Why should you care about your ability and capacity to innovate | Creating Competitive Advantage through Innovation

A series by Gary Thompson, Community Partners Innovation SME.

“Another One Bites the Dust”, was a top track sung by Freddie Mercury and Queen.? It is not an easy song to decipher as its lyrics switch from topic to topic related to losing out – sometimes mortally!

But the overall message of the song is, no matter what comes along, we are ready! And embracing a culture of innovation will make your company ready, head and shoulders above your competitors. It is the culture you need to engender in your business and in your workforce so you can outperform the rest.

As Karl Albrecht, Founder of Aldi, said:

“There are only two ways to establish competitive advantage: do things better than others or do them differently”

So, have you ever seen a company that is not wary of its competitors? If you have, I would be really surprised.

We all want to be number one in our markets and we all want to stay there. We need to know what our competitors are doing. Why? In case they do better than us. In case we get surpassed or swallowed up.?

Where have all the big guys gone?

Being surrounded by smaller, more agile companies with a start-up mentality makes business life challenging. Because of the way start-up organisations think and act, some will have better or more improved products or have made innovations that change the industry by serving its customers better.

Complacency, sluggishness and lack of innovation are usually what will force industry-leading companies from their dominating positions and allow the newer, smaller competitors to take over their position at the top of the industry.

History is littered with examples of “has-been” big guys and here are a couple of household names that have all but vanished:

• Yahoo! vs. Google: By the start of the 21st Century, Yahoo! was the leader of the search engine market having 56% of referrals in a market that was inundated with multiple rivals. At that time, Google had around 1% of the market. However, due to complacency (they could have bought Google in 2002) and a lack of innovation, Yahoo! allowed Google to steal a march on them and began to quickly lose market share.? For exactly the opposite reason Google’s share grew exponentially such that by 2024, Google has over 90% market share whereas Yahoo! has around 1.3% (https://www.oberlo.com/statistics/search-engine-market-share)
• Nokia vs. Apple: In 2007, Nokia had more than half of the worldwide smartphone market with BlackBerry (11%) and Apple (5%) way below them. However Apple had dominated the digital music device market consistently for years. They applied their innovative culture and the learnings from digital music to do the same for smartphones. Meanwhile Nokia failed to acknowledge the impact of software, including apps that would provide the foundation for the rapid transition from standard mobile phones to smartphones. Now, Apple are totally dominant and constantly innovating. As for Nokia…
• Myspace vs. Facebook:? Having been purchased my Rupert Murdoch’s News Corporation in 2005, Myspace was considered the most popular networking site when at that time Facebook was still restricted to college students. However, the acquisition by News Corp signalled a shift in culture away from optimising the user experience or boosting R&D, to a strategy of driving advertising revenue.?Alternatively, Facebook developed a far superior and user-friendly service incorporating a newsfeed and better-facilitated communication and networking for its members. In 2009, Facebook surpassed Myspace viewers and has driven on to be the global leader for members with around 3 billion members, operating in a market full of newcomers and disruption. As for Myspace, it is still a social networking site, but mainly focused on new music.

But please note, these stories are not just restricted to industry greats.?

Competition is not just limited to global giants.

And innovation is not just exclusive to Fortune 500 or FTSE 100 companies.

Innovation Democratised – the cultural shift to beat the competition

Every company wants to steal a march and differentiate itself from its competitors and instilling an innovation culture within your business can help you creep past your opponents.

If you are fixed and staid in developing your business model and the markets you serve, or the products and services you deliver to that market, you will limit the growth and expansion capability of your company. Fail to innovate and you risk stagnating and being surpassed by your more agile and forward-thinking competitors who march onward. The three examples above of “has-been” companies show that.

So what do those stories have to do with innovation??

Well, perhaps if the original industry leaders had democratised innovation through a cultural shift within their organisation, they may have generated the type of ideas used by their successors. At the time, they were the much larger organisations and more than capable of swotting out the competition.

A business enveloped in an innovation culture generates the largest possible environment for idea generation through utilising diversity across the whole workforce; bringing together a mix of skills and experiences from different backgrounds and functions across the organisation, to review what you do today through different lenses. Get them thinking about how we could do things better and what do you get? Loads of ideas.

