What's Next For Innovation?
As the economic clouds darkened near the end of 2008, a colleague asked a troubling question: "Is this the end of the innovation movement?" After all, tough times typically lead to corporate belt tightening, and innovation efforts that promise payoffs in the distant future would seem to be easy targets for cost cutters. In an unexpected way, however, today's tough times may very well be remembered as the moment when the nascent innovation movement took a great leap forward.
The 1980s and 1990s can broadly be called the era of optimization. Companies focused on exploiting winning business models. They expanded their businesses globally for top-line growth, and used tools like Six Sigma to bring greater predictability to the bottom line.
A sharp rise in venture capital coupled with dramatic technological enhancements in the mid-1990s heralded the beginning of the end of this era. Events of the past two years should make abundantly clear that today we're in an era of constant creative destruction.
What are the hallmarks of this era? Competitive advantage disappears in an instant. The competitors that companies have to worry the most about are the ones that don't yet exist. And leaders who wait until data are clear usually are looking for their next leadership opportunity.
Some leaders are wistfully waiting for things to return to normal. It will be a long wait. Every trend suggests that the business world is going to face more, not less, turbulence in coming years.
The shocks that rocked the world economy in 2008 are without recent precedent. No one knows for sure what long-term changes will result from the reverberations. Companies might feel an overwhelming desire to return to the corporate equivalent of comfort food—a focus on operating the core business as effectively as possible. Entrepreneurs might polish off their resumes and seek safe havens at big companies that appear better positioned to weather the storm.
Unfortunately, the "new normal" of constant change means there are no safe havens. Companies that turn inwards are sowing the seeds of their own destruction by creating opportunities for attackers to pull profits out of existing markets or create defensible competitive advantage in new markets.