Most companies adjust their business plans to focus on efficiency and cost reduction during economic downturns and on revenue growth during economic upturns. Unfortunately, some firms forget to adjust to changing conditions and quickly lose ground to competitors. With the economy now changing for the better, will your company be a winner or a loser?
A common error in business planning during an economic upturn is to forget about innovation. A lack of innovation leads to:
– Margin erosion: Without innovation, similar products crowd the marketplace leading to differentiation solely on price. Price competition in turn erodes margins until only the low-cost producers can survive.
– Market-share erosion: Design and manufacturing lead times continue to decline, resulting in look-alikes or work-alikes appearing in record times. Any market share gained from being “first-to-market” will be quickly lost.
– Brand erosion: Without innovation, your product blends in with the competition’s. If your product is lost in a sea of look-alikes, you have no opportunity to build or strengthen your brand.
Innovation is the hallmark of successful companies such as 3M, Avaya and Intel. Look for firms that lead or create entirely new product segments on a regular basis and you will find:
– Innovation culture: Innovation stems from creativity and taking chances. If you already have a creative team of workers, you must inspire them to innovate. Innovation is based on a series of trials and errors — no one gets it right the first time. In addition to rewarding staff who get it right, you must also reward staff who get it wrong. If you punish failure, staff will become risk averse and innovation will subside.
– Innovation processes: Innovation has to be a valued and respected activity in the organization, not just something performed during downtime. Creative juices don’t always flow on command, so allocating one “creative hour” a week is the wrong approach. Instead, establish formal processes that foster innovation, have the support of management and reward those who participate.
– Outside the box: Although the phrase “think outside the box” is worn, many companies still place so many restrictions on the creative processes they limit themselves to evolution, not revolution. Skillful facilitation of creative brainstorming sessions will let staff explore the limits of their creativity while still applying their efforts to commercially viable products or services.
– Corporate flexibility: To the surprise of many corporations, the most creative ideas often don’t come from the marketing or sales departments. Creativity and inspiration can come from anywhere in the corporation, so innovation processes must cross all departments. As well, the best ideas don’t always come from the same people, so restructuring to create a single innovation team is the wrong approach.
– Supportive leadership: Just placing the word “innovation” in the corporate mission statement does little to create an innovative corporation. Chief executives should know that fostering a culture of innovation starts with them, from actual financial commitments to actively placing innovation on the executive agenda.
If your company isn’t an innovator today, it’s not too late to start. Tapping the ideas and creativity of your employees can help you seize opportunities created by economic upturns. A regular stream of product or service innovations will let your salespeople answer the question “What’s new?” with a new product, not just a new price.
SOURCE: London Free Press
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