The Innovation Imperative of Insurgent Companies

The Innovation Imperative of Insurgent Companies:

 

As the saying goes, “necessity is the mother of invention” or, said another way, “when the need for something becomes imperative, you are forced to find ways of getting or achieving it.”  This famous proverb is most often used to describe how most people tend to respond to a personal crisis or stressful situation.  For most, the survival instinct is so strong that it compels them to action.  But these words also have relevance in the context of the current business environment, where disruptive forces such as globalization, technology advances, demographic shifts, market volatility and new competitors threaten company performance and, in some instances, its survival .

 

The history books are littered with companies that were once household names that are no longer around – or are diminished versions of their former selves.  Woolworth, Blockbuster, Kodak, and Dell are a few names that come to mind.  Moreover, only one third of the companies that made up the Dow Jones 30 index at the start of the twenty-first century are still included on the list today.  As incumbents, they tended to operate in the same markets, serve the needs of the same customers and offer the same products; their structures, their management systems and the capabilities of their people were all designed to protect and grow their existing customer base.  Having been around for decades, these incumbents enjoyed long periods of success with this approach.  But, as Harvard professor Clayton Christensen remarks in his best-selling book, “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail”, “companies fail because the very management practices that have allowed them to become industry leaders also make it extremely difficult to develop the disruptive technologies that ultimately steal their markets.”  Like the senior leaders at the once dominant companies mentioned above, most incumbents are too concerned with survival and protecting the status quo, and their failure to innovate fast enough played a key role in their fall from glory.

 

In this age of disruption, Insurgent companies know how to win in an unstable business environment.  Insurgents are rewriting the assumptions underpinning how customers and stakeholders are engaged and how to hyper-mobilize people and resources to achieve results faster than their incumbent competitors.  A few of the most recognized insurgent companies include Amazon, Apple, Neflix, Airbnb, and Uber.  These innovative companies leveraged digital platforms and new technology as well as their understanding of the shifting demographics and unmet market/customer needs to develop transformative products and services—tools of the new economy.  And, the market is rewarding them for their innovation.  Over the past five years, Apple has achieved dramatic growth in both its revenues and earnings, from $100M to $240M and $25B to $53B, respectively.   Since its disruption of Blockbuster and the home video market, Netflix has been dominating the streaming media and DVD market, with over 83 million subscribers worldwide.  And Uber, the online transportation service first introduced in the US in 2009, has upended the taxi and limousine businesses with its innovative business model that allows consumers to use the Uber mobile app to request a car and allows drivers to make money with their own cars.  In just seven years, Uber has reached revenues of more than $1.5B.  Besides these new economy companies, I would be remiss if I didn’t mention some traditional incumbents that have been out front on innovation, including IBM, Pfizer, McDonalds and Legos .

 

As innovators, all of the aforementioned companies share some common attributes that have led to their success:

 

Visionaries.  Insurgents develop leaders with the skills and courage to solve complex problems.  While certainly focused on driving performance and continuous improvement of the existing business, they are keenly aware of market trends that could lead to new growth opportunities .

Creative.  Insurgents recognize that innovation is a team sport and are committed to unleashing the creativity of all its employees.  Employees and other stakeholders across the ecosystem are encouraged to share ideas for solving the most challenging customer problems.

Flexible.  Insurgents achieve the best results by working in cross-functional teams or as networks of employees with a common, unifying purpose.

Learning Culture.  Insurgents, unlike incumbents, view failure as a necessary prerequisite for success.  Instead of pointing fingers and assigning blame when there is a problem, insurgent leaders work extremely hard to foster a culture that values risk-taking and that embraces failure as a learning opportunity, for the organization as well as the individual.  Insurgents understand the potential value that awaits them in unchartered territories and thrive on continuous learning.

Customer-focused.  Insurgent companies are maniacally focused on their customers’ wants and needs.  They have a keen knack for doing this without ever asking the customer directly. Insurgents make it a habit to get out of the office and interact with customers in their environs, which helps them to gain first-hand knowledge of their problems.  They also invite customers into their offices to further explore these problems together and help them co-create a range of possible solutions.

 

For many incumbents, developing an innovation capability is still the road less-traveled.  For-profit, public-traded incumbents, in particular, are under constant pressure to deliver increasingly higher short-term earnings from Wall Street and shareholders.  This pressure is further exacerbated by the myriad of other disruptive forces converging on the market.  Accepting the challenge to develop innovation as a competitive advantage requires leaders who possess the five aforementioned attributes as well as a healthy dose of courage.  The ground beneath their core business may be breaking apart as if a volcano is erupting.  But, by taking a leap of faith, these leaders have put their companies in a better position not only to survive but to thrive.

 

Depending on your industry, the demise of an incumbent is not a matter of if it will happen but when it will happen.  If you are one of the lucky ones who works in an incumbent organization that is continuing to win in the market, I promise you that remaining complacent is not a feasible solution when you or your industry is being disrupted.  Taking this position is fraught with potential risks and has a low probability of sustained success.  In this dynamic and hyper-competitive environment, you cannot afford to view innovation as an optional capability to have.  It is an imperative!  As you continue to commit energy and resources to protecting your products and the existing business model, you must also invest in building your organization’s innovation IQ and finding new business models.  Is your company or industry being disrupted?  Is it time for your company to become an insurgent?

 

To learn more about how to become an insurgent and develop your organization’s innovation capabilities, please contact me at rmoses@insurgencegroup.com. We will be happy to share our perspective with you.