Innovation and Business Success
A colleague of mine posited a question to my team this morning after reading a provocative blog post from CFO Magazine entitled "Do Banks Care About Innovation". Here's an excerpt:
"..In a survey on innovation from Accenture that polled vice presidents, directors, and managers at 640 large U.S. and U.K. companies, responses from executives at banks and capital-market firms stood out. More than two-thirds of those execs said their organizations prioritize short-term financial results over investing for the long term. Very few saw innovation playing an important role in efforts to increase operational efficiencies and reduce costs. And more so than executives in any other industry, they characterized their quest for innovation as searching for the next "silver bullet" rather than "a diverse pursuit of new opportunities."
Based on the demographic from the survey, the question should really be refined to: "Do Big Banks Care About Innovation?" But even that's misleading. There's a nuance in here that deals with misconceptions about innovation. Innovation does not necessarily mean "invention" but it sounds as though some of the execs interviewed were thinking about silver bullet/breakthrough innovations. But being innovative is more like the Tour de France. Many people who win the early stages (the actual inventors) are not the ones who develop winning business models around those inventions. As Jim Collins notes in "The Most Creative Product Ever", being inventive or first to market often doesn't necessarily mean all that much. You can be innovative but be very, very late to the game. See MP3 Players/Apple/iPod for a great recent example. Here's how Jim puts it.
Great companies do not necessarily have innovation as a central part of their vision or strategy. They are just as likely to be followers as they are to be leaders with pioneering products and leading-edge services. IBM, for example, grew from a one-building small business into one of the largest corporations in the world because of its professional sales force, not its product innovation. In fact, when IBM fully launched into computers, in the early 1960s, it already lagged far behind rival companies, such as Burroughs, in innovative computer technology. And it was Diner’s Club, not American Express, that invented the modern credit card. American Express didn’t introduce its card until eight years after the debut of Diner’s Club—hardly leading-edge behavior. Nordstrom, Wal-Mart, McKinsey, Marriott—none of those companies attained success primarily through innovation.Certainly, some great companies—notably Sony, Johnson & Johnson, W.L. Gore, and 3M—have innovation as a core value or an integral part of their strategy. So, you can be innovative and great. But the fact remains: you do not need to have innovative products, services or technologies, or visionary market ideas, to create a great company.
Jim's article was written in 1997, before the Internet arguably became one of the most compelling and powerful technological AND social innovation in a very long time (Guttenberg’s press maybe is on par). However, his point was clear - innovation isn’t critical to a company being “great”. So this brings me back to Vincent's question: "Do big banks care about innovation?"
Why pick on banks? Why not any company? The question is probably best positioned as "Should anyone care about innovation?" and do some degree the answer is both yes and no. You certainly can't be a luddite and excel in today's world. But putting too much emphasis on forcing breakthrough inventions is also not likely to be a winning strategy for most companies.
When all is said and done, people don't remember that Edison didn't invent the first lightbulb (22 others came before him), Apple didn't invent the MP3 player (countless others came before them), or Ford the first car (Karl Benz had the patents nearly 30 years before the Model T), we just remember who did these things better than anyone who came before them and generated lasting success.
Breakthrough innovation is great and important, but a company's ability to "innovate" processes and business models that allow them to out-execute their peers/competitors is every bit as important to a company's success.
PS - If you read the Collins article, try not to smile too much over Jim's pseudo-eulogy for Apple. What a difference 12 years can make. Apple has gone from a coulda-been-a-contend/also-ran to the poster child for innovation. In Jim’s defense, the way Apple has roared back to life is by being VERY late to the game in a lot of core areas but very acutely attuned to the social aspects of the technology they developed. Apple came back to life through the very social innovation Jim holds up as critical to greatness.
