In the dozens of conversations I have with business leaders, I hear a common theme: “We’ve done the cost cutting and adjustments. We’ve done the necessary re-
sizing, and we’ve done the hard work of recalibrating our
cost structure to support our core business. We’re profit-
able, and we are holding loads of cash. Now what?”
Businesses are expected to operate at peak efficiency
and profitability. Getting there is good, but it does not dif-
ferentiate one organization from its competitors. Inves-
tors take it for granted, and quickly punish its absence.
To move beyond the mere expectation of cost efficiency and respectable profitability, every business needs to
grow, and to grow, you need to innovate.
Problem is, innovation is one of the greatest and most
ill-defined buzzwords in business today. What comes
to mind when I say “innovation” are open-floor labs, or
a conference table ringed by whiz-bang technologists
working on a white board, or the solitary inventor, on the
ramparts of discovery, perhaps in a garage somewhere.
Innovation, in short, is cultural, not technical. It happens because of business routine, not exceptions to the
routine. Leaders can inspire it or squelch it, organizations
can invest in it or starve it, and talent is drawn to it or
repelled by its absence. Companies can become innovative, and they can lose their ability to innovate—not by
luck or chance, but as a direct outcome of strategic decisions by leaders.
In a sense, that’s why I like to talk about innovation
in the context of growth. Because if you don’t see it as
connected to the future of the business, it’s hard to make
it a part of the culture. When innovation is seen as a “nice
to have”—a function of especially bright inventors, for
example—it gets pushed aside eventually. I tend to think
of innovation as a “must have”—an essential element to
the sustainability of the business.
I’ve seen countless organizations that had all the necessary ingredients for consistent innovation—brilliant
discoveries, exciting products, a dynamic line of business—but failed to deliver that innovation to the market.
One of the most cited examples in the study of innovation
is Kodak. Here was a company that had largely invented
digital photography, but was ultimately undermined by it.
in developing a
business-chang-ing idea. But in
the end, it did not
want to change—
and the company’s
leaders, employees and investors
paid a terrible
price. But the example of Kodak
is somewhat extreme. What worries me more are the less dramatic ways that companies
can miss the opportunity to innovate. So, with my colleagues at Deloitte, some of whom have spent their lifetimes evaluating innovative organizations, I’ve tried to
put together a few core insights into what helps leaders
develop a culture of innovation at their organizations.
First, and above all, the future is much closer than
you probably think. Business leaders need to BUILD
AWARENESS not only of the pace of technological
change—which is increasing exponentially, thanks to
Moore’s Law of computing power, which shows that
computing power, processing speed, memory capacity,
sensors and even digital camera pixels doubles every
18 months. They also should build awareness of areas
where the change is process-oriented, such as the way
social media has accustomed people to shape their own
networks and provide valuable insights into their likes
and dislikes or how crowd-funding and crowd-sourcing
are providing new opportunities to businesses of all
types—large and small.
We have recently announced several strategic alliances; 3D Systems, the premier 3D printing company; XPRIZE, an organization that solves global challenges through the creation of large-scale incentivized
competitions; and Singularity University, co-founded by
Ray Kurzweil and Peter Diamandis, to expose our own
teams and clients to disruptive innovations, which can
promise exponential change. Whether in robotics, 3-D
BY JIM MOFFATT
The Culture and Cost of Innovation