We are living in an unprecedented era of innovation. But do you know how the innovation game has changed? Today there are more opportunities for innovation than ever before. At the same time, the rewards for innovation and the punishments for lack it is becoming bigger. As a result, every business needs a robust innovation strategy today.
The Punishment for Lack of Innovation
The penalty for lack of innovation is becoming brutal. In this age of disruption, markets punish the non-innovators hard and fast.
The Case of CT Scanners
Consider the case of CT scanners. Back in the early 1970s, EMI came up with the first CT scanner. The X-ray incumbents like GE and Picker didn’t know how to build CT scanners. They lacked the knowledge of algorithms needed in a scanner. In fact, they took five years to enter the market. During those five years, EMI and others had garnered the lion’s share of the market.
But by 1980, GE and Picker had developed better scanners than those by EMI and others. As a result, GE and Picker overtook the leadership of the CT scanner industry.
The Case of Digital Cameras
A similar story of second chances unfolded in the camera and film industry. The industry was shaken by a radical innovation called digital cameras. It threatened the existence of both Kodak and Polaroid.
Polaroid innovated furiously in the domain of digital imaging. But customers didn’t want the printers on digital cameras that it was pushing. Kodak also innovated in the same field, but customers didn’t want the Photo CDs and Photo CD players that it was promoting.
Both Polaroid and Kodak went out of business. But it took them over a decade of mistakes to lose market position.
A Changed Current Scenario
Fast forward to 2000s to see the punishment for lack of innovation. Consider the evolution of the smartphone industry. BlackBerry and Symbian both controlled the smartphone market early on. By the end of 2007, the year iPhone arrived on the scene. It was a much better smartphone than the ones in the market.
Within a matter of three years, both Blackberry and Symbian had lost more than half of their market position
As Blackberry and Symbian tried to innovate, they found ti hard to match the iPhone. Within a matter of three years, both Blackberry and Symbian had lost more than half of their market position. In another two years, they had become marginalized. The market leaders got just five years to sink or swim with innovation. They sank.
Magnified Rewards for Innovation
The punishment for lack of innovation seems to be increasing too. The same magnification is taking place in rewards for successful innovation.
Nokia, Kodak, and Polaroid all suffered heavy punishment for their innovation ineffectiveness. On the flip side, the innovators received huge rewards. Apple rose from being a small company with less than $8 bn market cap in 2001 to being the most valuable company with a market cap of over $600 bn by 2012.
Consider a few companies that were born after the bankruptcy of Polaroid in 2001. Google dominates the search business. Facebook has over 1.65billion users in a matter of 12 years. Dropbox, Spotify, AirBNB all became multi-billion dollar companies in a matter of a few years.
Effective Innovation helped these companies reap handsome rewards.
A key lesson here is that while innovation was always a critical part of business, it seems to be more so today. An even more critical lesson is that earlier companies had some leeway in innovations; they could make mistakes and recover. Today, that freedom has diminished. Companies can no longer expect second chances in the innovation game. The call of the day is a robust innovation strategy that allows you to innovate and respond to change effectively.