“Capital isn’t so important in business. Experience isn’t so important. You can get both of these things. What is important is ideas. If you have ideas, you have the main asset you need, and there isn’t any limit to what you can do with your business and your life” - Harvey Firestone, founder of Firestone Tire & Rubber Company

For example, I have seen ideas generated by innovation-led product development teams resulting in additional turnover of up to 10% over 5 years. Likewise, I have seen incremental improvements delivered by a process innovation function decreasing the turnaround time for a mortgage application to fulfilment process from 3 months to 15 days. These results are quantifiable and can be used as a measure of the success of your innovation activities.?

An innovation culture and innovation processes and techniques have been proven to give companies a competitive edge, an advantage that doesn’t just end with your current competitors.?

Innovation can support the development of a company’s expansion strategy, helping it understand how to break into new markets and reach new and different customer segments. By developing products that cater to the distinctive needs of different demographics or by utilising new and novel marketing techniques to reach a broader audience with existing products and services, a company can significantly expand its footprint.

Chances are the biggest challenge to your business over the next 5 years does not currently exist. Radical innovation – really thinking outside of the box – can result in some fundamental shifts in the business landscape.?

I don’t know where I saw this quote but it sums up the concept that although you may be focused on making what you do and what you make better, others outside of your business world may be focused on ideas that will totally disrupt your market.? Remember:

“The light bulb was not invented by candle-makers, and e-mail was not invented by the postal service.”

As an example, look at?Amazon’s?operating model in e-commerce and fast delivery. Always innovating since the late 1990s, the company has moved from being an online?bookstore to?the?world's?biggest marketplace, continually looking at how to do business better and listening to its customers. Amazon’s radical innovation has redefined modern commerce and improved the customer experience, giving them a considerable advantage over their competitors, and is the major reason for the company’s ongoing dominance in a market where many others have followed in their footsteps.?

It is now often copied but has yet to be surpassed. And it is still innovating today in testing drone delivery!

The more input, the merrier

Speed to market is crucial in gaining a competitive edge. Innovation in the workplace provides the environment for both idea generation AND idea delivery. The two go hand in hand.

Many years ago I was privileged to be a founder of the company that developed DOORS, a requirements management tool that provides a platform for managing requirements, impact analysis, tracing dependencies and generating reports. ?The tool, now part of the IBM service offering, is often used in?aerospace, defence and automotive industries as a means to speed up the product development process and get products to market faster by ensuring the traceability of requirements.

That product that was launched in the 1990s and developed in an organisation where innovation was democratised across all areas and functions. The founders and developers worked together to bounce ideas around and, in collaboration with customers, developed a product that brought a methodology to life and addressed the needs and concerns of the market.??

So, all good stuff so far? Democratise innovation and start to gain that competitive advantage.

Yet when it comes to investing in developing and building an innovation culture in an organisation one of the largest blockers cited by business leaders is the amount of investment needed in terms of time, money, and resources.?

True, innovation in the organisation is not a Harry Potter magic wand. The time taken to embed an innovative culture and start to have a positive impact on the business can be a long lead time. There are many variables that influence this such as where is your starting point and what is the state of your business.?

All responsible organisations invest in their future and building & maintaining an innovation culture within an organisation should be seen as a research and development expenditure. The effect of innovation may be focused on impacting future customers and may have little or no impact on today’s customers, today’s profits, and today’s returns.?

If you want to drive a culture of innovation start small on, say, continuous improvement of processes or a specific product development. Then, like a pebble dropped into a lake, let the culture ripple outwards and spread throughout the organisation, gaining momentum and being utilised outside of the initial focus area.?

But remember, you must embed a culture into your business. It is like a seedling that needs nurturing and feeding until it is established. Give support to your new innovation culture and it will grow.

But start now.

Because most likely, your competitors have already started!

So finally let me leave you with a quote:

“An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage" - Jack Welch (Ex-Chairman & CEO of GE Electric)

I hope this piece on Creating Competitive Advantage through Innovation has sparked your interest and you will continue to follow me on the journey of unpicking the “what” and the “how” of innovation.? My next article explores how innovation can help your business grow and do things better, making it more resilient to what the market and competition have in store.

Until the next time…

I’m sure that after reading these blogs on innovation in the workplace you will have a backpack full of questions regarding the “What and the How” of innovation and maybe feeling a bit stuck.?

Never one to leave you in the lurch, I am always happy to try to have a brief chat and address your questions.? Just reach out and let’s see if we can bring resolution to what is keeping you awake at night.? Email me at [email protected] and let’s arrange a virtual coffee or connect with me on LinkedIn - Gary Thompson

And one other thing – I would love to hear your feedback on this article.? My father had a shop and from being a child I was taught to listen to the customer, so I welcome your comments.? It’s time I practiced what I preach!