instead of using the future as a starting point. The company was too busy focusing on incrementally improving itself while companies like Netflix came in and began taking market share with its subscription model.
A former Secretary of Health, Education, and Welfare, John W. Gardner, once said, “The creative individual has the capacity to free himself from the web of social pressures in which the rest of us are caught. He is capable of questioning the assumptions that the rest of us accept.” When you approach your innovation strategy, you should keep a similar mindset and not make assumptions. Instead of making assumptions about users, every disruption needs to be carefully timed to meet market needs. Disruptive players develop a fine-grained understanding of how their users and future customers operate in order to anticipate user needs for products and technology. Ethnographic research--task flow analyses, user interviews, contextual inquiries-- all provide the crucial insights to forecast and meet future customers’ needs. You need to do more than just conduct surveys and market research. Companies need to invest in developing a finely tuned, detailed assessment of their users’ behaviors, thought processes, and situations.
According to The UX Book, 25% of software development projects fail outright and 60% produce substandard or ineffective products. These depressing statistics damper a company’s chance of surviving in the digital innovation era. However, companies can assess the resources and current frameworks in place for incorporating technological advancements and figure out how to mitigate risk. Not taking the time to understand users will cause software development projects to fail.
This may not be something you want to hear especially if you’re risk-averse. However, your company will have to abandon the incremental changes model so that you can transform the business. Applying the model of transforming the business will carry more risk and has to come with a change in cultural and business processes. According to Harvard Business Review, “you might need a culture or organizational structure that encourages play, serendipity, and random interaction. A few companies are experimenting, counterintuitively, with switching the focus from success to failure, rewarding employees who dare to stick their necks out.” For example, at Google, employees are rewarded for brilliant failures that provide insight. These programs help people get over their fear of failure and stimulate them to think beyond acceptable innovations.
Tackling strategic innovation planning in the digital age is hard. However, by using the future as your starting point, conducting ethnographic research, changing your approach, accepting risk, and implementing better strategies, companies can stay ahead of competitive threats.
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